Valuing Park Owned Homes

I’m looking to purchase my first mobile home park. I’ve read all your books and listened to all the CDs. Frank and Dave’s message about valuing Park Owned Homes (POHs)

at “zero” when figuring a CAP rate is stated loudly multiple times. So does their message about buying at a minimum true 10 CAP. Looking at all the listings on in my area (South-Mid East), every one without POHs are looking for a 6-8 CAP. The ones at a 10-11 CAP have a lot of POHs and the owners insist that the home rental income should be included in the CAP analysis, since they’ve also accounted for the maintenance/repair costs for these homes.

I understand that mobile homes are not built like apartment complexes, so its not reasonable to value them as such.

The question I have is this… If, for example, the seller is renting the homes for $300/month, at a 10 CAP, those homes are being valued at $36,000. We’re told that this is

no good, since these homes are likely only worth about $5-10k. BUT, why shouldn’t we consider some amount of the $300 towards “Lot Rent”? I know that banks don’t give any value for rental homes, but I’m not seeking bank financing. Is it reasonable to argue that the pads that these homes are sitting on are generating no rental income? There is money coming in from all these rentals.

The problem is that I don’t see any parks listed anywhere near a 10 CAP unless they have and are figuring in a lot of rental homes. And we all know, that once you start digging in to the seller’s numbers, the true CAP rates only get worse.

So, what to do?? Settle for less than 10 CAPS? Allow the seller to factor in rental homes in figuring in the CAP (as long as the repair costs are properly factored in)?