Mobile home parks can be the dream investment for some real estate investors. Is it one for you to get excited about as well?
Mobile home parks have gained popularity over the past several years, and for good reason. In many ways, a mobile home park is an investor’s dream. There’s cash flow, low overhead, and minimal maintenance. Besides that, there will always be a demand for them.
If you’re not familiar with mobile home park investing, you might think it involves owning several mobile homes. With the amount of maintenance that would involve, that doesn’t sound like an easy investment. However, most mobile home parks are nothing more than several individual lots that are rented out to people who own mobile homes.
As an investor, you don’t own the homes. This means you don’t have the burden of answering maintenance calls in the middle of the night or making expensive repairs. You’re simply leasing out a small piece of land. The homeowner has to deal with their own maintenance and repairs. They even have to mow their own grass.
There are some common areas you will have to maintain, such as the roads and any clubhouse, park, or picnic area. This is typically very minimal, though.
Investing in mobile home parks is all about cash flow. Every month, the lot rent comes in, and not much has to go back out. Expenses are low compared to multifamily or commercial properties, so a high percentage of your income goes right to the bottom line.
If you own other investment properties, you know how expensive property taxes can be. However, property taxes aren’t nearly as high on the land itself as they are on the structures. Since you don’t own the mobile homes, the only improvements you have to the land are some roads and an office or clubhouse. The individual mobile home owners are paying their own taxes. This means your tax bill is much lower than a multifamily property with the same amount of gross income.
You rarely see new mobile home parks being built. That’s not because they aren’t in demand; it’s because most municipalities don’t want new ones being built. Buying vacant land to develop a new mobile home park is not an option in most areas, so it’s a market that’s unlikely to become oversaturated.
How many other types of businesses are there that don’t have to worry about a competitor moving in next door, let alone even in the same town? In fact, the number of mobile home parks is actually shrinking. In the past, some investors wanted to get paid rent on the home as well as the land, so they owned the mobile homes as well.
The problem with this is that mobile homes begin to fall apart and become very difficult to maintain. Mobile homes have a limited life, so they need to be replaced. Since most of these investors didn’t set aside enough reserves to replace them, the code violations started piling up so high that these types of parks are getting shut down.
Mobile home parks will always be in demand
Mobile home parks fill a need in the housing market. Mobile homes are relatively inexpensive and can provide a fairly large living space. People are able to own their own home, in a space large enough for a family of four, for less than it would cost to live in an apartment or rent a house somewhere. There will always be a need affordable housing, and mobile home parks will always be able to fill that need.
Original Source: Kevin Vandenboss