Why You Should Invest in Mobile Home Parks

Earnest Money Basics

Real estate investors always seeking new ways to earn money. Single-family houses, multifamily properties, and even mixed-use investment properties are popular among the general public. One investment type that is worth considering could be the mobile house. Find out the reasons to consider investing in a mobile home park.

What Are You Investing In?

If you buy a mobile home park you’re purchasing the land that is designated to be let out in separate lots to various owners of mobile homes. You then lease these areas to owners of mobile homes for either a monthly or annual fee. You are the owner of this mobile park while the residents have their own mobile homes.

Pros and Cons of Mobile Home Park Investing

What We Like

  • A lower unit cost per unit than the rental property
  • The tenant is responsible for repairs as well as maintenance
  • A lower rate of turnover for tenants as compared to a traditional rental property
  • Demand is high due to the difficulty in obtaining approval for zoning

What We Don’t Like

  • In order to get the tenant to be in compliance with the maintenance obligations
  • A limited number of mobile homes can be parked in parks.
  • Fluctuating, inconsistent demand
  • Aiming your marketing at specific groups of people

Pros of Mobile Home Park Investing

Mobile home parks hold the potential to become great investment options for a variety of reasons.

  • Lower Cost Per UnitWhen you purchase a rental home it is an asset in physical form that you are able to rent to tenants. When you buy a mobile home park you purchase the land you will rent out to tenants who then put their property, a mobile house, onto the property. Because you’re paying for an already existing property when you buy an investment property for rental and the price per unit is more expensive than the unit cost of land that is part of the mobile home park. If, for instance, you buy a six-unit structure for $1 million, the price per unit would be around $167,000 dollars. If you decide to purchase a mobile home park you might be able to purchase $1 million dollars and have 100 lots that you can lease to tenants, making the total cost per unit 10,000 dollars.
  • The tenant is responsible for repairs and maintenance owner of mobile home parks is solely accountable for maintenance and repairs on the actual property and any other physical structure located on the property he or owns. This might include cutting grass or clearing snow, garbage removal or repairs, and maintenance to the clubhouse or pool that is shared with other residents. This is up to the resident of the property to carry out all necessary maintenance or repairs. If they experience any plumbing issues then they must call an experienced plumber and pay to get it fixed.
  • low turnover of tenants The signing of every lease is an agreement. If a tenant moves to or from home and leaves, they must take their belongings with the property. It’s much simpler for a person to relocate a couch or some clothing than to move a mobile home. This means that the turnover rate is significantly lower in the mobile home park as compared to traditional rental properties. The turnover in mobile home parks is between 10 to 15% per year however, the turnover of traditional rental properties is between 50 to 60% annually.
  • High Demand According to the 2017 US Census Statistics, there are around 8.5 million mobile homes in the United States and that’s about 6.4 percent of the housing units. As it can be challenging to obtain zoning approval to construct the new parks for mobile homes, mobile homeowners have to pick from a few mobile home parks that are already in existence that help to boost the number of people who want to live in the parks.
  • Risk Reduces with Additional Units The presence of more mobile home units on your property lowers the risk. If you have only 5 mobile houses on your property and one tenant goes away from the property, you lose the equivalent of 20% of earnings. If you own 50 mobile houses on the property and one tenant is gone from the property, you will only lose 2percent of your earnings.

Cons of Mobile Home Park Investing

There are a variety of dangers to be aware of when making a decision to invest in mobile home parks.

  • Maintenance and Repairs If the owners of the property fail to maintain the repair and maintenance for their properties, they may cause the remainder of the park to appear shabby. This may make other owners of mobile homes leave your park and search elsewhere for a permanent home. The lease you sign with your tenant ought to contain conditions regarding the maintenance of your property however, it is difficult to get your tenant to adhere to the requirements for maintenance.
  • Density Per Acre Legally, you can only be allowed the number of mobile homes within your park based on the area. If you’re purchasing an existing mobile home park, ensure that the current owner isn’t exceeding the legal limit.
  • Demand in a specific area demand in Specific Area You must be sure that there is a real need for mobile homes in the region of the nation in which you intend to build. Certain areas of the nation like the South are home to a greater amount of homes on mobiles. The demand for mobile homes will vary across states as well one town could have a huge demand for mobile home parks, and another town in the state has no requirement for one.
  • Filling vacant spaces- Mobile home rentals are exclusive with only 6.4 percent of all housing units in the nation. If you are in the market for a vacant that you have to fill, you’re not advertising to the general population of tenants. You must target your marketing efforts towards homeowners who are mobile or tenants who are looking to lease a mobile property with the owners.
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