Mobile Home Park Valuation

[Jeremy Hebert]

I am looking at purchasing a small mobile park with 4 park owned units.  What is a good way to value the park with the park owned units?  I have the value of current rents being paid.  

[Landon Bleau]

Base it on the cap rate, figure out the return that you want on the property (cap rate) and once you have that, divide the net operating income (income after the operating expenses are deducted) by your cap rate and that'll give you the value you should pay.

Ie, if you want 10% return on your money (10% cap rate), and the NOI of the park is $20,000/year, you should offer $20k/10%= $200k.

Keep in mind someone else may be willing to go down to a 5% cap rate, in which case they'd be willing to pay $400k for that same property.