MHP CAP Rates - 2020

[Dustin Wiskes]

Hello Everyone,

I am looking to make an offer on an off-market MHP in Wisconsin and would love some help on what CAP rate would be appropriate to use for pricing. I know rates will vary widely based upon park location, size, infrastructure, etc., but I'd love to understand what other folks are using today when making an initial offer to purchase. Here are some details on the specific park:

40 pads, 100% occupied, all TOHs, avg lot rent $250, CSW metered, town size of 5000 (no metro unfortunately, but town does have a Super Walmart about 2 miles from park and a test ad indicated a high demand). What CAP rate would be appropriate to use based on this information?

Thank you for any help!

Dustin

[Jack Martin]

@Dustin Wiskes if you are not familiar with cap rates in a particular market, the best folks to call are commercial brokers, lenders, or appraisers in that market.  In a small market like that, cap rates can be largely subjective and I wouldn't be surprised to call 10 commercial brokers, lenders, or appraisers and receive 10 different answers within a spread of 3 points or so. Also, cap rates are not just a location based metric, but also include the volatility of the particular market's economy, and the quality of the asset. 

Do that research with commercial brokers, lenders, or appraisers to gain an average. Then, before you make an offer, see if the seller knows what the cap rate is.  If he agrees, you know where the expectation of pricing will be.  If he doesn't, now you have done your research with credible resources and you can educate the seller, gain incremental agreement through cap rate, and arrive at a price. 

All the best,

Jack