Valuing a fully occupied, lot rent only MHP

Doing my due diligence on my first mhp purchase. Any rules of thumb for valuing a fully occupied park that I would receive only lot rent on?

I’d like to target a 15% cap rate, does that sound a little too rosy? Seems like a lot of parks on here are selling for ~9-10% target.

Note- the park I’m considering is only 10 spaces

I would be ok with a lower cap rate than that if it were fairly close to me or other real estate we owned. 15 cap sounds hard to find but maybe it’s just because I’m not finding them!

I’d love to find some small 15 cap parks within an hour of Austin, TX or Louisville, KY where I or my partner is!

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Thanks for the response. Just for clarification, you are saying you’d be ok with a cap rate lower than 9-10%?

I should clarify that the listed asking price puts it at a ~7-8% return.

Based on some comps I think it’s overpriced and will be putting together a few offers well below asking. Based on market data it can support a slight lot rent increase that would push the cap rate up towards 9%, but anything above that is really pushing it.

With the lot being fully occupied and almost at max market rent, I think the asking price is rather high.

Thoughts?

I would think the same thing. It sounds like it has little upside so I would want above a 10 cap personally especially since it’s so small.

These days, most people are using market rates for figuring out your cap rate, or at least figuring in your first rent increase into your cap calculations. Because the park is so small, I would want a higher cap rate than the more typical 7-8% range you mentioned. I would probably want something in the 10-14% range for it to be worth my time, range depending on the desirability and stability of the asset, and the age of the existing tenant-owned homes.

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