How to Underwrite a Mobile Home Park: Complete Step-by-Step Guide

Why Mobile Home Park Underwriting Is Different

Mobile home park (MHP) underwriting follows many of the same principles as apartment underwriting — Net Operating Income (NOI) analysis, cap rate valuation, financing modeling — but several factors make it a distinct discipline. The biggest difference is the land-lease model: in a well-run park, residents own their homes and pay lot rent for the land beneath them. This creates an income stream with remarkably low turnover because moving a manufactured home costs $5,000 to $15,000. MHPs also have unique expenses around infrastructure (water, sewer, roads) and unique valuation methods like the 70x rule.

Step 1: Understand the Revenue Structure

Lot Rent (Primary Income)

Lot rent is the monthly fee residents pay for their pad site. This is the most valuable and stable income stream in a mobile home park. Lot rent covers use of the land, road access, utility connections, and common area amenities.

Average lot rents vary dramatically by market: $200 to $350/month in rural markets, $350 to $550 in suburban secondary markets, and $550 to $900+ in strong metros and coastal markets.

Home Rent (Park-Owned Homes)

Revenue from renting out homes the park owns. Generates higher gross revenue per unit but carries much higher expenses (maintenance, appliance replacement, turnover costs). The industry trend is moving away from POH toward lot-rent-only models.

Other Income

Common sources include utility reimbursements (often the largest "other" category), late fees, application fees, pet fees, storage unit rentals, RV storage, and laundromat revenue.

Step 2: Analyze the Lot Mix

The park-owned home (POH) vs. tenant-owned home (TOH) ratio is one of the most important factors in MHP underwriting:

Every POH unit you can convert to TOH (through rent-to-own programs or home sales) reduces expenses and increases the park's valuation.

Additional Lot Categories

Step 3: Compare Lot Rents to Market

Mobile home park lot rents are frequently well below market. Many parks were purchased decades ago by mom-and-pop operators who rarely raised rents. Research comparable parks in the area using MHP listing sites, property tax records, and direct outreach to neighboring park managers.

If your target park charges $275/month lot rent and comparable parks charge $375 to $425, the $100 to $150/month gap per lot is meaningful upside. Run it on occupied lots only, and net of the same vacancy/collections and management assumptions used for the rest of the park. On a park with 72 occupied lots, a $100/month raise is $86,400 a year of gross lot rent. After 5% vacancy/collections and a 10% management fee, roughly $73,872 reaches NOI — about $1,055,314 of value at a 7% cap rate. That figure assumes no move-outs in response to the increase; a steep raise can push some residents out, and vacant lots earn nothing until they are filled.

Important: Lot rent increases must comply with state and local manufactured housing regulations. Some jurisdictions have rent control or rent stabilization ordinances for MHPs. Research local laws before underwriting aggressive rent growth.

Step 4: Evaluate Infrastructure

Infrastructure is the hidden risk in mobile home park investing. The park owner is responsible for all utility systems, roads, and common areas within the park. A failing septic system or water main can cost $500,000 or more to replace.

Critical Infrastructure to Evaluate

Rule of thumb: Always budget $1,000 to $3,000 per lot for year-one infrastructure improvements on an acquired park, even if the property condition report looks acceptable. Deferred maintenance in MHPs is common and often underreported.

City utilities vs. private systems: Parks on city water and sewer are significantly more valuable and less risky than parks with private wells and septic systems. Private systems require ongoing maintenance, testing, and regulatory compliance, and replacement costs can be catastrophic.

Step 5: Calculate NOI

Example: 80-Lot Mobile Home Park

NOI = $420,660 - $182,466 = $238,194

Expense ratio: 43.4% — within the typical MHP range of roughly 35% to 45%.

Split NOI Into Lot NOI and Home-Rent NOI

Lot income and park-owned home (POH) rent are valued differently (see Park-Owned vs. Tenant-Owned Homes), so the single NOI figure needs to be split before valuation. The allocation used here: each POH lot keeps a lot-rent equivalent at the park's $375 lot rent, and only the home premium above it belongs to the home-rent stream. That stream then carries its own share of vacancy and management plus all POH home maintenance.

Lot NOI = $238,194 - $28,170 = $210,024. Everything else — lot rent from all 72 occupied lots, utility reimbursements, other income, and the park-level expenses — stays in the lot stream.

Step 6: Valuation

Separated-Stream Value (Primary)

Lot income is capitalized; park-owned homes are added at a flat per-home value, the same treatment described in How Mobile Home Park Exit Value Is Calculated. The 7.0% cap rate and $15,000 per home are illustrative — older park-stock homes often trade in that range, while newer homes can be worth considerably more, so tie the figure to local resale comps.

70x Rule Quick Check

72 occupied lots x $375 average lot rent x 70 = $1,890,000 (lot value only)

Plus POH value: 12 homes x $15,000 average = $180,000

70x estimate: $2,070,000

The 70x rule is a rough floor rather than a valuation: it ignores utility reimbursements and other income and assumes a generic expense load, which is why it lands well below the income approach here. Many operators also lower the multiple (to roughly 60x to 65x) when the park carries private water or sewer.

What a Broker OM Usually Shows (Comparison Only)

Capitalizing the combined NOI at one rate gives $238,194 / 7.0% = $3,402,771 — about $222,429 (7.0%) above the separated-stream value. The difference comes entirely from treating $28,170 of home-rent NOI from depreciating homes as if it were perpetual land income. The exit value guide explains why that treatment tends to overstate value.

Which Method UWmatic Uses Where

• Free screener (/calculator): a quick check that capitalizes lot income and home income at two separate cap rates (7% and 10% by default) and shows a 70x lot-rent figure.
• Full underwriting: the exit is valued as lot NOI divided by the exit cap rate plus park-owned homes at a flat per-home value, less selling costs. The analysis page also shows a quick lot-rent multiple of 60x to 70x depending on who pays for water and sewer, and an as-reported vs. institutional comparison of the going-in value. The exit cap rate and selling costs are editable; the per-home value comes from the park-owned home values you enter, or a default when none are entered.

Step 7: Model the Value-Add Plan

Every NOI change below is shown after 5% vacancy/collections and a 10% management fee, the same assumptions as the Step 5 example, and only on lots that are actually occupied.

Stabilized NOI is $291,108: $277,023 of lot NOI plus $14,085 of home-rent NOI from the six remaining park-owned homes. Selling homes lowers NOI, but under the separated-stream method it barely moves value — the home-rent income was never capitalized, and the homes convert to cash at roughly their flat value.

Holding the exit cap at the 7.0% going-in rate (no compression), the stabilized separated-stream value is $277,023 / 7.0% + 6 homes x $15,000 = $4,047,464, before selling costs, the cost of the five infill homes, and any capital plan. That is about $867,121 above the $3,180,343 going-in value. If the exit cap instead expands to 7.5%, the stabilized value falls to $3,783,633 — a reminder that the plan's value depends on exit-cap assumptions as much as on operations.

These figures are illustrative; actual results vary with market rents, resident turnover, infill costs and timing, and local regulation.

For a full checklist of what to verify before closing, see The MHP Due-Diligence Checklist. Related reading: Underwriting MHP Infill: Yield on Cost, Lot by Lot and Park-Owned Homes: The MHP Expense Load Models Miss.

UWmatic is an AI-powered underwriting platform built for multifamily and mobile home park investors. It parses MHP P&Ls and lot rolls, separates lot rent from park-owned home income, and values the exit the way this guide describes. Try the free underwriting calculator →

This guide reflects current market interpretations as of the publication date and may evolve as new data becomes available. Figures cited are illustrative and drawn from general market conventions; they are subject to revision. Nothing in this post is investment advice; readers should conduct their own diligence and consult qualified professionals before making investment decisions.