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Investing in a mobile home park is a smart investment that lacks many disadvantages of regular property investment
Have you always wanted to own real estate property? Maybe that has been your lifelong dream, but you don’t know how to get started. Most investors think of purchasing single-family homes or apartment complexes. While these are profitable investments, there are several “cons” to these real estate properties.
For example, as the property owner and investor, you have to deal with tenants and contractors on a daily basis. This might be counterintuitive to your goals, making the investment more stressful than you originally intended.
So, what’s the solution? Mobile home park investing, of course! Unlike single-family-home investing or owning an apartment complex, investors don’t own the individual trailers in the mobile home park. Instead, they simply own the land. Tenants own the trailers and then pay rent for the space to park them. It’s less high-maintenance than owning a home or apartment complex.
But what are the other pros of mobile home investing? How can you get started? Don’t worry: we have your complete guide right here so you can get started as soon as possible.
It’s a bargain
You already know before investing in a single-family home or a large apartment complex that the cost per unit is going to be high. This isn’t a surprise because you’re not only buying the structure itself but also the land it’s built on.
With a mobile home park, investors are allowed to acquire more units for less money.
You are only purchasing the land and common areas (streets, clubhouse, etc.). The operating cost to own a mobile home park is roughly 30 percent compared to 50 percent with apartment complexes.
“Mobile home parks offer the lowest cost investment per unit of any real estate asset class with potentially higher risk-adjusted returns,” commented Andrew Lanoie, Founder and CEO of Four Peaks Capital Partners.
Investors can expect to pay $100,000 per home or apartment unit, but you can pay as little as $10,000 per lot in a mobile home park. Doesn’t that sound much better? Your bank account would probably thank you.
Demand has increased for mobile homes
In recent years, there has been more demand for mobile homes inside well-managed parks. This is due to the increase in home prices while American incomes are not rising at the same rate. More and more people want to find affordable housing, and the only solution is inside a mobile home park.
In 2020, the Baby Boomer generation is retiring in record numbers, creating a greater demand for mobile homes and affordable housing.
According to Lanoie, “10,000 Baby Boomers retire each day with an average social security benefit of just $1,294 per month.” In addition, 75 percent of retirees have less than $30,000 in their retirement funds, so they’re looking at mobile homes as a chance to still be homeowners while living on a fixed income.
If you decide to invest in a mobile home park, there will be plenty of retired folks waiting to park there and call the place “home.”
Lower cost for repairs
When you own a home or apartment complex, you can expect to make multiple repairs or renovations. It seems like there is a new problem every day. However, you don’t have to make as many repairs when you own a mobile home park.
You don’t work with contractors, which is one of the most difficult parts of owning a home or apartment building. Instead, each mobile homeowner is responsible for the maintenance, repairs, and updates of their individual residence, not the landlord of the park. All you have to do is be accountable for the expenses of the upkeep of the park.
This will be significantly cheaper than what you would have to pay for the maintenance of homes and apartment complexes. Are you ready to sign a check right now?
Turnover is generally less
As a landlord of single-family homes or other properties, one of the largest expenses is tenant turnover. After a tenant moves out of a home or apartment, property owners must clean the unit, sell the property to a new tenant, and make up for the lack of income during the vacancy. This could take thousands of dollars per unit out of an investor’s bank account every year, which could become exhausting.
However, in a mobile home park, each tenant owns their own mobile home, and it can cost them anywhere between $5,000 and $7,000 to move their home out of the park. With this in mind, 98 percent of mobile homes remain in the same location after the second year of living in the park.
In fact, 75 percent of mobile homeowners stay in their homes for five years or longer. They never plan to sell their homes, so there is very little risk of losing tenants in the park.
Less competition
The housing market is incredibly competitive in 2020. It’s hard to find reasonable rates, and it can be difficult for investors to craft strong and supportive business models. When it seems to get to be too stressful, that’s when you should consider investing in a mobile home park.
Mobile home park investing is the key ingredient to success in the real estate business. Unfortunately, not too many people know about the investment opportunity, but that should change.
“Mobile home parks offer the lowest cost investment per unit of any real estate asset class with potentially higher risk-adjusted returns,” commented Andrew Lanoie, Founder and CEO of Four Peaks Capital Partners.
If you’re looking to make a great deal but you don’t want to compete with several other investors, mobile home investing is your best bet. But you might be confused about how to get started. If you’re interested in making this investment, you might have several questions. Read the following guide to learn how you can start working toward this investment today.
Financing a mobile home park
Financing is probably your biggest concern before you continue working toward investing in a mobile home park. However, it’s not that different from traditional real estate financing. There are some important things to note about financing and getting a loan for property investment, however.
For example, there will most likely be a pad (the lot a mobile home sits on) minimum. Most loan lenders will require a “15-pad minimum.” There may also be a preference for paved roads over gravel. In addition, mobile homes must be owned by the tenants.
The homes should be skirted without any hitches showing, and there will be a preference for off-street parking. The homes are required to obey HUD-Code (requiring homes to be constructed on a permanent structure).
There will be a preference for communities that have less than 10 homes per acre, and there will also be a preference for communities with an attractive package.
Several lenders will probably request detailed expense reports dating back three years. This might be difficult to find if you don’t have sophisticated records. Gathering this information may take a long time to complete, but if you’re determined to invest in a mobile home park, it’ll be worth it in the end.
How to find a mobile home park to invest in
Now that you’re interested in investing in a mobile home park, you need to find a park to purchase. You can search your local market, but there are also many online resources. For example, RealtyMogul allows investors to be a limited partner in a property, which is beneficial if you are just starting out.
Another option is MobileHomeParkStore, which lists between 1,000 and 2,000 mobile home parks for sale. It’s the easiest source available for investors. Another source is LoopNet, which allows investors plenty of options to choose from. This website is the leader in commercial real estate as a whole.
Finally, Auction.com lists real estate owned (REO) auctions of mobile home parks. If you prefer to proceed with the auction route, this website is your best tool to find what’s available. Online searches are the best way to find available parks to buy. Everything is right there at the click of a button.
You may also seek guidance from real estate brokers. They sell the parks and they know what’s most valuable. They can find parks that are not publicly on the market, and they’re also able to disclose any information to investors.
How to get started
While investing in mobile home parks is easier than owning a single-family home or an apartment complex, it’s not a walk in the park. There are challenges involved in operating mobile home parks.
75 percent of mobile homeowners stay in their homes for five years or longer. They never plan to sell their homes, so there is very little risk of losing tenants in the park.
You may not have to deal with contractors on a daily basis, or troublesome tenants, but you still need contractors to help put in or move out a trailer. In addition, you may need to make occasional repairs to the common areas of the park. But overall, the wear and tear of the job is far less than that of owning an apartment building. You won’t have as many gray hairs with this investment.
Start the investment by doing your homework. Don’t rush into this deal because you feel pressured by the real estate market. This will only lead to a disaster. For a beginner, take your time to gather all the information you need, speak with other investors to learn about their experience, and practice the business to fully understand the investment.
Does this seem appealing to you? It’s time to get started before you miss your chance.
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