Mobile Home Park Cap Rates in Florida: What Yours Really Is

Every week somebody tells me they read that park cap rates are around 6 percent, so their park should sell at a 6. I have to be the one to say it: that number probably has nothing to do with your park. For the older Florida parks I actually sell, a realistic cap rate usually lives in the 8s and low double digits, not the 5s and 6s you see in the headlines. Let me explain why the gap is so big, because if you price off the wrong number you'll either chase away every real buyer or leave a pile of money on the table.

First, what a cap rate actually is

No jargon. Your cap rate is basically the return a buyer gets in year one if they pay all cash. Take your net operating income, what's left after real expenses but before any loan payment, and divide it by the price. A park that nets $80,000 and sells for a million trades at an 8 cap. Simple as that.

The important half is which direction it runs. A lower cap rate means a higher price, because the buyer is accepting a smaller return for a safer, cleaner asset. A higher cap rate means a lower price, because the buyer wants more return to take on more risk or more work. So when someone brags about buying at a 6, that's an expensive park. When your park prices at a 9, that's not an insult, it's just the market pricing in what it takes to own it.

Why the headline number is a trap

The averages you read, the ones hovering around 6 percent, are pulled way down by the trophies: big, 200-plus-lot communities, city water and sewer, 95-percent occupied, in metro markets, bought by institutions with cheap agency debt. Those trade in the 4s and 5s all day. But that's a different sport than a 40-lot park on a well and septic outside Ocala.

Once you step down into stabilized secondary-market parks, cap rates drift up into the high 5s through the 7s. And for the smaller, older, park-owned communities in tertiary Florida markets, the ones I sell most, buyers are underwriting somewhere in the 8s to low double digits. Same asset class, completely different neighborhood on the risk spectrum.

What actually moves your park's cap rate

Here's what a buyer is really adjusting for when they land on a number for your park.

Who owns the homes. This is the big one. Tenant-owned, lot-rent parks price tighter because they're clean and land-like. Park-owned communities price at a higher cap because the buyer is taking on aging structures and heavier management. On my deals that difference alone can be four or five points.

Your utilities. City water and sewer is a lower cap. A well, a septic field, or a private treatment plant raises it, because the buyer is pricing in the risk of a big infrastructure bill and the cost of a licensed operator.

Occupancy and the market. A full park in a growing county prices better than a half-empty one in a thin market. That part everybody understands.

Size. Small parks, under about 25 lots, tend to price at a slightly higher cap. The buyer pool is thinner and the financing is harder, and thin demand always shows up as a softer price.

A quick example from a real sale

I sold a small park-owned community up in Lake City that penciled out to roughly an 11 percent cap. On paper that looks steep next to the national headline, but it was the right number: ten aging homes the park owned, no shot at agency financing, and a limited buyer pool. Price it at a 6 because a survey said so and it would have sat on the market for a year. Priced honestly, it sold. That's the whole game, matching the number to the park in front of you instead of the park in the magazine.

The bottom line for your park

A "good" cap rate isn't a single number, it's the honest one for your specific park, and getting it right is most of getting your price right. If you price off a national average, you're using a number built from institutional deals that look nothing like what you own.

My valuation model does this the way I do, blending the two park types and adjusting for your utilities, occupancy, size, and market to land on a cap rate and a value that a real buyer would actually pay. Run your park through it and you'll see the number it lands on, and why.