There has been a lot of discussion recently related to the roll-out of different Dodd-Frank provisions; most specifically the recent enactment of the Ability to Repay law. The net effect of these legislative failures will be the reduction in available mortgages for those who need them. And the impact of Dodd-Frank will be a benefit to the mobile home park industry.
Eliminates the competition
The single family and condominium markets are completely dependent on mortgages. Without the ability to borrow, the number of purchase transactions would drop exponentially. Few single-family purchases are made with cash. With a huge reduction in buyers with funding, the single-family market would crash like an airplane loaded with bricks and no engine power. And, of course, the elimination of competition would be a benefit to mobile home park owners and their yields.
Forces everyone to be renters
Between the SAFE Act, Dodd-Frank’s 1,200 pages of regulations, the judicial failure to stand behind the right to foreclose and expedite the process, and the new Ability to Repay law, the federal government appears to be sending a message that “we are no longer going to tolerate mortgage companies making a profit”. So, as a result, fewer of them are going to remain in business. What happens when you reduce the supply of mortgages? The answer is that fewer Americans are able to obtain them, and become renters, instead. In fact, the number of Americans who are homeowners today is nearing a historic low in the 65% rate. Since the number one competition to renting a home is owning a home, the failure to obtain mortgages will push many people into mobile home park living. And this will increase mobile home park yields to their owners. Of course, not only mobile home parks benefit from this new “renter” nation economy. Apartments have benefitted greatly from this same phenomenon with unusually high occupancy levels. And that, of course, has boosted their performance, as well.
Makes Wall Street leave its comfort zone and look for higher yields
A giant part of the U.S. financial market is based on the creation of mortgages as a yield providing investment tool. If there are a fraction of the mortgages put in service, where else are these investment titans going to go to find reasonable real-estate backed returns. In many cases, they will have to get out of their comfort zone, and some of these folks are going to look at mobile home parks as the solution. As the demand for parks intensifies, so will the yields.
The Dodd-Frank laws are one of the dumbest chapters in American history. They help nobody, and actually hurt the Americans they were intended to serve. But, as long as we’re stuck with them, why not profit from them with a mobile home park. As the other real estate niches reel from the enactment of these landmark reforms, mobile home parks are actually benefitting and showing higher rates of return. Shouldn’t you explore mobile home park investing as the ultimate hedge to government control of housing?