November 3, 2019
Mobile Home Parks
Pros and Cons of Investing in Mobile Home Parks
Pros
Tenant responsible for repairs and maintenance, considering you are renting out only the land for the mobile home. If this is the case, the landowners are not responsible for the mobile home, only the land’s upkeep and its physical structures. The landowner is responsible for things such as cutting the grass, garbage removal, shoveling snow etc. If the mobile home park contains common areas such as a clubhouse, pool and playground, those areas are most often the landowner’s responsibility.
Lower tenant turnover rate than in a traditional rental property. It will typically cost mobile homeowners more than they are willing to pay to pack up and move a mobile home to a different location. Since it’s not many new mobile home parks being developed, most tenants are not so quick to relocate.
Getting zoning approval can be difficult, causing a high demand. Since it’s not easy to get zoning approval to build new mobile parks, it only leaves a limited number of existing mobile home parks, which helps to increase demand.
Per unit cost are typically lower than the average rental property. When purchasing a rental property with an existing building/structure already existing on the property vs purchasing land that you can rent to a tenant who can then put their physical asset, the mobile home on that land, usually calculates to paying less per unit for the land. For example, if you purchased a four-unit apartment for $300,000 it would cost you $75,000 a unit. When purchasing a 10-acre 30-unit mobile home park where tenants are responsible for the home, using the same $300,000 brings the unit cost to $10,000 a unit. Knowing the amount of returns you can receive on both scenarios will make the differences.
Ownership problems from older “mom and pop” owners who are not keeping up with the market. Rather it’s complacency or loss of interest over the years, older park owners may no longer put their time and energy into maintaining the parks appearance and operation.
Cons
Demands for mobile homes aren’t consistent, markets are known to fluctuate. Based on statistics, certain areas of the country have a higher population of people residing in mobile homes, such as the South. Although the South as a whole, have more mobile home parks, the demand in certain towns will have a huge impact on the success of the park.
Towns are concerned that a mobile home parks could make the area unattractive. It’s no doubt that one bad neighbor, or shall I say, “less respectful neighbor” will cause dissatisfaction among several neighbors by leaving behind an eye sore for any and everyone to see.
Getting tenants to comply with maintenance responsibilities. My seeing, touching, hearing, smelling and not so such much tasting senses tend to think in terms of longevity. Some people find it annoying when they are given advice on closing a door gently, instead of slamming it, or being told that the home would stay cooler if the doors weren’t left open extended periods of time with the AC blasting day and night, wondering why the electric bills are higher than average. Also, creating driveways throughout the yard, killing the beautiful green grass. After two months, the kiddos are still pulling the window blinds down and the teen driver continues to back the car into the trailer skirts, and the list goes on.
Limited number of mobile homes allowed in the park. Based on your lot size, legally, you will only be allowed to have a certain number of mobile homes in your park.
More lower income tenants are attracted to this property type due to the affordability. This could mean serious problems dealing with a less appealing market arising. Less money often leads to more problems. Making up roughly 6% of all housing units in the U.S., mobile home marketing takes a well-thought-out approach for filling vacancies.
There are not many new mobile home parks being built, which means most parks available for purchase are older, 10-20 plus year-old parks.
Above graph is from 2017
As with any investment, it will take researching the location and knowing the past and present performance of the park you are inquiring as well as other local parks within the chosen area.
