It was a close game between the Seahawks and the Patriots. But in the match-up between real estate asset types – from apartments to office buildings – the winner, once again, are mobile home parks. They are, year after year, the highest yielding form of commercial real estate. They score the highest in return on investment, stability, recession-resistance, financing capability; every metric you can imagine. Their returns are often 100% higher than alternative options. So how do mobile home parks win every year?
Several reasons. The first is that there are 44,000 mobile home parks in the U.S., and 42,000 or so are still owned by the original moms and pops who built them. This group owns these properties free and clear, and price them at whatever suits their fancy. In many cases, their estimates of value are at least a decade old, and their operations are terribly non-maximized, so you get not only a low price, but one with plenty of room for upside in raising rents and cutting costs. Also, because they own them free and clear, they often utilize seller financing, which saves you from having to go get a bank loan.
Another reason is that mobile home parks are all about affordable housing, and that’s an asset that’s in short supply in today’s market. Roughly 30% of the U.S. can only afford $500 per month or so for housing, and the average apartment rent last year was over $1,000 per month. The only niche that can satisfy this crisis is the mobile home park. As a result, the demand is gigantic and you can get up to 100 calls a week for a single vacant trailer.
Finally, there is a huge stigma wall that keeps most investors out of this asset class. People think that “trailer parks” are all about crime and poverty. They’re not. The typical mobile home park is a community of folks that do not have high incomes, but have the same lifestyle and aspirations as everyone else. They take care of their property, wash their cars, send their kids to school, everything that people in a subdivision do. But the stereotype created by the media – Jeff Foxworthy, COPS, and other shows – has greatly reduced the number of investors who work this niche. And this lack of competition creates a world of opportunity for those who do.
If you want to win big in your investing, then consider mobile home parks. They are the true Super Bowl champions.