For over 40 years, Dollar Tree charged $1 for every item in the store. Whether it was a shirt, a toy, or a book, there was no price check needed because your tab would be exactly $1 per item. But recently, Dollar Tree raised that amount to $1.25 per item. Of all retailers, Dollar Tree is the most comparable to the mobile home park industry, as “trailer parks” have been offering ridiculously low prices for decades, and our customer base is very similar. So what’s the story on why Dollar Tree went to $1.25, how has that worked out, and what are the lessons learned for mobile home park lot rents?

Jerome Powell with the Federal Reserve has raised interest rates around 4 points in 2022 – the fastest such increase in 40 years. And, predictably, this is causing widespread disaster with the single-family home industry, which had experienced 14 straight years of world-record low home mortgages. So what’s the impact going to be on the mobile home park business when the single-family bubble bursts?

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.

Nouriel Roubini is the New York University economist who rose to fame as the first to predict the 2007/2008 Great Recession and was given the name “Dr. Doom” for espousing what was considered then a heretical doomsday vision at a time when the U.S. economy appeared to be booming. Now “Dr. Doom” has issued his new predictions and we couldn’t agree with them more.

Jerome Powell at the Federal Reserve is in the process of raising interest rates farther and faster than America has seen in over 40 years. And the effect of these increases has resulted in a plunge in the stock market coupled with a great deal of uncertainty regarding commercial real estate. While some sectors of real estate are already going down – such as single-family homes – the impact on mobile home parks has been much lower. Why is that? Better ability to raise rents

You only have to go back to January 2021 to get a 30-year home mortgage of 2.74%. But with the advent of some of the dumbest governmental policies since Jimmy Carter the 30-year home mortgage has now broken the 6% barrier and is on the way to approaching 7%. While that’s historically about the norm (the 1972 mortgage rate was 7.28%) it’s going to be a huge shock to an America that has been enjoying quantitative easing and low rates since 2008. What will be the impact on this doubling of home mortgage rates for the mobile home park industry?

You’d never find it in a mainstream media outlet today, but there is still fair and balanced journalism to be found in places like Hazleton, Iowa, which recently published this story on the turn-around of a mobile home park. Here’s a quote from the story:

Most apartment tenants dream of lower rent payments and detest increases. The same is true of those who live in mobile homes. One big difference; apartment dwellers can more easily move while mobile home buyers own their home. That makes comparison difficult, so what determines “fair” park rent?

One of the strange media fixations on the mobile home park industry is that “mobile” homes are anything but mobile. Between the high cost to move a home ($5,000+) and the dangers involved (the home can fall to pieces in transport) it makes about as much sense to move a mobile home as it does a stick-built one. Yet the media frequently fakes moral outrage that these dwelling units can’t just be hitched to the back of your minivan and hauled down the highway like a U-haul trailer. Let’s analyze why this argument is so absurd.

In many parts of America, you’ll find mobile home parks located next to sewage treatment plants, cattle feed lots, airport runways and railroad yards. These can create massive noises and odors on a daily basis. So what is the impact of these on mobile home park success in both operations and valuation?

Vice Media recently released a video to its American audience, attempting to play on their woke sensibilities with the worn-out theme that mobile home parks are nothing more than rich landlords beating up on the poor. Instead, this misguided reporter and story probably built one of the best videos ever on the benefits of mobile home park investing. Here’s what the video basically tells the viewer.

Sure, the U.S. is now officially in a recession. And this one will be more serious than the 2020 Covid dress rehearsal. But mobile home park owners are not worried about the decline of the economy. It’s the same phenomenon that “dollar stores” are currently experiencing: in times of financial decline, more customers look for less expensive options. That’s why dollar store sales are up over 70% while every other form of retail is in total decline. So why do mobile home parks do better when times are bad?

Once upon a time, a mobile home dealer named Jim Clayton, frustrated by look-alike mobile homes, decided he could do better and opened a little factory to produce innovative mobile homes. Or tried to, before learning how difficult that task would prove to be. Clayton became very successful, but his homes look just like the competition. Innovation is hard.

Six years ago, the transmission went out in my aging GMC Yukon. It had about a billion miles on it and The Blue Book Value was around $2.75. It made no sense to fix it as it was not worth the cost. So I moved on and found another used GMC Yukon. After six hard years and multiple crossings of the continent, the head gasket blew on my second GMC Yukon.

Many Americans were surprised when it was announced that Mark Cuban’s crypto bet that he’d been hawking for months had collapsed. But the bigger question would tie to one of Mark Cuban’s recent quoteas to what makes an investment have inherent value:

There’s one unique type of deal that is only perhaps found in the mobile home park sector: the “zero down”. We’ve done 12 of these over the past 25 years, but have also done deals with 2.5%, 5%, 10% as well as other low-down payment amounts. In fact, there’s a general assumption that “zero down” and other “low down” constructions can cure all ills with any mobile home park purchases. But is that really true? Let’s examine the facts.

There’s nothing more American than baseball, hot dogs, apple pie … and mobile homes? It’s true. There is no more “American” form of housing than the good old trailer park. How did that happen and why are so few people aware of this fact?

So what can you do to find a good investment “storm shelter” for this high-odds occurrence? One good option is buying a mobile home park.

In 1996 I ventured into the mobile home park business with my first buy being a dilapidated old mobile home park built in 1951 called Glenhaven. I knew nothing about what I was buying or how it operated.

The Wall Street Journal recently released an article touting a grassroots movement for rent control. It cites that U.S. rents are up 18% on average in some markets as the catalyst to a new world order in which rents are set by state government. So how realistic is the concept of rent control in the markets that have not embraced it over the past 100 years? There’s a lot more math to this issue than what the Wall Street Journal released to readers.

As an economics major from Stanford, the fist lesson learned is that markets move in cycles. But even an Uber driver summed up the main lesson in a recent cab ride:

There are around 44,000 mobile home parks in the U.S., with roughly 40,000 of those still owned by the original moms and pops. It is the challenge – and opportunity – of the current generation to bring these selectively back to life. Some qualify for investment and others don’t, but the trick is understanding what makes money and what’s hopeless and following established guidelines for making them successful again. The photo above is from the 1955 book titled “How to Build and Operate a Mobile Home Park” and, as virtually all mobile home parks in the U.S. were built between 1950 and 1970, the photo above represents the “before” shot for many of these investment projects. So how do you create the successful colorized “after” photos?

The sudden rise in inflation to levels not seen in 40 years has changed the playing field for successful investments. Americans have become accustomed to inflation rates of 1% to 2%, and therefore tolerated investment returns that were only mid-single digits in everything from stocks to bonds. Even those who ventured into real estate often did so with REIT dividends of around 4%.

One of the most common questions we get regarding buying mobile home parks is “can you make $100,000 per year on a single asset?” This is understandable as most investors are looking at alternative investing to do what the stock market fails at, and that’s to provide predictable and significant cash flow on a recurring basis. With the average dividend yielding around 2.5%, you would need $4 million in stocks to accomplish this. And to own $4 million in stocks you’d have to earn around $8 million pre-tax. That’s not much of a business model. So here’s why mobile home parks can hit this target, but based on complete science and not a “get rich quick” infomercial premise.

The Holiday season invariably includes mobile home fires. Not necessarily in your park. Maybe only once a decade, if ever. But there’s no question that fires occur in mobile home parks more frequently in winter than summer.