I’m a commerical agent who buys mobile home parks (MH parks) for personal investment and syndications. The true value in a MH park is to own the land, not the homes. (Ironically I currently own a MH I bought on a tax sale, use it as a rental, and it is doing great!). Having owned several MHs, they wear out over time and have high maintenance costs. They simply cannot be compared on an apples-to-apples basis to single family homes, especially if you have tenants who don’t treat them well.
I often see listing agents using the value of all the park-owned MHs rental income for a sales price on a park without considering the maintenance involved. Often the maintenance numbers are staggeringly low - while I can’t prove this, I suspect that the seller has neglected maintenance for the last few years. As a result, you have an asset which is unlikely to appreciate, has lots of deferred maintenance, will continue to have high annual maintenance, and yet shows high levels of income. If you use this with an aggressive cap rate (4-6%), and a sales agent can come up with a grossly over exaggerated sales price, and to someone who doesn’t know MH parks, it may actually look ok.
My fix is that buyers need to be aware to this tactic, and read notes like this and other articles on the true cost of owning a MH rental. Sellers need to be aware maintenance costs, and realize that a MH park is not as simple as using the trailing 12 and NOI with a local CAP rate to get a sales price. If a selling MH park does not have realistic maintenance numbers, then possibly historical numbers should be used in its place.
