Lot-rent worksheet
What is your mobile home park worth?
A park is valued on its net operating income divided by a cap rate, and lenders want lot rent to carry most of it. Rent from homes the park owns counts too, but lenders cap how much of it they'll lean on, so this worksheet keeps it in its own line.
The park's income
| Lot rent if every pad were full | - |
|---|---|
| Lot rent collected | - |
| Home rent, park-owned homes | - |
| Bill-backs and other income | - |
| Less bad debt | - |
| Collected income | - |
| Operating expenses | - |
| Net operating income | - |
| NOI from lots alone | - |
Value
| At the high cap rate | - |
|---|---|
| At the midpoint | - |
| At the low cap rate | - |
| Per pad, midpoint | - |
| Lots alone, midpoint | - |
What a lender will notice
- Turn on JavaScript to run the worksheet, or work it by hand from the method below.
How the worksheet gets its numbers
Net operating income is collected income minus operating expenses, before any loan payment. Value is NOI divided by the cap rate. On the example park, $268,000 of NOI is worth $3.83 million at a 7% cap and $3.15 million at 8.5%. That spread is why you see a range.
Home rent is shown on its own line because it isn't the same income as lot rent. A lot tenant owns the home and pays for its upkeep; a home renter can leave with a phone call, and the park pays to fix and re-rent the home. Freddie Mac won't finance a park where homes owned by the borrower, its affiliates and outside investors add up to more than 25% of the homes. Fannie Mae's limit is 35% of homes being tenant-occupied, with a business plan once it passes 25%. The "lots alone" line strips out home rent and home costs so you can see what the dirt is worth by itself.
Fannie Mae underwrites at least 5% economic vacancy, so a full park with almost no bad debt still gets haircut. The worksheet flags it when your numbers come in under that.
Where park sellers overstate NOI
Leaving out management because the owner does it. Leaving out reserves. Counting utility bill-backs as income without showing the water bill they offset. Using lot rent from the new rent letter when half the residents haven't hit their renewal date yet. Underwriters add these back.
A rent increase you plan after closing is a business plan, not current income. Lenders size on what the rent roll collects now. Raise rents under the lease terms and the notice your state requires, and apply the same rules to every resident: lot rent and fees can never vary by race, religion, sex, disability, familial status, national origin or any other class your state protects.
More on this: valuing a park on lot rent and park-owned homes and lenders.
Next step
Send this park to the desk
Janover Capital is a commercial mortgage brokerage. Send the park and the loan you want; a person at the desk replies, and if you want to go ahead, takes it to agency, bank and conduit lenders that finance manufactured housing communities. Your worksheet numbers go with the request so nobody asks you twice.
The worksheet is an estimate from the numbers you enter. It isn't an appraisal, and it isn't an offer to lend.