Park-Owned Homes: The MHP Expense Load Models Miss

Published June 25, 2026

Two mobile home parks can post the exact same $300,000 net operating income and be worth a quarter-million dollars apart at sale. The entire gap traces to one thing most models handle carelessly: park-owned home expenses, and the capital cycles hiding behind them. A park that is 70% park-owned homes is not a land-lease deal with a few extra repairs — it is a small rental-housing business wearing a land-lease costume, and underwriting it like a pure lot-rent park is one of the more expensive mistakes in this asset class.

This post is about the expense and capex reality specifically: what park-owned home expenses actually contain, why they wreck the expense ratio, and what they do to value at exit. (For the broader structural framework — financing, tax, operations — see park-owned vs. tenant-owned homes.)

Why park-owned home expenses break the expense ratio

The headline number everyone reaches for first — total operating expenses divided by effective gross income — is the most misleading figure on a POH-heavy park. On a clean, tenant-owned (TOH), direct-bill park, an expense ratio in the 30% to 40% range is normal and defensible: the park collects lot rent and pays for roads, water and sewer infrastructure, common-area upkeep, taxes, insurance, and management. There is no home to maintain.

Stack park-owned homes on top of that and the ratio is no longer measuring the same business. A park-owned home generates more revenue per pad — combined lot-and-home rent instead of lot rent alone — so the denominator swells. That can make the ratio look fine even as the park quietly absorbs a rental operator's full cost stack: turnover, make-ready, appliance and system replacement, code compliance, and double-barreled vacancy. The denominator grows faster than the seller's reported expenses, and a low ratio reads as efficiency when it is often just deferral.

The fix is not a better ratio. It is to stop running one ratio at all. Underwrite the lot-rent business and the home-rental business as separate P&Ls, each with its own expense, vacancy, and capex assumptions, then combine them. (The mechanics live in the mobile home park underwriting guide.)

What park-owned home expenses actually contain

Here is the cost stack a TOH park never sees, and that a POH-heavy park carries on every owned home:

• Make-ready and turnover. When a park-owned home turns over, the park eats the make-ready — paint, flooring, cleaning, minor repairs — and the vacancy while it sits. A TOH turnover costs the park almost nothing; the resident handles their own home.
• Repairs and maintenance, per home. Plumbing, electrical, skirting, steps, doors, windows. On a rental home this is a recurring line, not an occasional one.
• Capital systems on a cycle. Roofs, HVAC, water heaters, flooring, and appliances each run on a replacement clock that has nothing to do with the rent line.
• Double vacancy. A vacant park-owned home costs both lot rent and home rent, while still accruing taxes and insurance. Lot occupancy and home occupancy are not the same metric and should be modeled separately.
• Insurance and code exposure on the structures. Owning the homes means insuring and code-complying them.

A rough, illustrative per-home annual load — useful only as a sanity check against the seller's numbers, not as a substitute for inspecting the actual homes:

Multiply by the number of owned homes and the "efficient" park starts to look different. On a park with 40 owned homes, the midpoint of that range is roughly $60,000 to $75,000 a year the land-lease ratio never showed you.

Two parks, same NOI, different reality

Take two 100-pad parks, both reporting $300,000 NOI, both at a 7.0% nominal cap.

• Park A (TOH): 95 tenant-owned pads, direct-bill utilities, sound infrastructure. Income is lot rent. The reported expenses are real because there is no home business hiding inside.
• Park B (POH): 60 tenant-owned pads plus 40 park-owned homes, averaging 12 years old. The combined rents inflate revenue; the seller's expense ratio reads "efficient" largely because the trailing R&M was thin.

Apply the per-home load to Park B's 40 owned homes and add an honest per-home capital reserve. Say that surfaces roughly $70,000 of expense and reserve the seller's T-12 understated. Park B's defensible NOI isn't $300,000 — it's closer to $230,000.

Now the exit diverges twice. First, Park B's defensible NOI is lower, so the same cap rate produces a lower base. Second — and this is the part models miss most — only the lot-income stream capitalizes at the land cap rate; the park-owned-home stream is carried at a flat per-home value, not capitalized like real estate. So even where the home income is real, it converts to value at a worse multiple. Two parks, identical reported NOI, and a sale-price gap that lands in the hundreds of thousands. The full exit walkthrough is in how MHP exit value is calculated.

Capex is per-home, not a percentage

The single most common modeling shortcut on POH parks is a flat capital reserve as a percentage of revenue. It is wrong on its face: a 14-year-old home's roof does not cost more to replace because the rent went up. Capital on owned homes runs on system cycles — roof every 15–25 years, HVAC every 12–18, water heater every 8–12, flooring and appliances faster. Build the reserve bottom-up from the age and condition of the actual homes, then spread it. A park with a fleet of aging homes can carry a capital reserve several times what a revenue-percentage rule would suggest, and that delta is exactly what catches first-time POH buyers in year two.

Where this thesis breaks

Park-owned homes are not a defect, and underwriting them as pure liability is its own mistake. A few honest counterpoints:

• POH can be a deliberate return strategy. Owned homes are depreciable personal property, and under current law they can generate substantial first-year deductions, which a sophisticated sponsor may want on purpose. See MHP and bonus depreciation in 2026. The capex burden and the tax benefit are two sides of the same asset.
• The conversion lever cuts the other way. A POH-heavy park bought right is a value-add setup: convert owned homes to tenant-owned over the hold, shed the expense and capex load, and shift income into the lot stream that capitalizes better. The "problem" is the business plan.
• Newer homes change the math. A fleet of recent homes carries far lighter near-term capex than a 20-year-old stock. Age and condition dominate; "POH" alone doesn't tell you the reserve.
• Some sellers' numbers are honest. Not every thin R&M line is deferral. Verify against invoices and the age of the systems before assuming the worst — over-normalizing kills good deals too.

The thesis isn't "avoid POH." It's "never let a single expense ratio stand in for two different businesses."

The bottom line

A POH-heavy park is a land-lease and a home-rental operation sharing an address. The expense ratio blends them and hides the home costs; the exit math then pays you a worse multiple on the home income you did collect. Split the model into a lot business and a home business, load each owned home with a real per-home expense and capital reserve built from age and condition, and value the streams separately at exit. Do that and the park-owned home expenses stop being the surprise in year two — they become a line you priced going in. Run the MHP due-diligence checklist before you build the model, not after.

UWmatic is an AI-powered underwriting platform built for multifamily and mobile home park investors. Split lot income from park-owned homes, load each owned home with its own expense and capital reserve, and see the exit impact of the POH ratio in minutes. Try the free underwriting calculator →

This analysis reflects general underwriting practice as of the publication date and may evolve as conditions change. Dollar figures and expense ranges in this post are illustrative benchmarks meant to frame the math, not market data or quotes — verify the actual expenses, home ages, and capital condition of any specific park during diligence. Tax provisions are summarized at a high level and depend on individual circumstances; consult a qualified professional. Nothing in this post is investment advice; readers should conduct their own diligence and consult qualified professionals before making investment decisions.