“Mobile home parks are incredibly favorable from an investor’s perspective in 2018,” Thompson concludes. “Right now, there is a rare combination of ever-increasing demand with an ever-decreasing supply.”
LOS ANGELES (PRWEB) January 10, 2018
Mobile home parks, generally overlooked by investors, are smart investments for 2018 when managed by experienced operators because tenants tend to be long-term, operating costs are low and there is a shrinking supply, according to Hunter Thompson, CEO of Cash Flow Connections.
“Mobile home parks have performed very well prior to, during, and since the Great Recession,” said Thompson. “A primary reason is there is very little available housing in a similar price range. In many markets, it is common for a mobile home lot to rent for less than half of the cost of a nearby 2-bedroom apartment. With housing costs eating up an ever-growing percentage of incomes, a mobile home is one of the most viable options for those who are looking for significant savings on housing,” he notes.
Another advantage to mobile home park investors is that the average tenant stays 5-7 years, compared to a 1-2-years average in apartments, Thompson reports. This is partially due to the cost of moving a mobile home that ranges from $3,000-$5,000. Since the homes themselves may only be worth $5,000-$10,000, it doesn’t make financial sense to move very frequently, he points out. The average length of tenant stay in mobile home parks is not only a benefit in terms of the predictability of income, but also decreases the marketing expenses required to advertise vacant lots as turnover is so limited.
Baby Boomers are reaching age 65 at the rate of 10,000 per day, notes Thompson, and many will retire on limited budgets, making mobile homes a great alternative for them. These seniors make excellent tenants as they are downsizing from single family homes and understand the responsibilities of homeownership and maintaining the value of their communities, he reports. “Their pride of ownership reduces management problems and decreases expenses to investors,” Thompson believes.
In many cities, like fast growing Denver and Austin, a massive infusion of high tech jobs has caused rents and home prices to rapidly escalate. As a result, developers are acquiring and transforming mobile home parks into Class A/B multi-family apartments, consequently, driving up values on existing mobile home parks.
In an attempt to reduce the likelihood of mobile home park redevelopment, an interesting trend is occurring, points out Thompson. Municipalities, non-profits, and charities are purchasing mobile home parks throughout the U.S. in order to preserve them and their affordability.
“Even though this may appear like a worthwhile short-term solution, keeping prices of housing artificially low only increases the amount of demand for the product, further restricting its availability. This strategy is comparable to San Francisco’s implementation of extensive rent control laws, which have helped create a housing crisis in the market. A far more viable solution would be for municipal governments to allow new mobile home park developments, something that has not taken place in a meaningful way since the late 1970s,” said Thompson.
Because of the combination of high prices in other real estate asset classes and the unique supply/demand profile of mobile home parks, large private equity groups have recently started buying and aggregating parks, which typically have been the province of mom and pop operators. This is another trend that is raising mobile home park values but also may create a unique buying opportunity in the future as these large institutional buyers may end up selling at discounts to more seasoned mobile home park operators who more thoroughly understand the nuances of managing these properties.
“Mobile home parks are incredibly favorable from an investor’s perspective in 2018,” Thompson concludes. “Right now, there is a rare combination of ever-increasing demand with an ever-decreasing supply.”
