Every mobile home park gets sold on a number. The brochure shows an NOI, a cap rate, and a price, and it all looks tidy. Then you run the financials yourself and the number moves. Sometimes it moves a lot.
Here is how I underwrite a BC park, what actually belongs in the NOI, and why two buyers can look at the same property and land 20% apart.
The formula every buyer learns first
Mobile home parks are income real estate. They get valued the same way most commercial property does, through the income approach.
Value = Net Operating Income ÷ Capitalization Rate
If a park throws off $150,000 of NOI and similar parks in the area trade at a 6.5% cap rate, the indicated value is $150,000 ÷ 0.065, or about $2.3M.
That equation never changes. What changes is what each buyer puts into the NOI line and what cap rate they apply. That is the whole game. Get the NOI right and the rest is arithmetic.
What NOI actually means in a BC park
NOI is the income the land produces after operating expenses, before debt service, before income tax, and before capital spending. It is the engine. Everything in valuation runs off it.
Build it from the top down.
Start with gross income
Gross income starts with pad rent. Thirty pads at an average of $550 a month, fully occupied, is 30 × $550 × 12, or $198,000 of gross potential rent.
Everything else goes on its own line, never buried inside pad rent. Proportional rent, late fees, laundry, storage, and any park-owned home rent. Park-owned home income carries a different risk profile than pad income and is valued differently. Typically we value park-owned homes based on what they would sell for instead of applying a cap rate to the income.
Take out vacancy and credit loss
Two different things hide in this line, so I keep them apart.
Physical vacancy is about the pad. Is there a home on it, occupied and paying. Economic vacancy is about the rent. It is the income you fail to collect even on pads that are occupied, through non-payment, concessions, or rent sitting below what the lease allows. A pad can be physically full and still economically vacant if the tenant is not paying.
On a stabilized park I carry about 1% for credit loss, the economic side of the line.
For physical vacancy, an empty pad that cannot be filled, because the lot is too small or the municipality will not permit a home on it, is worth zero in the NOI. An empty pad that could be filled is upside, not income. I do not pay today for rent that does not exist yet.
Subtract honest operating expenses
The real expense lines for a BC park are property taxes, insurance, the utilities the park pays directly, repairs and maintenance on the infrastructure, management or caretaker pay, professional fees, snow removal, landscaping, and a reserve for capital replacements.
In BC I see well-run parks land in the 20% to 30% expense-to-income range, and if utilities are separately metered sometimes under 20%.
One honest note on the reserve. NOI is technically before capital spending, so some appraisers show NOI first and carry the reserve below the line. Fine. Just make sure a reserve lives somewhere in your math and aligns with what is the norm for the comparable cap rates being referenced. Pretending the water/sewer lines and roads never need money is the fastest way to overpay.
The rent rules that cap your upside
BC pad rents live under the Manufactured Home Park Tenancy Act. The 2026 allowable increase is 2.3% plus proportional rent, a pass-through for changes in local government levies and regulated utility fees.
Two things matter here.
First, proportional rent is not bonus rent. It exists to recover rising property tax and regulated utility costs, spread across the pads. It offsets an expense increase. It does not drop to your bottom line, so do not underwrite it as growth.
Second, assignment of a tenancy does not reset rent. When the park changes hands, the existing rents come with it. So I underwrite from in-place rent and treat any gap to market as an upside scenario, not the base case. If a seller is showing you market rents the park does not actually collect, that is a story, not a number.
Watch how the margin moves over a hold
Here is something brochures never mention. Your rent is tied to inflation and capped near it. Some of your costs are not.
Operating expenses can grow faster than the capped rent, and proportional rent only recovers tax and regulated utilities, nothing else. Over a long hold that can squeeze your margin even in a park you run well.
It is not a rule. A park where tenants are individually metered and pay their own utilities, or one where you are bringing below-market rents up through turnover, can hold its margin or improve it. The point is to test it, not assume it. The cap rate you assume on exit deserves the same scrutiny as the one you buy at, because a park is not a bond. The margin moves.
Cap rates in BC right now
Across BC I am seeing stabilized parks trade roughly 5% to 7.5%. The spread comes down to region, infrastructure, and whether park-owned homes are a factor. Recent BC Interior transactions have settled in the 5% to 5.5% range on well-positioned assets, per the RDOS Commercial Interior BC market report.
Larger parks, 50 pads and up, on municipal utilities, in urban or commuter locations, trade tighter. Smaller parks, 10 to 30 pads, on well and septic, in remote areas, trade wider. Parks with redevelopment optionality trade tighter than the income alone justifies, because buyers are paying for the land use on top of the cash flow.
The adjustments that move the number
A few normalizations change the answer more than anything else.
Park-owned homes. If the seller folds park-owned home rent into NOI and you cap it at the pad rate, you overpay. That income carries higher operating cost, more capex, and more turnover. Value it on its own.
Owner expenses. Strip out anything personal the seller runs through the park. Then add back what is missing, usually management at a market rate, a capital reserve, and proper accounting and legal.
Capital reserves. I budget a reserve of roughly 1% to 3% of effective gross income. A working estimate, not insurance, but never zero.
A worked example
A 30-pad park in the BC Interior. The owner reports 30 pads, 28 occupied with one unmarketable and one between tenants, average pad rent $550, no park-owned homes, $42,000 of reported expenses, asking $2.8M.
The pitch is $140,000 NOI, 5% cap, $2.8M. Here is what I get when I underwrite it honestly.
- Gross potential rent, 30 pads at $550 a month: $198,000
- Less physical vacancy on the two empty pads: ($13,200)
- Less 1% credit loss on collected rent: about ($1,850)
- Effective gross income: about $183,000
- Expenses (reported $42,000 plus $14,000 management, a reserve of about $3,700 at 2% of EGI, and $3,000 legal and accounting): ($62,700)
- Normalized NOI: about $120,300
At a 6% cap on a small Interior park, $120,300 ÷ 0.06 is about $2.0M.
The seller asked $2.8M on a number that gave the next owner no credit for real costs. That is roughly an $800,000 gap, and it is not unusual. The brochure number is the asking price. It is not the value.
The point
The formula is not the hard part. The discipline is. Run an honest NOI, apply the cap rate the market is actually printing, and keep pad income separate from everything else on the operating statement.
Do that and you stop overpaying. Skip it and you inherit someone else's optimism.
If you want a read on a specific deal, send me the offering memorandum and the trailing twelve months of financials. I will tell you what I see.