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Why Invest In Mobile Home Parks
Mobile home park investing is starting to be recognized as an attractive real estate sector. Why is mobile home parks suddenly on the radar screen of the real estate community? The sector has always done extremely well, but investors are finally getting over the stigma and learning to appreciate the power of affordable housing. So what’s so special about mobile home parks?
Highest Yields
Mobile home parks have one of the highest yields in commercial real estate, with cap rates often over 8% at a time in which apartment cap rates are often around 5% or lower. Because there are fewer buyers for mobile home parks than other real estate niches, the supply/demand formula has always given mobile home parks a higher going-in rate of return.
Hedge Against The Economy
If you believe that the U.S. economy will continue to decline in the years ahead, under the weight of social programs and the drag of an aging population, then mobile home parks are virtually the only form of real estate that performs better in a recession. It’s also the only true form of non-subsidized affordable housing. As America gets poorer, mobile home parks are the only form of housing devoted to this demographic.
Barriers to Entry
One big reason that mobile home parks have long held their value is the simple fact that many cities or towns in the U.S. will allow new parks to be built. Many people do not want a mobile home park as a neighbor, and their vocal dislike for mobile home parks eliminates any chance of political approval. In the entire United States, it is estimated that less than 10 new parks are built each year.
Barriers to Moving Out
Another interesting barrier is the difficulty tenants have in moving their home out of a mobile home park. It costs around $5,000 to move a mobile home, so virtually not many tenants can ever afford to move. As a result, the revenues of mobile home parks are unbelievably stable. But what happens when a tenant cannot afford to continue to pay their rent? Then they normally abandon the home, and the park owner ends up with title under abandoned property laws.
Demand That Grows Daily
Affordable housing is a giant topic in America right now. Over 20% of the U.S. population has a household income of $20,000 per year or less, which is nearly the poverty line. On top of that, there are 10,000+ baby boomers retiring per day into social security checks that average only $14,400 per year. The demand for affordable housing literally grows daily and this will continue for over a decade.
Final Thoughts
Mobile home parks offer higher returns and greater stability than any other real estate sector. They are the only real estate segment that grows stronger as the economy weakens. That’s probably why the two top investors in this niche are Warren Buffet and Sam Zell.
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.