Financial Glossary
Mobile Home Park Cap Rate
A mobile home park cap rate (capitalization rate) is the ratio of a community's annual net operating income (NOI) to its purchase price or current market value, expressed as a percentage. It estimates the unleveraged annual return an investor would earn at a given price and is the standard shorthand for comparing manufactured-housing communities. A lower cap rate generally signals a higher price relative to income, while a higher cap rate implies more income per dollar invested, often with more operational risk.
Problem & Application
Mobile home park investors use cap rate to compare deals and to spot value, but the input that matters most is a clean, defensible NOI. Parks with tenant-owned versus park-owned homes, deferred infrastructure, or below-market lot rents can show a flattering cap rate that does not survive due diligence. Normalizing income and expenses before applying a cap rate is what separates a real return from a broker's pro forma.
In Short
Cap rate is only as reliable as the net operating income behind it, so verifying the financials is the real work of valuing a park.