Why a Mobile Home Park Could Be a Wickedly Profitable Investment
When you think of real estate investing, a few scenarios may come to mind. You might imagine buying a house and becoming either a long-term landlord or a vacation rental host. You could also invest in commercial property like offices, warehouses, or retail via real estate investment trusts (REITs). You may not have thought of investing in a mobile home park, but an increasing number of investors are doing just that.
Let’s look at what’s involved in investing in a mobile home park and explore the role the affordable housing shortage is playing in making this investing opportunity potentially more lucrative than ever.
It’s essentially a land investment
Although today’s mobile homes are much nicer than those of the past, they do still tend to require more maintenance and have a shorter lifespan than site-built homes. But when you own a mobile home park, you only own and are only responsible for the land the homes sit on. The residents own their own mobile homes and are generally even responsible for maintaining their own yards.
That’s a very big deal. When you’re a landlord for a site-built home or a multifamily home, you need to keep plenty of money set aside for ongoing repairs and maintenance.
With a mobile home park, you’re only responsible for maintaining the road within the park and any common areas, like a playground, park, or other gathering area you may choose to offer.
If you hire a property manager for a traditional property, they’ll generally charge around 10% of the rent to manage everything, largely because of all the maintenance and repair calls they’ll likely be responsible for fielding. You could likely negotiate a lower rate for managing a mobile home park since they’ll most often only need to collect the rent. You may even decide you can handle it yourself.
An answer to the affordability crisis?
Mortgage applications are plummeting as rising interest rates deter an increasing number of would-be homebuyers, many of whom have been priced out of the game for some time anyway. And even if home prices begin to soften now in response, they will have a long way to go to impact those who were just about to afford a home before prices took off.
Mobile home parks offer a way for those priced out of buying site-built homes to still own their own home and be responsible for their own space. They can be free to paint and decorate however they choose, don’t have to let anyone else have a key to their property, and don’t have to hear anyone stomping around above them, blaring music below, or yelling through the walls. They’ll also likely have a small yard where they can cook out and kids and pets can play.
The White House is even acknowledging the potential mobile homes have to aid in the housing crisis. Part of the Biden administration’s housing plan includes making mobile homes more attainable with expanded financing options.
Should you invest in mobile home parks?
If you need more convincing that mobile home parks could be an incredible investment, perhaps Warren Buffett can help. His holding company, Berkshire Hathaway, has owned America’s largest manufactured homes builder, Clayton Homes, since 2003, when they paid a whopping $1.7 billion for it. And of course, all those mobile homes need somewhere to go.
It’s worth mentioning that mobile home parks can’t go just anywhere. If you’re thinking of buying land for one, you’ll need to check out the zoning situation and make sure that would be an allowed use. It quite often isn’t. The advantage to that, though, is that your market can’t become oversaturated with mobile home parks.
If you have the opportunity to purchase an existing park, you’ll of course want to take a look at the books to see how it’s performing. And if a direct mobile home park or land purchase isn’t in your budget right now or you’d simply like to start smaller, investing in a manufactured housing REIT could be a great option.
If you’d like to invest in real estate in a way that can help address the affordable housing crisis, mobile home parks are definitely worth a look. They have an excellent business model, and the current economic environment is encouraging their growth. It’s definitely hard to imagine them going anywhere anytime soon.