There are only around 44,000 mobile home parks in the U.S. – and that number is set in stone with roughly ten times more torn down each year than built new. Of that number, around 4,000 are owned by professional investors, leaving about 40,000 up for grabs. What are you doing to buy your fair share of these properties – and why bother?
Mobile home parks have the highest rates of return in U.S. real estate
You have probably seen articles on the return rates of mobile home parks vs. all other U.S. real estate sectors. Most mobile home park buyers are targeting a 20% cash-on-cash return, which is more than double that of most other alternatives. How is this possible? There are several reasons why mobile home parks dominant in the arena of investment returns:
- • High cap rates of around 8% to 12%
- • Low loan interest rates of even under 4% with Fannie Mae.
- • This creates the greatest “spread” of any real estate sector.
- • Huge potential to increase rents and occupancy from mom and pop sellers.
- • Seller financing often available at attractive terms.
- • The demand for affordable housing has never been higher.
- • A contrarian bet on a weaker U.S. economy.
They also have the ultimate “moat”
Warren Buffett – America’s greatest investor – has long maintained that the most important feature of a good investment is a “moat” to protect it from competition. In the case of mobile home parks, that “moat” is simple: most American cities have not allowed new construction of mobile home parks in nearly 50 years. Mobile home parks are, in fact, the only form of American real estate that has been effectively “banned” from new construction. This has kept the supply capped at around 44,000 parks for the last half-century.
But there’s a window of opportunity
Mobile home parks are just like any other real estate sector in that they definitely have a “window of opportunity” and once it closes, the chance for success is over. The window of opportunity is limited due to two factors:
- • The aging of the mom and pop owners, who are mostly members of the Greatest Generation and Silent Generation.
- • The coming boom of consolidation, in which larger buyers go on an acquisition binge.
Both of these factors weigh heavenly on the remaining opportunity time frame.
And once they’re gone, they’re gone
Because the number of mobile home parks in the U.S. is essentially fixed at around 44,000, once these have all been purchased by professional owners, the opportunity is permanently over. So far, the professional owners have purchased around 4,000 of them. But the time urgency is actually even worsethan it would appear. That’s because, of those 40,000 remaining mobile home parks, only a subset are investment quality which would include:
- • Quality locations in desirable neighborhoods.
- • Lots large enough to hold newer homes and meet all setback and fire requirements.
- • Legal permit.
- • Safe and functioning utilities delivered to residents.
- • Ample parking for residents.
Conclusion
If you want to buy a mobile home park, you’ll need to know the correct way to identify, evaluate, negotiate, perform due diligence on, re-negotiate, finance, turn-around and operate mobile home parks. We’ve been perfecting that science for over 25 years, and you’ll find all the information you need in our Mobile Home Park Investor’s Home Study Course or Mobile Home Park Investor’s Live Boot Camp events. It’s the sum of our career spanning over two decades assembling roughly the 5th largest portfolio of mobile home parks in the U.S.