We are looking at a park in Florida and everything seems to be right but the cap rate. Since Florida is not a state we usually look at I am curious what pitfalls we should look out for and what an average target cap rate should be. I know places like California are much lower than the average so I didn’t know if this had a lower cap rate as well.
Any help would be appreciated.
Not an expert, but the experts here regularly recommend staying away from both coasts because of the low cap rates to be found there. 10-12% is possible in the heartland; I’m guessing yours is closer to 6.
I’d be nervous about Florida because of the hurricane risk. And be sure you understand insurance issues. I found out recently that, if my park were fully insured and then wiped out, the best I could get from my insurance company is removal of the wreckage and cleanup of the park, then 6 months of lost-income reimbursement. After that, I either have to fork out major bucks to bring in new homes, or I have to sit and wait for folks to bring their mobiles in.
FL seems to be an 8% cap market. I’d be leery of buying near the west coast (within 10 miles of the water) because of hurricane risk.
Frank avoids all of FL like the plague. I’d probably be dumb enough to buy in FL if I got something closer to an 11% cap and inland from the coast.
Let us know how it works out for you,
We’re in the Tampa Bay area in Florida, and as first time investors, we’re wrestling with the line of thinking that investors should avoid Florida with the benefits of having our first park within an hour or two drive of where we live. We’re thinking that if we stay away from the coasts, we should be able to find parks with both the right prices and less hurricane risk. Would appreciate any thoughts on whether there is “a way to do Florida” smart… Thanks
As a former Florida resident and having lived through a hurricane; inland is really not safer since 12 inches of rain in 24 hours is possible and very high winds. The MH parks in Florida have been scrutinized by buyers for over 30 years. The last time I tried was 16 years ago and since have happily chosen the mid-south (Kansas, Oklahoma, and N. Texas. Having parks in many different states in the past generally the tenant-landlord laws are the best especially in Oklahoma. Stay with exceptions properties and even rural areas where the zoning laws are workable and I am having great success with dealing with retires and second home owners on large lakes. It is very difficult to turn around a troubled park and if you are an absentee owner the bar of success is lowered.
Insurance and property taxes are very high. Also sellers are very proud and their pricing is generally unreasonable.
Florida has been a great mobile home park state for many operators such as ELS. But what separates those who have done well in Florida vs. those who get killed is really about when they bought their park. Any purchase made in 1960 to 1990’s is a winner. After that, cap rates became ridiculously low and there’s no real profit in the deals without land appreciation (which is a risky investment strategy). It’s the same in California. We wish our whole portfolio was in Los Angeles – but only if we had bought in 1980 when the lot rents were $300 per month and not the $1,000 today, and when cap rates were at 10% and not 5% like today.If you can find a well-priced deal in Florida, then that’s great. But they are really, really hard to find.And, of course, all the negatives expressed here, such as hurricanes, hold true, as well.