The primary trait of any “doomsday” investment is the fact that it gets better as things get worse. In the Great Depression of 1930, investors quickly found that only two things had value: necessities and vices. Everything else was basically worthless. That’s why St. Louis had the tag line “first in shoes and first in booze” to promote its resilience during that period. You can already see the prime catalyst of what drives mobile home parks higher: the affordable housing crisis. As people get poorer, they need less expensive housing. And mobile home parks are focused on that one niche.
It should also be noted that mobile home parks have proven their value in a storm as their occupancy has never been higher due to the pandemic and urban unrest, causing apartment dwellers to move to suburban mobile home parks where they can socially distance and have a yard.
Mobile home parks have an unbelievably large “moat”
Warren Buffett is a huge sponsor of the concept that all good business models have a “moat” – and the bigger the better. The “moat” is what keeps your investment free from the perils of excessive competition. No investment type in the U.S. has the restrictions that mobile home parks have. Virtually no U.S. city has allowed new mobile home park construction in over a half-century; most new park construction ended in the 1970s. As a result, there is no new competition, and the number of parks in the U.S. is actually declining as there are about 100 torn down each year for development into alternative uses.
You can’t eat gold but you can eat cash flow
Sure, Rosland Capital can tell you that gold is the most important thing to own in a depression, but exactly what do you put on that to give it a good flavor? Most food requires cash to buy it, and that makes income properties that create monthly residual cash flow infinitely superior to something that you have to make a market for to monetize, and are basically selling off your seed corn. There’s no way you can compare an asset that sends you a monthly stipend to one that just sits there.
All real estate does well in inflationary environments
If the U.S. printing trillions of dollars bothers you – as well it should – then mobile home parks will also hedge your inflation concerns. Real estate is one of the best performing sectors in inflation as property values and rents rise proportionally while your debt remains static. In fact, much of the wealth created in the U.S. has been through real estate value increases as a result of inflation over time.
Just look at who is hedging America with “trailers”
For the most accurate clues as to the projected performance of mobile home parks in troubled times, look at the “insider trading” of who is involved in the mobile home industry. Warren Buffett (through Berkshire Hathaway) is the largest owner of manufacturing and financing of the homes, while Sam Zell is the largest owner of mobile home parks through ELS (mobile home park REIT). You can’t get any better company than that. And recent investors now include GIC (the country of Singapore), Brookfield (Canadian REIT), and Carlyle (the largest private equity group in the U.S.).
Contact Jeff Cook in you’re interested in investing in mobile home parks today.