There are at least a thousand ways you can invest your money. So why should you put it in mobile home parks? Well, there's a variety of reasons that even the top investors in the U.S. - from Warren Buffet to The Carlyle Group (the biggest private equity group in the U.S.) -- are choosing this industry. And the reasons they are excited about affordable housing are only increasing.
High rates of return
The mobile home park business has had the highest rates of return of any real estate sector for as long as such numbers have been tracked. The reason simply ties back to supply and demand, as there are very few investors who understand or buy these properties compared to the other real estate niches. For every mobile home park investor there are probably, literally, a million single-family home investors. Since it's harder to find a mobile home park buyer, the sellers have to offer higher yields. And how high are they? Mobile home parks typically buy and sell for around a 10% cap rate, which is 2 to 5 points higher than the other real estate sectors.
Stability and predictability
Mobile home parks are probably the most stable niche of real estate. Why? Because it costs about $5,000 to move a mobile home. As a result, the customers can never leave. It is estimated that 98% of all mobile homes in the U.S. never leave the location in which they were first delivered. What this means is completely consistent occupancy. In a world in which typical self-storage centers churn 10% of their entire customer base per month, it's refreshing to find an industry that you can buy a property at 86% occupancy and have that same 86% for as long as you own it. And, of course, what adds to the stability of this asset class is that it is a basic need: shelter. Unlike retail, hotel, and many other real estate forms, this is not something that the average American can cut back on or eliminate from their budget.
Low management demands
The mobile home park business offers unbelievably attractive time requirements. In a mobile home park, the tenant typically owns their own home, which means that not only does the park owner not have to bother themselves with repairs, but that the tenant is also a stakeholder in the business. The park owner gets away with simply renting a lot to the tenants, and is only responsible for the streets, common areas, and utility delivery. Compare that to apartments, in which the owner not only has those responsibilities, but each and every door, wall and toilet.
On the right side of all current trend
The biggest trends in the U.S. are all favorable for the mobile home park business. As the American economy continues its decline, more people need affordable housing. Are you aware that 20% of all households have an annual income of $20,000 per year or less? Well, it's a fact, and those comprise the bulk of mobile home park customers. The fact that another 10,000 baby boomers per day are retiring into social security incomes averaging $14,400 per year fuels the demand even higher. And are you aware that you can't build any new mobile home parks in the U.S. (except in remote areas) as virtually every city in the U.S. has banned their construction. That means that the danger of increased supply of parks is negated.
The reasons for mobile home park investing are numerous and compelling. You should definitely take the time to learn more about the mobile home park business and see if it fits with your investment goals.