To build an additional stream of income – or entirely replace a day job – there are really only two options: 1) buy income properties or 2) buy a business or franchise. Of these two options, the income property route is far superior at this moment in U.S. history, and the mobile home park is the winning choice for an income property. So why is buying a mobile home park superior to buying a business or franchise? The reasons are numerous.
When you buy a mobile home park, your money is protected by a piece of valuable real estate. When you buy a business or franchise your money is protected by … really nothing. If you buy a FastSigns franchise, for example, you’ll get some equipment and parts and a “we’re open” sign, but the building is leased and you have only a penny on the dollar of actual, tangible assets to show for your money. That’s probably the single biggest difference between these two types of business models: one is secured by real estate and the other secured by hot air.
Ability to get financing
And this key difference is also reflected in the lending options. When you buy a mobile home park you can typically obtain a loan for about 80% of the purchase price from a lender on a 30-year amortization. But when you buy a business of franchise, no banker will touch it. Why? Because the lender can use the real estate of the mobile home park purchase as collateral, whereas the business or franchise have no tangible property of value. And this also means that you can buy a mobile home park that is worth five times what you have in capital, while a business or franchise has no such leverage potential.
Focus is NOT on people making money for you, but nice, safe land
Here’s the other key difference between a mobile home park and a business or franchise: you are investing in an asset that produces income in the absence of employees vs. one that relies on people to actually make money. A mobile home park is essentially a parking lot. Your product is the land itself, which the customer parks their mobile home on. The manager is there to help collect rent and other items, but the customer is paying their rent regardless of whether you not you have a manager or the manager even shows up for work. When you buy a business or franchise, on the other hand, the only way you make money is if your employee does a good job that warrants the business getting paid. And this reliance on people is a curse that only grows bigger every day. Not only is the American employee today a disaster between not showing up and not putting forth much effort, but even worse they can turn around and sue you for even the most minor infractions. People are toxic in the U.S. today, and who wants to invest in a business or franchise that is 100% reliant on people?
Betting on affordable housing is the safest bet in America today
It comes as no surprise that the hottest product in the U.S. is affordable housing – and that’s what mobile home parks are all about. “Trailer parks” are the dollar store of housing at a time when everyone is trying to find the least expensive alternative. With apartments averaging over $2,000 per month while the average mobile home park lot rent is only around $300 per month, there’s no question that mobile home parks have tremendous demand as well as tremendous potential to increase rents. There is no business or franchise in America that offers as much demand as “trailer parks” do.
Proof is in the pudding
The average failure rate of a small business is between 65% and 80%. Meanwhile, mobile home parks have the lowest default rate of any form of commercial real estate – it’s the polar opposite. Why does one do so well and the other so awful? It’s simply the manifestation of the reliance on people coupled with the safe bet on affordable housing. And all of that is backed by good old American real estate.
If you are considering mobile home park investing vs. buying a business or franchise, the answer is simple. In each and every factor of decision-making, the mobile home park is clearly superior. That’s not to say that all mobile home parks are worthy of investment. But if you find a mobile home park with the correct infrastructure, density, location and economics, then there is no business or franchise that can compete.