Significant demand and media attention has been brought to mobile home parks recently and for good reason. Mobile home parks were the top-performing real estate class in 2020 as stated by Green Street Data. Mobile home parks had a 12% increase in commercial property value when a majority of other commercial real estate asset classes struggled in 2020.
A worker earning the average wage does not have many other housing choices, with the national mobile home park lot rent at $375-425 range per month in a majority of the country. In comparison, the average rent on a one-bedroom apartment was $892 a month in 2017. Families have even fewer choices. A two-bedroom apartment was $1,103, according to the Fair Market Rents kept by the U.S. Department of Housing and Urban Development according to Manufactured Housing Institute.
Important trends show a surge in the population aging into retirement increases the demand for affordable housing. The age 55-plus cohort in the U.S. will grow by nearly 1.7 million people in 2020, and through 2025, another 7.6 million will reach this milestone. As these residents retire, many will consider purchasing manufactured homes in age-restricted communities, boosting mobile home park demand even more.
Midwest Park Capital is a private real estate investment firm providing accredited investors with exclusive access to high-yield investments in the Mobile Home Park vertical. Our fundamental strategy is to assemble a diversified portfolio of low-risk, high cash-flow mobile home park assets with the goal of delivering capital preservation, consistent quarterly cash-on-cash income paired with equity growth. We achieve this objective by acquiring, then adding-value or repositioning under-valued, mismanaged, sub-performing, or improperly capitalized income-producing assets. Investing passively allows you to get the cash flow and tax benefits of owning real estate, without the headaches of being a landlord.
As middle and lower-class families continue to be pressured financially, growing demand for inexpensive housing makes mobile home parks the most attractive housing option for the average American earner which currently is around $33k per year. Mobile homes will continue to be the best option for those unable to pay the high costs of conventional homes and ever-increasing apartment rents. Mobile home parks are typically 1/3 the cost of a single-family house or 1/2 that of an equivalent apartment building in the same community.
Due to increasingly burdensome zoning regulations, few mobile home parks are being built with approximately only 10 new parks developed in the past 20 years. These government regulations artificially constrain the supply of mobile home parks. In addition, profit margins for mobile home park developers are often inferior to those in the apartment industry. Finally, many parks are redeveloped or torn down every year for bigger real estate projects that bring in higher tax revenue to the community.
The cost of moving a mobile home is roughly $5,000-$10,000 along with the headache of hiring a fully licensed transporter driver and a licensed and insured technician team to disassemble all the utilities. This is too high of a cost for most of the residents in a mobile home park. Mobile home parks in which you rent the land to the homeowners have a much lower turnover ratio as compared to apartments as the average mobile home tenant stays 14 years in the same community. In most cases, once the home is moved into a park, that home will stay for decades. When residents decide to move, they simply resell the home which remains in the park and the new homeowner becomes a tenant.
For 5 decades, mobile home parks have outperformed other real estate sectors. Even outperformed other real estate sectors during the most recent recession by a large margin and were the top-performing real estate asset class even in 2020. Mobile home parks increased in value by 12% when a majority of other real estate asset classes went down in value during Covid-19. Demand for mobile home parks which are the only affordable housing and non-subsidized option actually increases as the economy tightens. The unique, favorable economics of mobile home parks produce superior risk-adjusted returns for investors in 2021 and the foreseeable future.
Looking forward to the rest of 2021, with the US facing a potential dollar collapse and the economy looking unstable due to Covid-19 restrictions and closures. Mobile home parks historically tend to do even better during economic downturns as they provide the only form of non-subsidized low-income housing and serving the 60 million Americans who need affordable housing. Factor in that the average household income for 20% of all Americans is under $20,000. Based on the government’s suggested ratio of housing costs to total income about 33% of these families can afford around $500 per month. Mobile home parks are the only option for this large percentage of the US population. Mobile home parks are very well-positioned to outperform the markets and properly position to hedge inflation for the foreseeable future.
Original Source: Yahoo Finance