Can you come up with a single positive hope the U.S. economy has of turning itself around? There are 10,000 baby boomers retiring per day and dragging down the social security system. Many states are over-run with population that lives off social programs. Over 60% of the new jobs created since the “Great Recession” began are minimum wage. Interest rates can’t get any lower and government spending can’t get any higher, and still there is no improvement. Not since the Great Depression of the 1930’s has the nation appeared so doomed. Is there anything tangible that can turn things around at this point?
Well, you can stop worrying about it and make money from the economic recession. There is one contrarian bet available in real estate – mobile home parks. Mobile home parks are the only form of real estate that actually strengthens when the economy gets worse. Office, retail, lodging – they all fall apart when there is no economic vitality. But mobile home parks actually feed on the forces that kill other real estate sectors. But why is this?
The cheapest form of housing on the planet
When it comes to affordable housing, nothing comes close to mobile home parks. You can live in a detached dwelling with your own yard for about half the cost of an apartment. The average apartment in the U.S. is over $1,000 per month, but you can find mobile homes for rent as low as $300. In an era in which the focus is on cutting cost to keep pace with the economic decline, mobile home parks fit the bill. And the economy is playing right into their sweet spot.
The ability to raise rents
Most mobile home parks utilize month-to-month leases, so they have the ability to raise rents as much as they like. Most parks increase their rents 5% to 10% per year, and they get it because have nowhere else to go. No other real estate sector works under month-to-month leases; apartment leases are traditionally a year in length.
Supply and demand
The demand for mobile home parks is skyrocketing, but the supply is capped by aggressive city codes that will not allow new mobile home parks to be built. So the simply supply/demand dynamic allows for higher rents continually. It also provides near 100% occupancy.
The customer is trapped
It costs around $5,000 to move and set-up a mobile home. They are anything but “mobile”. As a result, customers stay where they are and pay any and all rent increases. This allows for greater flexibility in raising rents as well as incredibly consistent rent rolls.
Mobile home parks are the only way you can bet on a weaker U.S. economy. If you think the U.S. economy will continue to decline in the future, and think that an upturn is decades away, then the mobile home park sector might be the right investment for you. There are around 50,000 mobile home parks in the U.S. and 46,000 of those are still owned by moms and pops. This is one industry that still has a ton of opportunity in it.