1% Rule for Mobile Home Parks

[Keith Meyer]

I'm currently evaluating two mobile home parks for purchase. I love the 1% Rule (Monthly Rent / Property Purchase Price) for SFH and MFH, and am wondering if there are any thoughts on how this applies to a mobile home park investment, where the chattel arrangement applies. Mobile home parks owners typically rent the land to tenants, who own the home on top of the land (chattel). So our income is primarily from lot rent.

I've seen recent figures indicating that average lot rent in the US is around $325-$350 monthly per lot. I'd say a lot of parks I've seen sold recently are in the $30k - $40k per pad range on average, so the 1% Rule seems to hold up fairly well. I'm just wondering if there are other considerations that should be factored in, such as incorporating the depreciable asset of the apartment structure in MFH versus mobile home parks being primarily land, etc. Since both asset classes are commercial property valued on the Income Approach, I'm thinking the 1% Rule should be a good metric for the most part.