A number of years ago, the idea of investing in mobile home parks rose to prominence. Multiple success stories led real estate investors to consider the fact that, while not sexy, these investments could offer healthy returns. For many, mobile home park investments have been life changing. For others, the returns have been minimal. However, despite what some may say, opportunities for profitability still exist in 2015.
2 Types of Mobile Home Investments
The first thing you need to know is that there are two different types of mobile home investments you can make. Understanding the differences between the two will instill clarity and focus.
- The first type involves investing in the actual real estate or lots underneath the mobile homes. You’re essentially purchasing the large tract of land, the streets, swimming pools, clubhouses, utility systems, and everything else that comes with the park. You then lease out that space to individuals who own their own mobile homes.
- The second type of investment involves owning the mobile home park and the mobile homes that reside in the park. The tenant’s then pay you for both the use of the land and the home. This is pretty much identical to the standard tenant-landlord relationship you’d see in an apartment complex.
Reasons to Consider Investing
There are varying opinions on which mobile home investment strategy is superior, but that’s another discussion. Ultimately, there are a handful of valid reasons for investing in mobile home parks and/or mobile homes.
- Steady demand. There will always be a demand for low rent housing. Regardless of how well the overall economy performs, a certain faction of society will always need affordable housing. In 2013, the official poverty rate in the United States was 14.5 percent. In other words, roughly one out of every six families in this country need affordable housing. Mobile home parks offer that solution.
- Low competition. There are a number of barriers in place that prohibit new mobile home parks from being developed in many parts of the country. This means the supply of parks remains relatively stagnant while the demand increases. If you can find an investment opportunity with promising numbers, it’s a no-brainer.
- Steady revenue. While mobile homes are, by definition, able to be moved, they very rarely are. It costs approximately $5,000 to move a mobile home to a new park, which means most people stay in the same park for decades. For an investor, that means steady revenue and low turnover.
Understanding the Risks
That’s not to say there aren’t risks that come along with investing in mobile home parks. Aside from not being a particularly attractive investment, not every mobile home park is a cash cow. Many parks have low occupancy rates and it can be difficult to convince renters to move into your park if you don’t already have mobile homes in place.
Furthermore, if you’re looking for a lender, you can expect the requirements to be stringent. Despite the success many investors have with mobile home parks, certain lenders find it difficult to look beyond the surface.
However, despite these risks, mobile home park investments are still viable and lucrative in 2015. Don’t overlook these opportunities, because they still exist.