Advise on valuating a MHP - Posted by Lynn

Posted by Lynn on January 21, 2004 at 17:05:56:

That was my thought exactly–value it as “vacant land with improvements”. I also agree that the cost of disposing the old homes could be great. The park is actually only 20 years old. All utilities are owned by the city and would be the responsible of the city to repair. The city is a well maintained city. The park is only responsible for service lines, which could also be expensive but not near the exposure of owning the systems. No septics. This is inside the city limits. I agree completely that we can’t pay for “potential income”. The numbers they provided were a complete joke. They gave me actuals and then also projections based on full occupancy. The projections were completely unrealistic, in particuler the projected expenses. I am currently researching info with the city officials, the county officials, local bankers, etc. Replacing homes has already been met with enthusiam; although, they must be 15 years old or newer. The sellers are going to have to “get real”. The sellers asking price is the same as the county’s appraised value, (I think they used the county appraisal to set their price) which I believe is close to 3 times what I would value the property at. In talking with the county, it appears they have the homes valued extremely high. Their value of the real estate ifself seems reasonable.

Advise on valuating a MHP - Posted by Lynn

Posted by Lynn on January 21, 2004 at 15:02:50:

Located a MHP.
Pros: All utilites, streets and lighting are all city owned and city maintained. Nice size lots, all pads, driveways and patioes are in and most in average condition. 25% of lots would easily accomodate doubles, all lots would easily accomodate 16x80’s.
Cons: No owner occupied homes. 50% of sites are completely vacant. The other 50% are park owned homes, all homes are at least 20 years old. The park owned homes are rental properties and only 20% of them are occupied. Park is basically vacant. However, the park is not trashed, it is well mowed, no cars on blocks and no trash everywhere. Condition of most homes is questionable. Best estimate is half could be rehabbed and other half would need to be disposed of.
I would plan to bring in late model repo homes and sell for cash or carry the notes. Need to explore the housing need in the area. Have already checked with city regarding ordinances, restrictive but not unreasonable or unfair. Basically no existing cash flow. Price is based on cash flow for an almost full park.
How would you suggest determing a fair value of this park? It is basically a vacant park, no cash flow and the park itself needs no work or maintenance; however, the homes need rehabbed or removed. Lots of potential if it can be determined that there is a housing need in the area.

Re: Advise on valuating a MHP - Posted by Darren McCammon

Posted by Darren McCammon on January 22, 2004 at 20:08:06:

You might suggest that your willing to buy the land if they will remove the homes and take them with them.

Not being serious here. Just a tactic that may help them get a little more realistic.

Re: Advise on valuating a MHP - Posted by Dan - GA

Posted by Dan - GA on January 21, 2004 at 16:34:35:

This park should be valued as vacant land with improvements, but you need to check the condition of the water and sewer/septic lines. If the park is old, the water lines could be old galvanized pipe that needs to be replaced and the sewer lines could be blocked or the septic fields could be bad on some or all of the vacant lots and homes.

The cost of disposing the old homes is equal to or greater than the cost of the units that could be rehabbed. It sounds like only 10% of the park is occupied in old homes that will eventually need repairs or major rehabs. You need to have a large cash reserve above and beyond the purchase price (or get owner financing) as you have to exist with little or no income while you’ve got the expense of bringing in new homes, setting them up, advertising and selling them.

This property may have potential, but the current owner doesn’t deserve to be paid much for that potential beyond the developed cost of the property.

Be sure that the county will allow you to replace existing homes and bring in units on the vacant lots. Some areas are zoning against replacement units. This may be why it’s empty.

If the Indians were paid for the potential revenue from the Island of New York, the Dutch would still be paying the mortgage.