Trying to value a park where are 80% of the homes are straight rentals, and by that I mean there is no path to ownership in place. No lease-option, no rent-to-own, no rent-credit program.
My understanding about why we should never cap home rent income boils down to the two main points
you can end up with a value for the home higher than what it would cost to bring a home in (example: home rent is $300/month x 12 months x 10 cap = $36000, but you could buy and bring a home in for less than that, so you are paying too much)
on any of the path-to-ownership programs, that payment will go away someday! Tenant might complete the program 3 months after you buy the park and now you no longer see that payment that you paid for.
For the park I’m looking at, at least this second part is not true, the park really owns the homes. Here’s some simplified math:
50 lots @ 300/rent
40 homes @300/rent
what’s your math look like?
Thanks as always,