I was an economics major at Stanford and one of the core principles of capitalism is market efficiency. In a perfectly efficient market, there are no great deals and little opportunity outside of the regular small advancements brought on by inflation. Everyone has perfect knowledge of every deal on the market and then bid them up to the point in which there is no profit. You are seeing that right now in the stock market where all key indexes are lower now than in January. Indeed, the only money you can make in America is in “inefficient” markets in which competition is restricted due to a lack of complete knowledge by all competitors – the type of efficiency that can then ruin any opportunity for profit.
One of the most “inefficient” markets in U.S. investment is in the “trailer park” industry. For that reason, bargains are still out there if you only focus your attention on finding them. Here are the reasons why mobile home parks are very inefficient as an investment market:
- Most deals are found by “inefficient” methods. Unlike other forms of real estate – and the stock market – there is no published list of all mobile home parks for sale. There are around 44,000 mobile home parks in the U.S. but only around 400 to be found on listing services such as Loopnet.com and Mobilehomeparkstore.com. The rest are found through talking with brokers about pocket listings (non-advertised properties for sale that they have knowledge of), cold calling and direct mail. This means that the playing field of properties for sale is extremely broken and you can find deals in the absence of competition.
- Deal terms can rapidly change due to “bonding” and seller’s motivations. There is probably no greater force in buying a mobile home park than “bonding” with the seller. This involves sharing your thoughts and enthusiasm and the seller liking you and wanting you to succeed. A seller might price a deal to a buyer they like at one price and to someone they dislike at twice that amount. In addition, seller motivations are constantly changing in urgency, and if the seller has reason to make a quick exit due to health emergency, divorce or general lack of desire to continue on with their property then the price may be lowered quickly and to the buyer’s favor.
- Creativity is a decisive part of the process. Most sellers realize that getting a mobile home park sold is complicated and that they need to be creative to get the job done. And most smart buyers share the desire to custom craft a deal that is win/win for both parties. This creativity can come from a number of sources but namely revolve around seller financing which can allow the deal to progress outside the traditional constraints of traditional banking. As a result, two identical buyers can end up with very different deal structures based on their ability at crafting a unique construction.
- Many deals are renegotiated during the diligence process. The final mobile home park deal is often only remotely similar to the one that was put under contract. As things pop up in due diligence there is often a renegotiation of the terms and this means that two identical buyers may end up at completely different end results because of their negotiation abilities.
Warren Buffett recently commented that the “glorious period” has ended for the U.S. economy. That means that affordable housing will become even more in-demand in the years ahead as the American markets tank. You are seeing that every day right now in the stock market as well as in the decline in all key indexes of the U.S. economy. To make money in the current environment you have to find an investment sector that offers “inefficiencies” and that will remain true for years to come.
If you are interested in learning more about mobile home park investing then we suggest you consider attending our final Mobile Home Park Investor’s Boot Camp of 2023 on December 8th to 10th. It’s a three-day immersion weekend that is both 100% live yet 100% virtual so you have no travel time or cost. It is Q&A throughout with no topic taboo. At the end of the event, you receive full recordings that you can refer back to at any time. You also receive some priceless tools including the complete list of all 44,000 mobile home parks in the U.S., a reference library of every contract and form you should ever need, park evaluation software – and even access to the instructor to help you review your deals.