Mobile home park lot rents are ridiculously low. In most markets, the difference between apartment rents and mobile home park rents is often $1,000 per month. But this is not going to remain the case, and smart investors are betting on the future run-up of mobile home park rents. Mobile home park rents stand to have larger increases than any other real estate sector in the U.S. Why is that?
The spread between mobile home lot rents and all other forms of housing have become ridiculous
The median home price in the U.S. is close to $200,000. The average apartment rent is nearly $1,200 per month. The average mobile home park rent is $275 per month. That’s not a misprint. Mobile home park rents are nearly $1,000 per month lower than apartments, and mobile homes sell for around $10,000, which is $190,000 lower than a stick-built home. How did the spreads get so huge? It’s because mom and pop owners of mobile home parks never kept their rents up to speed with their competition. Kind of like those rare occasions where you find an old vending machine in a small town where the Coke is 10 cents a can.
Rents must go up for parks not to be developed into other uses
At $275 per month average rent, the typical mobile home park is worth less than $5 per square foot. Virtually every other use for land out there is more than $5 per square foot. So you can basically figure on most mobile home parks being torn down and redeveloped if the rents don’t go up significantly. One day there will only be two types of mobile home parks : those that charge high rents and those that have been rebuilt into a different use. This is already happening across America.
Professional owners are going to demand professional-grade rents
Mobile home parks are the most fragmented segment of real estate, with 44,000 total parks and only 2,000 of those professionally owned and managed. Self-storage, which is only half as old, is already three times more consolidated. As professional investors buy out these parks, they are going to be bent on increasing rents significantly. And why not? And even twice the rent, mobile home park living is still a bargain.
Higher rents are required to offer a quality product and offer quality management
Mobile home park managers earn less than a half of what apartment complex managers earn. That’s got to change. In order to deliver a quality product, the rent in mobile home parks has to go up substantially. That’s the only way to provide professional management and a quality experience for the tenants. To keep a mobile home park in top condition takes money. And that money comes from rents.
Look what happens to mobile home park investments when this happens
If you bought a mobile home park at $275 per month rents at a 10% cap rate, did nothing with it except raised rents, and those rents doubled over time, here’s what would happen: if you bought and sold the park at a 10% cap rate, each lot would be worth $33,000 more than you paid for it. On a 50 space park, that’s a $1.6 million profit. For doing nothing but being in the right place at the right time.
Mobile home park rents are destined to go up substantially in the near future. Those who own parks are going to get unbelievably rich from this. And they don’t have to do anything but simply be sitting there.