There have been three transactions in the mobile home park industry over the past 90 days. And each one was around $2 billion. That’s right billion with a “b.” The three mobile home park portfolios were Carefree, Northstar and YES (which is so fresh that it’s still just a rumor). That’s six times more than the largest transaction in history to date, and all in just a few months. So what’s going on?
The boom in the affordable housing business
Mobile home parks are all about housing people at low cost, when compared to single-family homes and apartments. In many markets we serve, the median home price is $150,000, the average apartment rent is $1,200 per month, and yet they can live in a 3/2 and have a yard for only $600 per month. As the U.S. economy has declined over the past eight years (following the 2007 start of the Great Recession), it has made inexpensive housing a huge boom industry, just as it has propelled the “dollar store”. Essentially, the mobile home park business is “hot” right now, and has no signs of dissipating.
The rise of consolidation
Mobile home parks are the least consolidated of all commercial real estate sectors. Self-storage, which is the youngest asset class in real estate, is still three times more consolidated. The fact is that the industry is heading for significant consolidation, and these three large sales are evidence of this. There will, no doubt, be more to come.
The end of the stigma wall
Most people don’t think about investing in mobile home parks because they have been trained by the media to think that they are gross, or dangerous, or filled with street people. So basically, American investors are letting the likes of COPs, Jeff Foxworthy, Trailer Park Boys and Myrtle Manor hold them back from making 10% to 20% returns – pretty sad. Fortunately, large institutional investors are not swayed by television and urban legend, and starting to invest in that “other” form of multi-family.
The entrance of foreign investment in this sector
It’s worth noting that two of the three buyers in these transactions are foreign. One is from Canada and the other is rumored to be from Singapore. There have been no large transactions to date in which the buyers were not from the U.S. When you include the world stage, the potential buyers for mobile home park assets is unlimited.
The strong return levels of the mobile home park industry
Of course, what really is fueling these three gigantic transactions is cash flow. Mobile home parks have the highest yields of any form of real estate. That’s the same reason that we’ve been buying them for the last twenty years, and why we’ve grown to 5th largest in the U.S. Cash is king in real estate, and that’s what has put mobile home parks squarely on the radar screen.
How you can share in it
Mobile home parks are an equal opportunity investment. There are parks that range from 10 lots to 1,000, and price points that run from about $30,000 to $30 million. You should learn the facts about this industry, and how you can get involved in it. There are around 44,000 mobile home parks in the U.S., and only about 4,000 of those are institutionally owned – so it’s a wide open playing field.
Mobile home parks have recorded $6 billion in sales so far in 2016. That’s an incredible number, and should serve as plenty of notice that the “trailer park” industry is far from what most Americans imagine. Learn the facts and decide for yourself.