How do you put a price on a mobile home park?

4 Replies

A question I've had for a while is: How do you put a price on a mobile home park (When selling one)?

Mobile home parks that only rent the LOT can rake in a great income. For example: XYZ Mobile Home Park rents 100 units (lots) at $400/Unit. After expenses (Guessing) that would be $435,000 a year. In 15 years that's $6,525,000. So if someone was selling a park like this, how the heck would they price it?! The price can't possibly be better than the income in 15 years. I might be completely off, so enlighten me or join me in my confusion.

Parks are sold just like any other income property.  Cap rates tend to be higher than other real estate investments.

Bill

A formula from Frank and Dave over at mobile home university forum board.

400 x 100 x 12 x .7 =  336000 / .1 = $3.3M

Commercial (parks) are actually easy to price. The difficulty and error comes in re accurate expenses and deferred CAPEX and business risk in general (septic / lagoons / wells).

That's using std factors for 100% lot rent of 30% expense ratio, and selling price at 10% cap rate.   Offer at 12% or higher cap rate...  Or what ever cap rate is your goal.

Originally posted by @Ajay Virdi:

A question I've had for a while is: How do you put a price on a mobile home park (When selling one)?

Mobile home parks that only rent the LOT can rake in a great income. For example: XYZ Mobile Home Park rents 100 units (lots) at $400/Unit. After expenses (Guessing) that would be $435,000 a year. In 15 years that's $6,525,000. So if someone was selling a park like this, how the heck would they price it?! The price can't possibly be better than the income in 15 years. I might be completely off, so enlighten me or join me in my confusion.

You're underestimating expenses; the NOI would be ~$100k less (or in that ballpark) and that is also assuming 100% occupancy (not likely).

And yes, as others stated it's priced similarly to other "commercial" property. A lot-rent only park would be priced in the same manner as an apartment building (ie: noi/cap rate).

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