How to Value a Mobile Home Park: The Cap-Rate Method, Step by Step

Ask ten brokers how to value a mobile home park and you'll get one formula and ten opinions about the inputs. The formula is the easy part. The money is made — or lost — in how honestly you build the income statement and how defensible your cap rate is. Here's the method buyers actually use, and the park-specific traps that make MHP valuation different from valuing an apartment building.

The one formula that drives every MHP valuation

Income-producing real estate is valued on its net operating income and a capitalization rate: Value = Net Operating Income (NOI) divided by the cap rate. A park throwing off $120,000 of NOI at a 7% cap rate is worth about $1.71 million; the same NOI at a 6% cap is worth $2.0 million. That single point of cap rate moved the price nearly $290,000 — which is why both numbers are worth getting right.

Everything else in park valuation is really an argument about two things: what the true, normalized NOI is, and what cap rate a buyer will pay for it. Get comfortable with those two, and you can sanity-check any price a broker puts in front of you.

Building an NOI that survives due diligence

NOI is all the property's income minus all its operating expenses — but not mortgage payments, depreciation, or capital improvements. The most common way sellers inflate a price is by handing you a 'pro forma' NOI built on rents nobody is paying yet. Start from the trailing twelve months (the actual T-12), then normalize.

On the income side, a park usually has more revenue lines than an apartment: lot rent (the tenant owns the home and rents the ground), home rent on any park-owned homes, and utility billbacks where you recover water, sewer, or trash. On the expense side, watch for costs a seller conveniently left out — property management, an owner who managed for free, deferred maintenance, and the real property-tax bill after a sale re-assessment.

• Count
  Lot rent (in-place, not market), park-owned-home rent, utility billback income, late fees, and other recurring income.
• Normalize
  Add a market management fee even if the seller self-managed; reset property taxes to the post-sale assessed value; strip one-time income.
• Exclude
  Mortgage/debt service, depreciation, and capital expenditures — those sit below the NOI line.
• Verify
  Tie every income line to a rent roll and bank deposits, and every expense to a bill. A T-12 that does not reconcile to deposits is a red flag.

Choosing a cap rate (and why there is no single right number)

A cap rate is the market's required yield for that specific park, and it moves with risk and demand. Nationally, mobile home park cap rates have generally traded in a band from the high-5% range to the mid-7% range in recent years, but that is an industry-reported range, not a rule — it varies widely by market, park size, utility setup, and the moment you're buying in. Always ground your number in current comparable sales and a broker's opinion for your specific submarket.

What pushes a park toward the low (more valuable) end of the band: a strong metro location, public water and sewer, mostly tenant-owned homes, larger lot count, and clean, verifiable financials. What pushes it toward the high (cheaper) end: private utilities like well and septic, a high share of park-owned homes, small lot count, deferred maintenance, or a rural location with thin demand.

The park-specific adjustments buyers actually make

This is where MHP valuation diverges from apartments. A sophisticated buyer rarely takes the seller's NOI at face value — they re-underwrite it against how the park will run under their ownership.

• Discount park-owned-home income
  Rent on park-owned homes is more like operating a rental business than collecting ground rent — higher expense, turnover, and depreciation. Many buyers value lot rent at the park cap rate and value home rent separately (or at a higher cap), because the home is a depreciating asset, not land.
• Price the vacant-lot upside separately
  Empty lots produce no income today but carry infill potential. They are usually valued as upside — a per-lot fill cost against future lot rent — not baked into current NOI at the going-in cap rate.
• Adjust for the utility setup
  Master-metered water on the park's dime is an expense drag until you submeter and bill back. Well and septic add capital risk. Public utilities with billback in place is the cleanest, most valuable configuration.
• Reset in-place vs market rent honestly
  Below-market lot rent is real upside, but you have to underwrite the notice periods and any rent-control limits in that state before you assume you can raise it.

Price-per-lot and comps: useful sanity checks, not the answer

You'll hear rules of thumb like a price-per-lot figure or a gross-rent multiple. They're fine for a five-second gut check on a listing, but they ignore expense ratio, utility structure, and park-owned-home mix — the exact things that determine whether a park is a good buy. Use them to flag an obviously mispriced deal, then do the NOI-and-cap-rate work before you make an offer.

Comparable sales are more reliable, but true MHP comps are scarce and often private. That's why a broker opinion of value plus your own re-underwritten NOI beats any single shortcut.

The valuation mistakes that cost buyers the most

The expensive errors are almost always on the NOI, not the cap rate: trusting a pro-forma rent roll, missing the property-tax reset after sale, valuing depreciating park-owned homes at the land cap rate, and ignoring a master-metered utility bill that quietly eats the margin. Build the income statement from verified actuals, value the land income and the home income differently, and treat vacant-lot infill as upside rather than in-place NOI.

If you want to pressure-test a number quickly, start with our mobile home park valuation calculator, then re-underwrite the NOI by hand before you rely on it. And when you're ready to run a park you're buying, Lotly keeps lot rent, home rent, and utility billbacks on one owner statement so your NOI is always a query away, not a month-end reconstruction.