Mobile Home Parks are an excellent investment opportunity and one often overlooked by first time investors. In order to get the most value from your investment, you need to make sure you purchase the right Mobile Home Park.
Mobile Home Park Types
There are 2 types of mobile home parks. The first type is where the investor owns the land and the tenants own the homes. The second type is where the investor owns both the land and the homes.
It is always better to own the land and the tenants to own the homes. The logistics and costs of moving the home creates long-term stable tenants that rarely leave. Also, unlike apartments or traditional housing, mobile homes are classified as a depreciating asset and never go up in value.
The Benefits of Mobile Home Parks
Mobile Home Parks are in high demand in the US and is considered the fastest growing segment in affordable housing.
There is limited competition as fewer new parks are being developed, creating a higher value for those in possession of one.
If you own the land only, after the initial investment in land, lot design, water, sewage installment, and lighting, the additional home upkeep falls to the tenant, generating a high return.
Banks are more likely to grant loans for Mobile Home Park investments as owners hardly ever default on a payment.
5 Things to Look For with Mobile Home Parks
- Location – Make sure the area in question is not decreasing in population and there are no negative stigmas associated with the Mobile Home Park.
- Avoid Extravagance – Keep it simple. Mobile Home Parks in areas like the beach with pools and club houses are less stable compared to simpler locations. These parks usually attract higher income tenants with the financial ability to move more often.
- Sales Price – Beware! 50% of Mobile Home Park listing prices are overpriced. As a general rule, the minimum cap rate is 10%. If the cap rate is lower, determine if the property has growth potential.
- Weather Conditions – Do not purchase in hurricane zones like Texas or the Southwest. If a natural disaster destroys your investment, you are still required to pay your mortgage. Your tenants may not have adequate insurance to cover the cost of their Mobile Home, therefore leaving you without tenants.
- City Operating Certificates – Before you purchase, make sure all permits are up to date and know when they expire. Also know how many homes are permitted on the property. Failure to manage these ordinances can result in fines or the Mobile Home Park shutting down.
When making investments for the future it is always better to have the expertise and negotiating power of a professional Real Estate Agent working for you. Allow us at Craft Commercial to get you the best investment deal possible. Contact us at firstname.lastname@example.org.