Real estate investors partnering with mobile home park owners can be a beneficial partnership for both parties. Mobile home lot investment is an opportunity often overlooked by real estate investors, despite the fact that this is one of the steadiest performing assets in commercial real estate.
Types of Mobile Home Park Ownership
One type of mobile home park ownership is where the owner owns everything within the park, including the land, the roads, any amenities such as a playground or swimming pool, and the actual mobile homes. In this case, the mobile homes are rented or leased rather than being owned outright by the tenants. This type of ownership results in increased maintenance costs for the owner, as well as a bigger tenant turnover rate, which also decreases the return on investment.
The second form of ownership is the topic to be explored more in this post. With this ownership model, the mobile home park owner owns the individual lots – the land each mobile home occupies. They also own all the roads within the mobile home park and all common areas. However, in this model, the actual mobile homes are not owned by the park owner but rather by individuals and families who then rent the land lots for the mobile home to sit on.
Why Invest in Mobile Home Lots?
Steady Performance
According to SNL Financial, mobile homes are the only asset class with a shrinking supply and an increasing demand every year. In large part, this is due to the affordabiity and low maintenance of the mobile homes themselves. There will always be a need for affordable housing, and mobile homes have proven to be a popular solution to that need. But a mobile home also needs a lot to sit on.
Cost Per Unit
When an investor acquires a mobile home park, they are actually acquiring multiple units. And, since we are talking here about the second ownership model where the owner owns just the land and not the actual homes, the cost per unit is much less than if the investment was a duplex, an apartment complex, or other multi-family dwelling.Â
Maintenance and repair costs are also much lower since the park owner is only responsible for maintenance and repairs to the actual park and not to the mobile homes. The mobile homeowners are responsible for any and all maintenance and repair costs for their individual homes.
High Demand/Low Turnover
As stated above, mobile home parks have proven to be one of the steadiest performing investments in that real estate asset class. Manufactured housing industry statistics indicate that about six percent (6%) of the U.S. population, more than 22 million people, live in trailer parks.
Recent U.S. Census data backs up those statistics and indicates that more than half (56.4%) of those people have lived in those homes for ten years or more. With more and more families looking for affordable housing options, these numbers are predicted to continue to rise.
There are also fewer new mobile home parks being developed because of various zoning changes which, again, creates a high-demand situation. And, since the homeowner would have to pay significant fees to have the mobile home moved to a new location, there is a very low turnover rate for lot rentals.
Partnering With A Mobile Home Park Owner
Many mobile home park owners are not huge real estate investors and, frequently are not professional landlords either. So these owners are often open to partnering with investors who have more experience. An experienced investor would be able to bring a lot of knowledge to the partnership, including current rate trends for lot rentals.
Many mobile home parks have retained the same lot rental rates despite increased costs for property maintenance and upkeep. The owner may also not be aware of lot rental rates in other mobile home parks in the same general area. An experienced investor, as a partner in the mobile home park, would be able to help the current owner revise the current rental/lease agreements or even create a more updated contract altogether. This could easily increase the profit margin, the return on investment, for both the current owner and the new investor.
American Made Home Solutions Can Help
At American Made Home Solutions, our mission is to rejuvenate neighborhoods and increase the standard of living by improving the overall quality of housing for the residents. Our team of experts includes real estate investors who are always open to new investment opportunities – including partnering with mobile home park owners.
The State of Tennessee currently has about 800 mobile home parks, with Memphis being one of the two main markets. So if you are a mobile home park owner looking for an experienced real estate investor to partner with, call us today to see how we can help you.
