How to analyze MHP deals with a low cap

[Justin Jones]

Hey everyone, I am trying to wrap my head around analyzing MHP for sale with a low cap rate, say 4-5. Do you approach it differently than one for sale that is at a 10 cap? Does the cap rate matter that much?

For example, say the park has 43 POH and 20 are vacant and need repairs ($500/month). There are also 20 RV lots and 10 are rented ($320/month). It has 5 apartments with one rented ($640). Park is listed for sale at 1.2M for a 4.5 cap. It is city water/sewer/trash included in rent and water is not sub-metered ($30k per year)

When I look at everything involved, it seems like it is only worth $500K to $700k. 

Am I looking at it wrong? Or do I just have to pay for the potential that is there? Any advice would be greatly appreciated.