The Mobile Home Park Expert is back with another article to help you navigate our complex industry. Today, we’ll be revisiting the topic of Mobile Home Park Evaluations. You can catch up on the first installment of our eval series here!
The first thing to know about mobile home park evaluations, is that they’re anything but easy. It’s no doubt one of the most tedious and difficult undertakings in the business. The Mobile Home Park Expert is here to help you wrap your head around things.
Reaching Your Mobile Home Park’s Maximum Value
While it can seem daunting, we can help bring things into a more manageable view. Think of your best case scenario. What’s your maximized value when there’s no vacancies, repairs, or capital expenditures? Remember, the more financeable and clean a park is, the higher that number will be.
With this figure in mind, it becomes a bit easier to pinpoint existing areas of improvement. Debt and cap rates are usually two of the most relevant areas in this regard. You can juxtapose this with the park’s current value. Owners’ collections, expenses, insurance, and more are usually the relevant factors here. Cross referencing these two points helps to bridge their gap!
Adjusting And Analyzing Expenses
Expenses are of particular note when it comes to evaluating a park. They may require adjusting based on some of a park’s greater add ons. For example, imagine a park that’s on a septic with no expenses attributed to it. We would still go back and add between $10-$20 a month per lot to expenses to balance things out.
Expenses can also tell you a lot about the state of the park. Know that if the water bill is exorbitant beyond reason, that’s not a normal occurrence. In fact, it likely points to leaks throughout the property. Again, this is an opportunity to plan ahead when adjusting up its total valuation. This is assuming that corrective measures have been at least identified to justify adjusting.
What’s The Simple Answer On Evaluating A Park?
It’s a trick question, there isn’t one! An average evaluation that yields some real value can take between 5-8 hours to complete. Sure, there are ways to generate a more general estimation of that figure. In a floor-target-ceiling model, these options will land you within a 10-20% margin of the real number. Want to complicate the process even more? Have park owned homes on your lot!
Your best case scenario is to not have any park owned homes. That way, the park is maximized in your favor already! All expenses and income are clean, provable, and ready to report. With no adjustments, this often makes underwriting a walk in the park. While ideal, unfortunately cases like these are fewer and further between. Most parks will have some adjustments to account for; we’ll explore this concept even further in our next installment of the eval series.
The MHP Expert
Have more questions about expenses and adjustments? Contact us today! We’re here to help you maximize your time and resources in the space. No need to struggle alone when we’re here to help guid your through! We look forward to hearing from you!