Buying a Mobile Home Park

[Dominick Dahmen]

I'm looking at a 44 space MHP. It's offering price is $1,350,000, and net income is $106,000. So a 7.8% cap rate. The thing is that the rents are considerably below market (according to seller which I need to verify) 315 and market is 475. What is interesting is they have put together essentially a 4 year plan to increase values to $176,000 without filling the 12 vacant lots. This would include metering water and raising rents to 475 over a few years.

It seems like they are partially valuing the park on the future profitability of the park (which isn't guaranteed). Maybe the park isn't as nice as the other one in the area?

Does anyone have any suggestions or input?