Here’s my estimate of what size operation you might think about:
For a stabilized park, assume you can get 6% bank financing at 30% down on a 30-year amortization schedule – although maybe you can do somewhat better. You’ll be paying $4.20 per $1k of purchase price, per month. ($700 financed per $1000 price).
By definition, at a 10% cap rate, you’ll be earning $100 per $1k of purchase price, per year, which is $8.33 per month.
This means you would be netting a cash flow of $4.13 per month per $1k purchase price. To get a cash flow of about $6k per month you’re talking about a $1.5M park (~$450k down)
Keep in mind that many parks come with park-owned homes which cannot be financed so you have to account for them & pay for them separately. You should apply the cap rate to the land-rental business only (not the home rentals!)
Here’s another way to look at it:
The net income of the park will depend on the lot rents & profit margin. Frank & Dave advise using a gross rent multiplier of 0.7 to find the net income (0.6 if utilities are sub-metered), although if you are learning, probably 0.6 is better to be safe.
As an example: $325 average lot rent x 70 occupied (rent-paying) lots = $22,750 per month of gross income, times 0.6 is $13,650, minus $6300 for the mortgage, leaves $7350 per month.
So you should be thinking of parks in the $1.5 million range, with gross income of $20k per month or so (lot rent only).
However, as you start out keep in mind that you want to get a good deal that will allow you plenty of room for error. Even so, it is possible to find parks that are cash-flow positive from day 1, and with some management can produce better returns than the net income on which you based the purchase price.
Keep in mind that some of the mortgage payment is principal paydown, so this builds your equity (slowly) although it doesn’t help your cash flow.
Anyway that’s my 2 cents,