MHP Evaluation Qs - Posted by Steve-WA

Real Estate Investing
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Posted by ray@lcorn on October 15, 2007 at 17:22:46:

Steve,

Here’s my take on your questions…

  1. The SFH in a park is a judgment call. If it is on a separate deed and tax ticket I’ve generally valued it as a stand alone, usually wholesale, marked down for the negative influence of it being located in the park. If it isn’t on a separate parcel, it’s worth replacement cost of the structure only, less depreciation. I suppose a case could be made for including SFH rental income at the same cap rate as the park, but it’s sometimes difficult to separate expenses for a true picture of what it produces.

  2. My experience is that chronic late payers are the first evictions. I usually toss any tenant more than 30 days late from the rent roll for first year projection. Another issue is the value of the receivables. We add up the 30+ day late list and offer 50% on top of the negotiated sale price. If the owner wants to keep the receivables he can do so, but with the provision he does not have the power to evict, and we have no obligation to collect the late payments for his account.

  3. Check your state’s laws regarding the operation of private utility systems. Many states severely limit the amount and type of charges that can be assessed without compliance with public utility statutes. Sub-metering has been outlawed in some states. If it is allowed it is generally required to bill by usage. A Flat Rate minimum charge for a certain amount of usage, plus a charge over the minimum based on volume is allowable in my state, but again, it’s a state by state thing.

ray

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MHP Evaluation Qs - Posted by Steve-WA

Posted by Steve-WA on October 07, 2007 at 19:04:15:

Also posted to the MH board . . .

Working on a park evaluation - coupla things pop up, and I’m curious how the experienced people address these issues:

  1. Sometimes, a park will include a stick-built, or more than one. How does one evaluate this into the value? I understand that MHs owned by the park could be assigned a wholesale value, and any rental homes’ rent income is disregarded, due to the risk of losing that. But a SFH could have a pretty high value, even wholesale, when compared to a MH. A value so much higher, that it could negatively impact the value of a park. Yet, it would have a lower value than a SFH in a regular neighborhood, 'cuz its in a trailer park. How have experienced people assigned a value, positive or negative, to these houses? (the park I’m evaluating has 3!)

  2. In viewing the rent roll, I see many people behind. I will take their rent out of the income calculation - but how far behind do most people consider a chronic, deductible, problem? At first I’m thinking $1K or more behind, but then I backpedal and figure that if I throw out people more than a month behnd, the seller will take action to correct that. What do y’all do?

  3. Park is on a well for water distribution. Residents can be billed flat rate, because of R&M, but what about metering, and billing more for excess usage above a standard? Also, as a method to determine problems?