Land Leases and modular homes

[Deleted member 152047]

I may know the answer to this, but I ask anyway......
I have been asked to appraise a 60 acre site, proposed to be developed with pads (mobile home park style) which would be leased.
The improvements will be modular homes of 1,200 SF or so.
The homeowner would purchase the home from a few styles, and the home would be delivered and bolted to a knee-wall foundation on the pad.
The homes would be about $100,000, and the pads would lease for about $2,800/mo each.
Simple question - What has the homeowner purchased?
And - what happens if the development fails after the first dozen or so homes are paid for and bolted down?
(I am a bit busy now and may be slow to respond to questions - apologies)

So it appears as though the developer is setting it up just like a mobile home park. I would reach out to the client for guidance as the value of the real property is likely just the capitalized lot rent (similar to a MHP).

If he has a markup on the cost of the modular homes, then you can incorporate that into your cash flow. You will need to "sell out" the homes to account for any profit made on the sale of the structures and you want to make sure that your reversion shows only lot rent income.

The numbers are staggering for the lot rent, but it sounds like a fun project.

 

[Restrain]

I have seen similar projects down here having the site owner sell the property out from under the manufactured home owner. Home owner is now responsible for removing the home, which becomes financially and physically impossible. Something to keep in mind if evaluating the lease terms.

 

[Wally Ballou]

However, any idiot who would buy into such tripe deserves all the headache they get.


As a trainee, what are you appraising? The land? The MH? The MH on a leased fee estate? Sounds like you are appraising the whole site- a commercial land development...Hope you have a good CG mentor, so what does he/she say?

Hi, I am one of those guys who has been appraising since 1993 and never got his ducks in a row to get a General license (I have other interests besides appraising - my avatar is me ocean kayaking). Regardless, here I am. I just turned 65 and have decided to try to get my general license in the next couple of years, if I live that long. My MAI boss (who I have worked for for 28 years) is unsure if we want the assignment. I am telling him to turn it down. The location is poor for senior housing, and the arrangement is too screwy. Something is up with this one.

 

[Wally Ballou]

$2,800 per month for a trailer site? Or $280? If it is a long-term lease, the tenant would have a leasehold interest, but has not purchased anything but the right to use that spot for the duration of the lease. I would say if the land is mortgaged, the lender may well end up owning the land and homes unless they are financed as personal property with UCC filings, in which case the home lender might get the homes. The homeowner may well leave with less than they came with. I'm guessing the proposed arrangement likely skirts one or more of subdivision laws, condominium laws, securities laws, etc. Don't believe I would want any part of the situation from any standpoint!

The property owner owns most of the land free and clear - as far as I know - and is buying some adjacent parcels.

 

[Wally Ballou]

However, any idiot who would buy into such tripe deserves all the headache they get.


As a trainee, what are you appraising? The land? The MH? The MH on a leased fee estate? Sounds like you are appraising the whole site- a commercial land development...Hope you have a good CG mentor, so what does he/she say?

Hi, I am one of those guys who has been appraising since 1993 and never got his ducks in a row to get a General license (I have other interests besides appraising - my avatar is me ocean kayaking). Regardless, here I am. I just turned 65 and have decided to try to get my general license in the next couple of years, if I live that long. My MAI boss (who I have worked for for 28 years) is unsure if we want the assignment. I am telling him to turn it down. The location is poor for senior housing, and the arrangement is too screwy. Something is up with this one

 

[Wally Ballou]

A headache

Best answer yet

 

[Wally Ballou]

Sounds like a scam in the making. Modular home typically cannot be disassembled. Who would finance such a thing for the buyer. Is the modular going to be classified as personal property. It cannot be real property. What happens to the modular if "owner" defaults on lot lease. Like Terrell said. Buyer would have to be an Idiot.

I agree on all points

 

[DWiley]

Still wrapping my head around $100,000 improvements on a site that leases for $2,800/month.

 

[Wally Ballou]

$2M+ a year coming in....wow.

Are you sure they are modular and not manufactured?

What amenities do these pads offer? Utilities? Shared olympic pool with a 5 star restaurant?

Not much - a clubhouse and small pool in a gated community

 

[Terrel L. Shields]

if I live that long.

That's a problem. Appraisers I know keep returning to room temperatures about then... I've made it to 70. But I cannot imagine buying into such a property and coughing up that kind of "rent"... I am doing a lakefront home where the HOA fee is $230 a month... a real bargain compared to $2,800 for rents.