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The Mobile Home Park Unfair Advantage
America takes pride in the concept of freedom of competition. That’s the reason that the Federal Government blocks potential mergers through anti-trust complaints. We’re the country that puts people in jail for price-fixing and even elects our President through freedom of choice. So how in the world did mobile home park owners get such an unfair advantage?
Unfair Advantage 1: Cities Won’t Allow New Parks to be Built
If you own a self-storage facility and someone wants to build across the street from you, there is nothing you can do about it. Now you have to compete and maybe lose half your tenants. The same is true for retail centers, office buildings, apartments, and every other type of commercial real estate. Who hasn’t seen the successful mall that is put out of business by the even newer one that is built just down the street? That’s just part of the competitive nature of the commercial real estate. Everybody has to contend with it, right? Wrong. Mobile home park owners have virtually zero competition because just about every city in America does not allow new mobile home parks to be built. Why is that? Because, let’s face it, nobody wants a mobile home park to be built in their neighborhood, although they pretend it’s some other reason. In the entire United States, there are only about 10 new mobile home parks built per year and almost all of those are way out in the county. Mobile home park owners are the only people in the commercial real estate world that have no worries about competition from new construction.
Unfair Advantage 2: Tenants Can’t Easily Move Their Homes Out
If you think that the fact that cities won’t allow new parks is unfair, wait until you hear about this one! If a mobile home park resident wants to move their home out, they have to pay roughly $5,000 for the privilege. That’s what it costs to move a mobile home from point A to point B, including transport, set-up, skirting, stairs, and utility hook-ups. That’s one reason that the term “mobile home” has been changed to “manufactured home” at the dealer level. This makes the tenant, in many ways, a partner with the owner, and not just a customer who can walk out the door whenever they choose. This does not mean that the park owner can gouge, as the tenants will all walk out and leave the park without any revenue, and no new tenants will move in. However, we can all admit it’s quite a barrier.
Unfair Advantage 3: If You Don’t Pay Rent, The Park Owner Can Take Your House
That’s not what the law says, but that’s how it works in real life in 99% of the cases. Let’s assume the tenant can’t pay their lot rent but own their own home. They obviously can’t afford to pay a mobile home mover $5,000 when they don’t even have the $300 or so for lot rent. So instead they run off and abandon it. Then the park owner takes the home through abandoned property laws. Sure, it sounds unfair. However, there’s nothing illegal about it. It’s no different than the self-storage center owner selling the tenant’s contents for unpaid rent, except for the fact that the home is worth about 100 times more than the usual self-storage contents.
Final Thoughts
If you like competition and relish hand-to-hand combat 24/7, then mobile home parks are not for you. If you like having a monopoly, holding all the cards, knowing the tenants are likely to stay a lot longer, never worrying about someone building a new property near you, and taking one of the tenant’s biggest assets if they default, then you’re going to love mobile home parks. That’s why mobile home parks have one of the highest returns on investment of all categories of commercial real estate.
Mobile home parks have a ton of benefits, but the time, energy, and money that goes into getting started. Finding the right property, negotiating terms, getting financing, then managing the property is a lot of work. This is one of the main reasons people may choose to invest passively!
Vecno Capital allows you to receive all of the benefits of investing in mobile home parks without all of the efforts.