Why Real Estate Investors Love Mobile Home Parks

For decades, the phrase “mobile home park” was unwelcome when it came to real estate investing. Although mobile home parks and manufactured housing have served as a bridge between lower- to middle-income buyers (or renters) and quality housing for decades, “trailer parks,” as they are often known, conjured up a lot of images, most of which weren’t pretty.

The stereotype of mobile home parks as almost a living symbol of rural poverty, rife with drug use and broken-down cars, has existed as mobile home parks themselves. However, that stereotype was not accurately reflective of the reality of manufactured housing. Many manufactured housing communities across the country are well-maintained, attractive places to live where pride of ownership is easy to see.

That’s a big part of why the perception of mobile home parks among investors is beginning to change. As apartment rents, home prices and mortgage rates continue to spiral out of control, mobile home parks have become popular targets for investors both big and small. The recent surge in the popularity of mobile home parks with investors comes down to a lot of factors.

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Why Mobile Home Parks are an Attractive Investment

Almost all those factors boil down to some investor-friendly economics. Mobile home parks have lagged behind traditional multi-family developments when it comes to value, which translates into investors getting a lot of bang for their buck. It costs a lot less money to buy mobile home parks than it does to buy a traditional multi-family housing community with a comparable number of units.

The cost of moving mobile homes from one park to another means mobile home park residents are much more likely to remain in place, even after new owners raise the cost of renting spaces inside the park. When renters who are priced out do move, their space is usually quickly replaced by a newer, nicer manufactured homeowner who is willing and able to pay a higher rent. So, in addition to affordability, you may have a more stable tenant base in mobile home parks than in apartment communities.

As traditional single-family home and multi-family home buyers find themselves increasingly priced out of the current housing market, more of them are turning to manufactured homes as one of the last bastions of affordable housing. This reality is creating demand to live in mobile home parks among a middle-class demographic that just a generation ago might have turned their noses up at living in a manufactured home community.

For investors, upward pressure from renters and buyers who are frozen out of the traditional housing markets combines with the comparatively low acquisition cost of mobile home parks to create the best of all worlds. Although they can buy the parks for less than it would cost to buy an apartment complex of similar size, they have an almost built-in opportunity to increase both the gross revenue of the property and its market value by increasing rents.

In many cases, with just a few upgrades and rental increases (that the existing tenants are likely to pay or be easily replaced with new tenants who can), mobile home park investors can turbo-charge their equity in a matter of months instead of years.

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To get similar rental increases out of apartment buildings would require renovations that could cost thousands of dollars per unit, whereas with mobile home parks, tenants are responsible for upgrading and maintaining their units. However, they are happy to pay space rental fees that are higher than anyone could have imagined just a few years earlier.

For all these reasons, mobile home parks and manufactured housing have become one of the hottest investment opportunities in real estate. If you’d like to get in on the action but don’t have the capital to buy an entire mobile home park yourself, there are still options for you. A number of institutional funds around the country are raising capital to buy mobile home parks. 

The best part is they’ve done all the due diligence, which means you as an investor can put your money in and benefit from the passive income and appreciation value without the headaches of everyday management. If you would like to know more about where you can invest in manufactured housing and mobile home parks, take a look at Benzinga’s Favorite Offerings for current investment options.

Photo: Courtesy of RealtyMogul