In 1996 I informed all my friends and family that I was buying a mobile home park called "Glenhaven" on South I-35 E in Dallas. They all thought I was crazy. Reactions ranged from "you'll lose your down payment" to "you'll get killed". But all that changed years later when Glenhaven sold for around $1 million more than I bought it for. That's a common story if you talk to mobile home park owners – but why? It all boils down to some basic issues.
Most people don't even know what a "mobile home park" is
The first problem is simply that the average American does not know what the concept even entails. They view a "trailer park" in the same category of a "convenience store" with the same clientele. I had people tell me "what are you going to do when they rob you?". Of course, the truth is that you don't sit in the mobile home park and sell beer and corn chips, you simply rent the land to people who then place their "trailers" on it and live there forever. It's not a transactional business. It's the most simple business model on earth: effectively a parking lot.
The negative stigma against "trailer parks"
It's a fact that Americans have a huge negative stigma against mobile home parks and those who live in them. It's not something that will probably ever change – and that's a good thing. It's this negative perception that keeps the industry from ever overbuilding and creates the "moat" that protects the investment. When you look at real estate sectors that people have positive attitudes about – like Class A apartments – you realize that this results in continual overbuilding as permits are simple to attain. You will find that virtually every city and town in America bans the building of new mobile home parks through zoning regulations. I fully understood why people gave me shocked expressions when I bought Glenhaven because I shared that same stigma, as most people do. But I also learned it was not justified over time.
They don't understand the big attraction
The first American real estate millionaire was John Jacob Astor back in the 1820s. He only had one focus with his real estate investments: the land. He refused to even build structures on his land, instead renting out the dirt and allowing others to build their homes or businesses without his involvement or responsibility for upkeep. Astor was lucky that his land holdings were located on the island of Manhattan, but mobile home parks are the most true to his vision. While outsiders think the money is in the "trailers" the actual money is in the land. When I did an interview with National Geographic a decade ago, the journalist kept coming back to the notion that when you own a mobile home park you're in the "mobile home" business. You're not. You're in the land business. When I looked at Glenhaven I saw 8 acres of prime land on an interstate highway, not a bunch of trailers.
No appreciation for the potential
When you're not a park owner you have no idea of the massive potential to create greater income with these properties. Most parks are bought from moms and pops who have lost interest in the business and have let things go downhill. By bringing the property back to life you are able to raise rents significantly yet still offer the type of remarkable value that keeps customers happy. And that also means you can typically fill the remaining vacant lots and streamline and improve management. When I looked at Glenhaven I saw a massive amount of potential to increase net income through occupancy gains (it was half empty) and raising rents to market levels (back then the lot rent was $150 a month when the market was more like $400).
The necessity to be contrarian
Perhaps the greatest characteristic of park owners – the one that separates them from the crowd – is the inherent ability to be contrarian and to literally not care what other people say. The late Sam Zell once said about investing "when everyone is looking left, look right". And that's what mobile home park investing is all about. When people criticized my decision it only served to actually affirm I was right. It even made me more determined to buy more parks since I realized the negative stigma and unfamiliarity with the product meant I was competing with fewer investors.
Conclusion
I have been in the mobile home park business for 30 years. It all started with Glenhaven and it's always interesting when people who used to criticize the industry are now among its biggest supporters. The banks that refused to make loans on parks now seek them out. The very people who thought poorly of "trailer parks" now aggressively hunt for them. If you want to make money in real estate, you can find no better option that mobile home parks – but don't expect to get that reaction from others. They don't know any better.