Mobile home parks might not seem logical, but, as the fixed-lot housing market is working to recover and able homebuyers or investing groups have already bought up to avoid another crash, alternative markets need to be found for solid real estate investing.
Demand for mobile homes is, in fact, high. Rates for fixed-lot homes have been rising consistently over the decades, while American incomes have stayed relatively flat, even at a difference of 12 times. Where mobile home parks have often rented only to populations over the age of 55, more recent tenants are also likely to be working families or younger people looking for opportunities to own homes. Added to that are retiring Baby Boomers who have spare to nil retirement savings and are looking for affordable housing.
Investors who may have come from highly competitive business areas, such as hedge fund managing or the tech sector, can find much more return in this more manageable supply and demand market. The object is to own an entire park, the land area, while the homeowners are responsible for the units themselves. In this case, cost per rental space for the investor is lower. The difference between a typical housing unit and a lot can be $100,000 to $10,000.
Lots are also typically narrower than a conventional yard space, anywhere from 1,000 to 35,000 square feet for a mobile home, compared to 8,000 for a typical home. Streets are often around 20 feet wide. This means cost of vacancy is defrayed across a higher number of units, so an unforeseen change can be absorbed more easily. Maintenance costs per lot are also reduced. These are the responsibility of the investor, while responsibility for the housing unit is left to the homeowners themselves. This extends the costs of turnover. Where unit cleaning, finding new tenants and lack of revenue during vacancy can be expensive, maintenance for a lot alone remains less.
Nevertheless, turnover is also less likely in a manufactured home community. The tenant has an existing investment in the housing unit and only needs to lease a space. Given that moving a unit can also run to thousands of dollars, turnover remains less than 5%. Existing parks are often run by local individuals who are also likely to be retiring soon and are interested in selling. This provides the opportunity to get in at a good price and upgrade the area.
It may take some work tracking down existing parks, so finding an investing group with a substantial work base that is dedicated to finding these types of markets might be a wise choice. And upkeep is a must. Poor maintenance leads to tenant trouble and steep fines from cities that frequently ban mobile home areas for this very concern. But the return on investment remains high in the current mobile home market. It might not seem obvious at first glance, but further investigation could prove that a mobile home park is a good find for investors looking for creative options.