Our subcontracted Appraiser Tom Borzell’s valued 5 mobile homes on 61 pads. 5 of the pads were owned by the park and valued separately. This resulted in an increased value of $50,000 for each pad. Tom determined that the average construction of a mobile home has a 25 year economic value. Tom then estimated these five pads to have between them an economical value of five to ten years, with an average remaining economic value of 7.6%. That meant they had a 13.1% return. The five units to rent were only getting $523 out of a market value of $575. Taking into account a 10% vacancy factor and 25% expense ratio, Tom ultimately estimated the value at $12,151 per mobile home and thereby raised the total value of the property by $50,000. Well done, Tom!
Below is a useful graph if you are more of a visual person when it comes to calculations. Here you can see how Tom estimated the market value of the subject’s five mobile homes. Key to the calculation was including a cap rate of 22.7%. 9.5% used for the pads only + 13.16%, the return of the 7.6-year average remaining economic life of the units. 1 divided by 7.6 = 13.16% per annum return of investment. And a 25% expense ratio on the marginal income generated by the mobile homes, versus approximately 35% expense ratio on the pad-only operation. It’s important to note that mobile homes have no R/E taxes but need about $500/unit/year for repairs and maintenance.
Based on the above analysis, the subject’s five park-owned mobile homes were projected to have a contributory value of $50,000 as of 12/2/2017. This graph illustrates Tom’s estimate for the contributory value to the mobile home park.