Mobile Home Park Investing

Jun 22
08:17

2011

Jo Amick

Jo Amick

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Have you ever Thought about investing in mobile home parks? I would like to share with you, my thoughts on why mobile home parks can produce some great cash flow

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Mobile Home Park Investing: Pros,Mobile Home Park Investing Articles Cons, and a Few Thoughts

          I would like to write about why I like mobile home park investing.  I know mobile home parks don’t sound flashy, but they can produce some great cash flow.  At the end of the day, that's what it comes down to.  I will write about working in some real value to the community using government funding on a later blog, but for now- let's talk pros and cons.

        There are a lot of mobile home parks in the U.S., and the states with the most are California (surprise!), Florida (no surprise), Texas and North Carolina.  A friend of mine recently sent me a link to a list of a lot of mobile home parks in South Carolina.  This state is not very populous compared to many, but boy are there a lot of MHP’s (Mobile Home Parks):  around 630 just on this directory list!  Out of this list, I am sure there are a few in my area who want to sell and will do so with some or all owner financing.  Buying a mobile home park with owner financing, producing cash flow on the first day by buying based on current and real numbers, and then adding value to increase revenue, only makes sense.  Along with this, here are a few other pros to MHP investing:

-affordable housing:  people always need that, in a great or bad economy!

-average expenses or operating costs for MHPs are generally less than for apartments:  35-40% of gross income, vs. 50-60% with apartments.

-there tends to be lower turnover rates in MHP’s, because the land is rented out to the homeowners.  On average, people will stay for 25 years or more, and then sell the home on the site rather than going through the expense of moving it.

-the increase of rental rates, for example $15, $20 is nothing compared to the expense of moving a mobile home to another site ($2,000-$4,000 for singlewide and doublewide, respectively).  With apartments, tenants can just pack up and move at will if rents increase, causing a higher turnover rate.

-lower operating expenses due to the decrease of maintenance costs:  no painting, cleaning, fixing as with apartments.  With MHPs, the park owner only has the expense of the common areas and utility connections!

-quicker depreciation:  apartments depreciate based on the actual buildings, over 27.5 years.  MHPs depreciate over 15 years, based on the roads, water and sewer lines, and utility poles, etc.  This has good tax benefits.

-easy to buy and sell new and used homes right there in the park!


As for the other side of these, there are not too many, in my opinion and are typical of any type of real estate investing.

A few of the Cons

-shady sellers with less than accurate numbers:  who doesn't encounter this with type of investing?  You really have to get in and get accurate numbers, talking personally with some of the renters and doing regular forms of due diligence.

-reputation of mobile home parks:  some investors may not take a lot of pride in owning a mobile home park, feeling some of the "stigma" associated with it.  The cure for this is to make sure the parks are well-run, clean and that homeowners keep their properties up well.

        It's all about how it is approached, and making our own way with our reputation as investors, in my opinion. There may be more cons, but this is it for the list, for now.  These can be great, cash-flowing investments when done right!