how do you decide a cap rate for a mobile home park that does not include the land. it is a ground lease.

65 spaces, no vacancies, no rentals or owner mobiles, built in 1964, rent $200 per month, very clean and well managed
In Selling Property - Asked by Kathy G. - Jan 23, 2013
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Answer(s)

Bill M.
Broker/Agent
Southlake, TX

Without the land, you can not maximize your sales price. Include the land lease with your expenses to deduct from your income to arrive NOI. Now, what return would a buyer of that cash flow want to earn? I would expect at least 10% depending on location and other demand factors.

Jan 23, 2013
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Stephen L.
Broker/Agent
West Des Moines, IA

I agree with Bill's answer and would add the length of the lease may make a difference. What is the lease term? Depending on the length of the lease I'd either increase or decrease the NOI deduction for investment risk. You should make some adjustment depending on a long or short lease term. The longer the lease term the less of a rent factor. The object is to recapture the investment and to make some return on the investment. If the lease term is 10 years you not only have to recoup the investment in just 10 years, but make a return and add a point or two to the CAP rate for risk of vacancy, etc.

Jan 25, 2013
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Robert J.
Appraiser
Henderson, NV

The selection of an appropriate cap rate for a leasehold property is both very difficult and very important. A small change in the selected rate can drastically change your estimate of value. I urge you to hire a competent Cerifited General Real Estate Appraiser in your area to help you. The savings will probably far exceed any fee you pay them.
Bob James
Certified General Real Estate Appraiser
San Diego, CA

Jan 25, 2013
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