Need help with "how small is too small"

I found a “cheaper” park listed at $500k, but I think they might bite at much lower number.

Town has pop of 3k, unemploy rate of 7% and med home px of $88k. But I downloaded all listed homes (110) in the larger metro area and the avg home for sale = $130k (talked to several agents and they confirmed barbell of old run down homes and newer more expensive homes- nothing in the middle)… town sits in between (15 min on either side) two larger towns each with pops of 60k/7% unemploy/med home pxs of $115k.

Pad rent is $175, POH $350-400 rent (vs. class C, 2BR apart rent avg of $600+)
NOI of $50k
Expense ratio of 40% run rate (but they pay for external prop mgt co)
42 spaces (17 POH, 14 lot rentals and 11 vacant)… owner is outside of town and hasn’t marketed to fill spaces, POHs stay rented (2 evictions in last 3 yrs)
Water and trash directly billed to tenants…

Net Net - strong rental mkt, admittedly a rural area but sits in between two larger towns, probably a poor housing mkt, mkt rents look to be $175-200 (but $200 comp pays for trash)… is this too weak a market?

Valuation of something like $435k would be a 10-cap on realistic NOI + values POHs at ~$2,500 each… not a stretch.
@frankrolfe, @Jefferson, When does a legit 10-cap in a strong rental market get overwhelmed by the “ruralness” of a low income town that depends on a 15-min commute? Thanks!

Test advertisement will tell you about the demand. There are several investors who invest exclusively in ultra small towns and are very successful.

However you typically see a 12% cap or more in tertiary markets like this, especially in the Southeast and parts of the Midwest US.

Thanks @jhutson, I think that (smaller, more rurul parks) might be my business model for the first few years… cap rates drop quickly when you get closer to Richmond (some listed now for 7-8% caps and [HNW] owners staying firm on price.

Go to and find the “metro” tab on the top of the page. If it says “none”, then you’re probably in trouble. If it has a metro, then that’s your official metro population.

The problem you’re going to have if it says “none” is that you’re going to be branded as extremely rural at roughly 3,000 population and that will greatly diminish your ability to get a loan and a buyer down the road.

Go check the metro tab and tell me what it says.

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