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

Every week somebody tells me they read a national average cap rate for parks, so their park should sell at that number. 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 sits well above the averages 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. That's the whole formula. Turn it around and you have a valuation: your NOI divided by the cap rate a buyer will accept is what the park is worth. 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 low cap rate, that's an expensive park. When your park prices at a higher one, 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 are pulled way down by the trophies: big, 200-plus-lot communities, city water and sewer, nearly full, in metro markets, bought by institutions with cheap agency debt. Those trade at the tightest cap rates in the business. 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. And for the smaller, older, park-owned communities in tertiary Florida markets, the ones I sell most, buyers want a higher return still. 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 it's the single biggest swing in cap rate I see. I broke that down in park-owned vs tenant-owned homes.

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. More on that in well and septic vs city utilities.

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 a cap rate well above anything you'd see in a national survey. On paper that looks steep next to the 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 off a survey because a magazine 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.

How to work out your own park's cap rate

You don't need a survey to get close. Start with an honest NOI from your own books: the rent you actually collected over the last twelve months, minus every real cost, with today's insurance and the tax bill a buyer will inherit after the sale. Then walk your park through the four drivers above. Mostly tenant-owned, city utilities, full, in a growing county, a decent size? You sit at the tighter end. Mostly park-owned, on a well and septic, some empty lots, a thin market, a small park? Every one of those pushes the cap rate up.

Then check yourself against real sales. If you know what a comparable park sold for and roughly what it earned, divide one into the other and you have the cap rate a real buyer paid. You can also sanity-check the value your cap rate produces against what Florida parks actually sold for per lot in the public record. If your number works out far above what parks like yours sold for, your cap rate is too low.

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.

Questions owners ask

What is a good cap rate for a mobile home park in Florida?

The honest one for your specific park. For the older Florida parks I sell most, that sits well above the national averages in the headlines. Those averages are pulled down by big institutional communities on city utilities in metro markets, which trade at the tightest cap rates in the business and look nothing like most Florida parks.

How much does home ownership change a park's cap rate?

More than anything else. On my deals, the gap between a tenant-owned park and a park-owned one is the single biggest swing in cap rate I see. Tenant-owned, lot-rent parks price tighter because they are clean and land-like. Park-owned communities price higher because the buyer takes on aging structures and heavier management, and older park-owned single-wides get underwritten more like apartments.

Do well and septic raise my park's cap rate?

Yes. City water and sewer prices at a lower cap rate. A well or septic field raises it, and a private sewage treatment plant raises it more, because the buyer is pricing in the risk of a big infrastructure bill and the cost of a licensed operator. In my underwriting, city utilities rank above well and septic, which rank above a private plant.

Do small mobile home parks sell at higher cap rates?

Usually slightly higher. Parks under about 25 lots have a thinner buyer pool and harder financing, and thin demand always shows up as a softer price. Size is one of four things I adjust for, along with who owns the homes, the utilities, and occupancy and market, when I land on a cap rate for a park.

How do I figure out my park's cap rate?

Divide your net operating income by the price. Net operating income is what is left after real expenses but before any loan payment. To value your own park, run it the other way and divide your NOI by the cap rate that fits its risk. A lower cap rate means a higher price, and a higher cap rate means a lower price.

This is how I price cap rates every day as a Florida mobile home park broker. Call me and I will tell you where your park sits.