How Buyers Value Mobile Home Parks: The Income Approach
Unlike single-family homes, which are valued by comparable sales, mobile home parks are primarily valued using the income approach. Buyers look at what your park earns, not what similar parks sold for (though market comps are a secondary check).
The income approach uses two key figures:
- Net Operating Income (NOI) — your annual revenue minus operating expenses
- Cap Rate (Capitalization Rate) — the rate of return buyers expect in your market
The formula is simple: Value = NOI ÷ Cap Rate
Step 1 — Calculate Your Net Operating Income (NOI)
Your NOI is your park’s annual income from all sources, minus all operating expenses — but crucially, before mortgage payments and depreciation.
Annual Income Sources
- Lot rents from tenants (primary income source)
- Income from park-owned homes (POH rents or payments)
- Utility income (if you bill tenants for water/sewer/electric)
- Laundry, storage, or other ancillary income
Annual Operating Expenses
- Property taxes
- Insurance
- Water, sewer, and utility costs (if park-owned)
- Maintenance and repairs
- Management fees (if professionally managed, or 8–10% if you self-manage — buyers add this in)
- Administrative costs, accounting, legal
- Road maintenance, landscaping
- Vacancy and credit loss allowance (typically 5–10%)
Example NOI Calculation:
| Category | Annual Amount |
|---|---|
| Total Gross Rent Income (80 lots × $450/mo × 12) | $432,000 |
| Less Vacancy (5%) | −$21,600 |
| Effective Gross Income | $410,400 |
| Less Operating Expenses | −$160,000 |
| Net Operating Income (NOI) | $250,400 |
Step 2 — Understand Cap Rates in Your Market
The cap rate is the rate of return a buyer expects given market conditions and the risk profile of your property. In 2025–2026, mobile home park cap rates nationally range from approximately 5.5% to 9%, depending on:
- Location: Urban/suburban markets in high-growth states (FL, TX, AZ) command lower cap rates (higher values); rural markets see higher cap rates
- Park quality: Well-maintained, professionally managed parks with stable occupancy earn lower (more favorable) cap rates
- Infrastructure: Public water/sewer parks command lower cap rates than those on private wells or septic
- Lot count: Larger parks (50+ lots) typically see more competition and lower cap rates
- Occupancy: 90%+ occupancy signals stability; lower occupancy increases perceived risk
Step 3 — Apply the Formula
Using our example above with a 7% cap rate:
Value = $250,400 ÷ 0.07 = $3,577,143
At a 6% cap rate (more competitive market), that same park would be valued at $4,173,333. This illustrates why market selection and park quality matter so much — and why improving your NOI even modestly can have a dramatic impact on your sale price.
How to Increase Your Park’s Value Before Selling
Since value is driven by NOI, anything that increases income or decreases expenses raises your valuation:
- Raise below-market rents — even a $25/month increase across 80 lots adds $24,000/year in NOI, which at a 7% cap rate adds $343,000 to your value
- Fill vacant lots — each occupied lot adds to your gross income
- Reduce expenses — renegotiate service contracts, address water leaks, improve management efficiency
- Convert POH to lot rent — selling park-owned homes to tenants on land-lease simplifies your operations and can reduce expenses
- Sub-meter utilities — billing tenants for their actual water/electric usage transfers costs and can increase NOI significantly
Want to Know What Your Park Is Worth? Our team can review your basic financials and provide a preliminary valuation and cash offer at no cost. Contact Mobile Home Community Buyers for a confidential, no-obligation review.