Mobile Home Parks – A Cash Flow Generator!

Mobile home parks (MHPs) are one of the best ways of investing money with low risk. Mobile home parks are improved lots, which are rented out to tenants, mobile home owners. A park tends to have over 15 homes. Larger MHPs have hundreds of lots. The mobile homes are also called trailers or manufactured houses, which are houses built in a factory and later installed in parks.

There are almost 38,000 mobile home parks in United States and growing. The following are some reasons why people invest in them:

Recession Resistant
The best thing about MHPs is that they are recession resistant. While luxury apartments and executive suites have higher vacancy rates in an economic downturn, MHPs thrive. Regardless of up or down markets, people always need shelter.

With mobile home double wides costing on average $40,000 and lot rental varying from $100-$500/mo, the barriers to entry are significantly lower than purchasing a single family house. This is a boon for a lot renter who gets home ownership at a much lower price point and typically pays less than renting a house or apartment. Thus, a properly operated MHP can be profitable regardless of economic cycles.

Less Competition
There is less competition in MHPs compared to other investment vehicles. There are relatively fewer investors experienced in both owning and operating a MHP. Due to low barriers of entry, MHPs attract low to middle class families. This tenant base of working poor plus park mismanagement create a “trailer trash” stigma, which repels some investors like institutions. Instead, many institutional investors prefer to project a “professional” image through owning a portfolio mix of high end office, retail and apartment buildings. This means less competition for a MHP investor.

Less Money at Stake
MHPs need less capital to acquire and renovate compared to apartments and other investment vehicles. Investors merely maintain the parks’ utilities, landscaping and common areas since the trailer owners are responsible for the purchase and maintenance of their own homes. Unlike commercial buildings, MHPs have no roofs, siding, windows, carpets, toilets, etc. to maintain! Except for the management office or clubhouse, there is no maintenance, deferred maintenance nor property insurance required! This keeps the expense ratio relatively low (30-50{da74ea48cec7d1c659e4125ffe517180d7bd6cbbe5631d32f11d21c45900f39b}) and cap rates high (~10{da74ea48cec7d1c659e4125ffe517180d7bd6cbbe5631d32f11d21c45900f39b}).

Overall, MHPs are a great investment option. Investors have low capital risk, less competition and recession resistance. All these factors turn mobile homes parks into a cash flow generator.