The most common mistake mobile home park owners make when selling is thinking their park is worth what they paid for it, plus some appreciation. Mobile home park value is driven almost entirely by income — specifically, the net operating income the park produces and what investors are willing to pay per dollar of that income. Here is how to calculate your park's value with real numbers.
Step 1: Calculate Your Gross Income
Add up all annual revenue: lot rents (the primary income source), park-owned home rents if applicable, laundry income, storage fees, late fees, and any other recurring income. Be honest — use actual collected income, not theoretical full-occupancy income. Buyers will verify every number during due diligence.
Step 2: Calculate Your Net Operating Income (NOI)
NOI = Gross Income minus Operating Expenses. Operating expenses include property taxes, insurance, utilities (water, sewer, electric for common areas), maintenance and repairs, management fees (typically 8–12% of gross rents), and any other recurring costs. Do NOT subtract mortgage payments — NOI is calculated before debt service.
Example: 50-lot park, average lot rent $350/month. Gross income: $210,000/year. Operating expenses: $72,000/year (taxes $18k + insurance $8k + utilities $22k + management $16k + maintenance $8k). NOI = $138,000/year.
Step 3: Apply a Cap Rate
Divide your NOI by the prevailing cap rate in your market to get an estimated value. Cap rates for mobile home parks currently range from approximately 5% (premium, high-occupancy parks in strong markets) to 10%+ (rural parks, high vacancy, or deferred maintenance issues).
Using the example above at a 7% cap rate: $138,000 ÷ 0.07 = ~$1.97 million.
What Increases Your Park's Value
- Raising below-market rents: Even a $50/month rent increase across 50 lots adds $30,000/year to NOI — worth $428,000 in value at a 7% cap rate
- Increasing occupancy: Each occupied lot adds recurring income that capitalizes directly into value
- City water and sewer: Parks on public utilities sell at lower cap rates (higher prices) than those with wells or septic
- Professional management: Well-documented operations reduce buyer risk perception and support lower cap rates
- Tenant-owned homes: Parks where tenants own their homes are more valuable than parks with high park-owned home inventory
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- High vacancy (below 80% occupancy)
- Well and septic systems that require ongoing maintenance
- High concentration of park-owned homes (adds management burden)
- Deferred infrastructure maintenance (roads, water lines, electrical)
- Zoning issues or non-conforming status
- Delinquent tenants and poor rent collection records
Frequently Asked Questions
What is a cap rate and how does it affect my park's value?
A cap rate (capitalization rate) is the ratio of a property's NOI to its value. If a park has $100,000 NOI and sells at a 7% cap rate, it's worth $1.43M. Lower cap rates = higher prices. Buyers in strong markets accept lower cap rates because they see less risk.
How do I know if my lot rents are below market?
Research what comparable parks in your county or metro area charge per lot. Mobile home park investment forums, local property managers, and park brokers can give you market data. If your rents are 20%+ below market, buyers will underwrite the upside but discount for the execution risk.
Does it matter if my park has well water and septic?
Yes, significantly. Parks on city water and sewer sell at cap rates 1–2 points lower (meaning higher prices) than parks on private utilities. Buyers know that well and septic systems carry maintenance risk and regulatory scrutiny.
How many lots do I need to attract institutional buyers?
Most institutional buyers and REITs look for parks with 75–100+ lots minimum. Below that, you're primarily marketing to regional operators and individual investors. Parks under 20 lots typically sell to individual investors or owner-operators.