We always think of mobile home parks as being great income properties – but what about the land underneath? Surprisingly, mobile home parks may be the most valuable development site in any city. And it’s been proven over and over again. Why is that?
City government typically hates mobile home parks
It comes as no shock that city government across the nation is not a fan of mobile home parks. Their true reason is that they are extremely expensive for the city, typically costing hundreds of thousands more in city services than they take in with property tax. Compare, for example, a mobile home park versus a retail center. The mobile home park might pay in around $500 to $1,000 per space in property tax annually (based on tax rate and assessed value) while the residents of that lot might have at least one child in school at a school district cost of around $8,000 per year. In this manner, there are mobile home parks that cost the city around $1 million per year. Meanwhile, a shopping center brings in property tax with no costs to the city, and then sales tax on top of that. And, of course, there’s also the negative stigma for nearby development that a “trailer park” brings to the dynamic, and aesthetic issues. The bottom line is that city government often hates mobile home parks with a passion.
They will do anything to get rid of them – including new and attractive zoning
If a city hates its mobile home parks with such enthusiasm, then it makes logical sense that they will be equally energetic to get rid of them. And the best way to do so is to offer extremely attractive zoning to make that possible. There’s hardly any property use that the city sees as less attractive than a mobile home park. In this manner, if you want to build anything from high-density apartments to industrial – the property uses that typically are impossible to get permits for – the best source for getting what you want is to offer to trade it for the demolition of a mobile home park. And you have to buy one in order to demolish it.
Most mobile home parks have great locations since they were built a half-century ago
One attribute of mobile home parks that is often overlooked is just how well positioned they are in most markets. They always seem to be on the main road near the center of town, or in the nice suburb with prime frontage. This is simply the result of being there first – most mobile home parks were built in the 1950s to 1960s and the city literally grew up around them. We have owned two mobile home parks that were the catalyst of the formation of the city itself – and both grew to over 50,000 population surrounding them. Even the Villages in Florida – the largest single housing development in the U.S. – began as a mobile home park a half-century ago. In this manner, mobile home parks offer prime development land for every type of use from big-box retail to apartments.
An example of this fact
Here’s a real-life example of this concept. I had a mobile home park in Springfield, Missouri that I subdivided and sold to two different developers. The commercial land was sold to Harley Davidson for a supercenter. But the bulk of the park was sold for high-density apartments, which was a zoning the city had refused to ever give out before. Since they were eager to get rid of the mobile home park, they gave the zoning to the developer as a trade for the park’s demolition. It was that property that taught me the reality of the true value of mobile home parks for development targets. In fact, the developer that approached me to sell the park told me of that theory – and they were 100% correct.
Mobile home parks are great income properties. But there is also a financial backstop to your security in that investment in the form of land value. Often mobile home parks present the most attractive development sites in the markets they serve. It’s rarely discussed but true. And that’s one more reason that park owners need to continually press to make their properties more profitable to prevent redevelopment into a different use – because it’s an ever-present option.