Mobile Home Park Appraisal Methodology

[Tejus]

I'm working on a Mobile Home Park Appraisal Methodology and would appreciate any suggestions you may have. For this discussion, I'm using "mobile" and "manufactured" interchangeably. Most mobile home parks are actually manufactured home parks, but the rest of the world refers to them as mobile home parks so I'm going to use that terminology here. If you want to discuss "mobile" vs "manufactured", please start a new thread.

I'm primarily interested in the Income Approach. This is typically the primary issue when appraising a park. I've been discussing this with park owners/investors regarding their park valuation approaches.

There are many issues which need to be considered, including the following:
- Cap rate (grey area).
- Are the lots rented or owned by the occupant?
- Are the homes rented or owned by the occupant?
- Are there empty park lots.
- Are there empty park homes.
- What is the park owned homes age and condition.
- What is the park infrastructure, i.e. utilities, separate metering, roads, etc.
- Are the homes considered real estate or personal property.
- Future Potential.
- Etc, etc, etc.

The Park Owners/Investors I've discussed this with use a relatively narrow minded view to value parks. I've seen this view get new buyers into trouble.

I'm interested in coming up with a more realistic park valuation methodology. I know the methodology will be complex, must be flexible to take into account all the variables and will contain subject decisions. This is also why I'm soliciting input from the local experts.

Please submit any relevant comments you have.

muchas gracias.

 

[Tejus]

http://www.vhcb.org/mhpappraisalstandards.htm

 

[Michigan CG]

I'm working on a Mobile Home Park Appraisal Methodology and would appreciate any suggestions you may have. For this discussion, I'm using "mobile" and "manufactured" interchangeably. Most mobile home parks are actually manufactured home parks, but the rest of the world refers to them as mobile home parks so I'm going to use that terminology here. If you want to discuss "mobile" vs "manufactured", please start a new thread.

I'm primarily interested in the Income Approach. This is typically the primary issue when appraising a park. I've been discussing this with park owners/investors regarding their park valuation approaches.

There are many issues which need to be considered, including the following:
- Cap rate (grey area). The cap rate in my former area was relatively low because there was a limited amount of parks allowed, and the municipalities did not want any more mobile home parks. Do not quote me, but I think the cap we used was about 10%.
- Are the lots rented or owned by the occupant? All of the lots were rented in my experience,
- Are the homes rented or owned by the occupant? The mobile home parks would not allow someone to own a mobile home and rent it out....their opinion was that it was bad for the other residents.
- Are there empty park lots.
- Are there empty park homes.
- What is the park owned homes age and condition.
- What is the park infrastructure, i.e. utilities, separate metering, roads, etc. All "homeowners" paid their own utilities with separate meters. I do not remember the sewer and water arrangements.
- Are the homes considered real estate or personal property.
- Future Potential. The mobile homes, and the park tend to lose assessed value as the homes age, lot rents though in this area increased yearly because of the lack of alternatives.
- Etc, etc, etc.

The Park Owners/Investors I've discussed this with use a relatively narrow minded view to value parks. I've seen this view get new buyers into trouble.

I'm interested in coming up with a more realistic park valuation methodology. I know the methodology will be complex, must be flexible to take into account all the variables and will contain subject decisions. This is also why I'm soliciting input from the local experts.

Please submit any relevant comments you have.

muchas gracias.

The Appraisal Institute has a book on this that I have briefly viewed and it is a good publication.

-------------------------------

You do not know what you do not know.

 

[PL1957]

I'm working on a Mobile Home Park Appraisal Methodology and would appreciate any suggestions you may have. For this discussion, I'm using "mobile" and "manufactured" interchangeably. Most mobile home parks are actually manufactured home parks, but the rest of the world refers to them as mobile home parks so I'm going to use that terminology here. If you want to discuss "mobile" vs "manufactured", please start a new thread.

I'm primarily interested in the Income Approach. This is typically the primary issue when appraising a park. I've been discussing this with park owners/investors regarding their park valuation approaches.

There are many issues which need to be considered, including the following:
- Cap rate (grey area).
- Are the lots rented or owned by the occupant?
- Are the homes rented or owned by the occupant?
- Are there empty park lots.
- Are there empty park homes.
- What is the park owned homes age and condition.
- What is the park infrastructure, i.e. utilities, separate metering, roads, etc.
- Are the homes considered real estate or personal property.
- Future Potential.
- Etc, etc, etc.

The traditional definition of real estate for a mobile home park includes the pads as well as any common areas. The housing itself is almost always considered personal property, due to the fact that it actually is mobile and can be hauled away.

The key to the analysis of the real estate is segregating the income generated from the actual real estate and separating it from other, non real estate income. The first example that comes to mind is rental of the actual mobile homes themselves. That traditionally wouldn't be considered as part of the real estate value. Many other income streams are available to an enterprising owner, including repair and maintenance of the homes (as opposed to the park).

Often, with larger parks, home sales will be a significant component of the income as well. Due to restrictive covenants and vague inspection requirements, it can be virtually impossible to move a home into an existing park unless it was purchased, either new or used, from the park owner. At that point, income from sale/resale of units must be segregated as well. Some of the larger operations are vertically integrated to a point where they even manufacture the homes that they sell in the park.

The Park Owners/Investors I've discussed this with use a relatively narrow minded view to value parks. I've seen this view get new buyers into trouble.

If buyers and sellers are using a narrow minded view, why should the appraiser try to do something different? If a simple explanation exists for market behavior, it usually the correct one.

I'm interested in coming up with a more realistic park valuation methodology. I know the methodology will be complex, must be flexible to take into account all the variables and will contain subject decisions. This is also why I'm soliciting input from the local experts.

Please submit any relevant comments you have.

muchas gracias.

The most sophisticated investors will tend to be the manufactured housing REITs (AIC, CPJ, ELS, MHC, SUI, UMH, etc.). Take a good look at their SEC filings to see how they deal with varying income streams. Its actually pretty transparent.

Dont overanalyze.

 

[Terrel L. Shields]

The difficulty I had was finding out how many spaces were leased out and how many had Park owned units that were leased. I found that most parks do own units for lease.

So it gets down to income and finding out the comps mix. Vacancy rates. etc. If you are in an area where it is resticted, that's a problem. If they are crummy old units and bad reputation..problem.

But if you can determine say 50% for $200/mo. (pads) and 50% $500/mo. (rentals)...you can break out the income, the cap rate, and adjustment for different amounts of each kind...Getting that income info will take some doing however.