Mobile Home Parks – A Cash Flow Generator!
Mobile home parks (MHPs) are one of the best ways to invest money with low risk. Mobile home parks are upgraded lots that are rented to renters, mobile home owners. A park usually has more than 15 houses. The largest MHPs have hundreds of batches. Mobile homes are also called trailers or manufactured homes, which are homes built in a factory and then installed in parks.
There are almost 38,000 mobile home parks in the United States and they continue to grow. The following are some of the reasons people invest in them:
Recession resistant
The great thing about MHPs is that they are recession resistant. While luxury apartments and executive suites have higher vacancy rates in an economic downturn, MHPs thrive. Regardless of markets going up or down, people always need shelter.
Since wide double mobile homes cost an average of $ 40,000 and rent for lots ranges from $ 100- $ 500 / month, the barriers to entry are significantly lower than buying a single family home. This is a boon for a lot tenant who gets home ownership at a much lower price and generally pays less than renting a house or apartment. Therefore, a properly operated MHP can be profitable regardless of economic cycles.
Less competition
There is less competition at MHP compared to other investment vehicles. There are relatively fewer investors with experience in both owning and operating an MHP. Due to low barriers to entry, MHPs attract lower to middle class families. This working poor tenant base plus mismanagement of the park creates a stigma of “tow garbage”, which repels some investors such as institutions. Instead, many institutional investors prefer to project a “professional” image through owning a portfolio combination of high-end office buildings, shops, and apartments. This means less competition for an MHP investor.
Less money at stake
MHPs need less capital to acquire and renovate compared to apartments and other investment vehicles. Investors simply maintain the utilities, landscaping, and common areas of the parks, as trailer owners are responsible for purchasing and maintaining their own homes. Unlike commercial buildings, MHPs do not have roofs, siding, windows, carpets, bathrooms, etc. keep! Except for the management office or clubhouse, no maintenance, deferred maintenance or property insurance is required. This keeps the expense ratio relatively low (30-50%) and capitalization rates high (~ 10%).
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In general, MHPs are an excellent investment option. Investors have low capital risk, less competition, and recession resistance. All of these factors make mobile home parks a cash flow generator.
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