Why Mobile Home Park is a Good Investment?
Owning a house is the ultimate American dream. However, before one can achieve it, he/she would need a big chunk of money. If not, he/she needs to work hard to afford the costs of buying a house. What if you do not have that huge amount of money yet? Good thing there are other available options — the mobile homes. Mobile home parks give affordable housing options to low-wage earners in the United States. Right now, mobile homes are becoming popular not just in the USA, but also to the other parts of the world. After reading this article, you will understand why the mobile home park is a good investment.
In today’s environment, the real estate market is tough. Especially with the pandemic going on. But even before the pandemic, homeownership rates in the United States have been stagnant for the past 12 months. Last year, the homeownership rate was 65.1%. And since the 2007-2009 recession, the rate continued to fall until 2016. You are maybe wondering why? Simply because of the tax laws, changing economic situations, and housing policies. They play a big role in the homeownership rate. The cost of owning a house is more expensive than ever. Some experts attributed this reason to low ownership rates.
This is also the reason why mobile homes are popular. Mobile homes are designed to help meet the low-wage earners’ needs. Who would not love the idea of paying just an average of $50,00 for a manufactured or mobile home? According to the manufacturing housing industry statistics, around 22 million Americans live in manufactured mobile homes. As of April 2020, Texas was the U.S. state with the highest number of mobile homes with 108,282 manufactured homes. Followed by Florida and Louisiana with 38,792 and 37,868 homes, respectively. Just consider how big the demand is for mobile homes. Let alone proves why the mobile home park is a good investment. Before we dig into investing in mobile home parks, let us first discuss how they work.
How Does Mobile Home Park Operate?
Generally, a mobile home park owner owns the land where mobile homes are on. He rents out small pieces of the land to the trailers/mobile homeowners. To simplify, an investor can buy an entire mobile home park then leases each piece or pad to residents. The residents either own a mobile home or rent from a third party.
To increase the mobile home’s rental potential, the investor can upgrade the park. He can do this without directly investing in each unit. For example, hiring a landscaper, updating the signages, or upgrading the park’s appearance. Aside from these, the investor will be responsible for the maintenance and amenities of the park. Namely electricity, sewers, road, and water.
There are two kinds of MHPs: affordable housing and not affordable housing. Affordable MHPs are where people mostly live in due to economic reasons. Usually, they have little to no amenities. This type of MHP makes up the majority of MHPs in the US. On the other hand, the other type of MHPs are the four to five-star MHPs. This is where people choose to reside without financial reasons. They are often gated, guarded, and have amenities like pools or event centers.
5 Reasons that Prove Mobile Home Park is a Good Investment
Low-Cost Investment
Compare to other real estate asset class, mobile home parks are the most affordable type. If you will invest in multifamily properties or single-family homes, each unit’s cost is high. For instance, in an apartment unit, you need to spend $100,000. But with MHPs, you can invest as little as $10,000 per lot. Hence, investors can acquire more units for less money.
Low-Risk Investment
Since MHPs allow investors to own more units, the risk for loss lessens. The risk spreads out as the number of tenants increases. For example, when you have a large number of units and one moves out, the vacancy will not hit your investment hard. Contrary to single-family homes, if one moves out you will be left with a vacant unit and expenses.
Demand for Mobile Home Parks Increases
With the number of MHPs mentioned above, the demand for MHPs is undoubtedly high. This only means that the need for affordable housing continues to increase. MHPs are the perfect choice for senior citizens that are retiring with little savings, or low-wage earners millennials. Mobile homes have become a good solution to the housing problem in the U.S.
Less Competitor
In a typical year, there are only about 10 new MHPs built throughout the country. And new mobile home parks are usually undeveloped because it is hard to get permits and zoning approval. So, building new parks is hard. As a result, current owners have less to no competition from new MHP.
Besides, most MHP owners are not big investors. Many of them are simple operators and owners. The mobile home park is perfect for investors who do not want competition with huge investors.
Low Maintenance
Another factor that makes the mobile home park a good investment is that it is easy to maintain. You do not even need to work with contractors most of the time. As mentioned, the park owner is responsible for the maintenance and amenities of the park. Such as electricity, sewers, road, and water.
Mobile homeowners are responsible for the repairs, maintenance, and upgrades of their mobile homes. Unlike single-family and multi-family homes, the owner is responsible for all upgrades and repairs needed in each unit.
DISCLAIMER:
Our intended investments in commercial real estate will be subject to risks relating to the volatility in the value of the underlying real estate, default on underlying income streams, fluctuations in interest rates, and other risks associated with debt, and real estate investments generally. This investment is only suitable for sophisticated investors with a high-risk investment profile. PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER, AMONG OTHER FACTORS, the section entitled “Risk Factors” contained in the Confidential Private Placement Memorandum of the Company, as may be amended or supplemented from time to time.
DUE TO THE FINANCIAL SOPHISTICATION OF THE PERSONS TO WHOM THIS OFFERING CIRCULAR IS DIRECTED, THIS OFFERING CIRCULAR SETS FORTH LIMITED INFORMATION MATERIAL TO EVALUATING THE MERITS OF AN INVESTMENT. PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN ADVISORS PRIOR TO DECIDING WHETHER TO INVEST.
Neither Alpesh Parmar nor Wealth Matters associated claim to be an expert in tax, legal, or insurance strategies. Please consult an expert or advisor.