Are deferred maintenance items figured into cap rate?


#1

Hi all, I’m trying to put together an offer on a 35 space MHP.

There is some deferred maintenance / one-off cap expenses that need to be addressed. Are these factored into the cap rate? I’m trying to arrive at an offer price that is a solid 10-11% cap, and I’m not sure if I should add these in – since they won’t be recurring – or arrive at an offer price without them, THEN subtract the expenses to arrive at a final offer price.

Thanks in advance!


#2

Your second suggestion is the most accurate way to do it. Typically you arrive at a value then subtract it from the price. If you’re already under contract and you discover deferred maintenance that was misrepresented, then you may ask for a credit.


#3

Come up with your value and then deduct the estimated deferred maintenance. You may want to add some additional cost for your time and effort to coordinate and hire contractors.