WHAT MAKES MOBILE HOME PARK INVESTMENTS SO GOOD?
INVESTORS WANT HIGH RETURNS WITH LOW RISK
Investors today have been through a lot. The stock market is all over the board. Residential has gone south. They want and need to put their money to work somewhere where it will produce HIGH RETURNS with LOW RISK, and more importantly strong, relialble POSITIVE CASH FLOW. Easier said than done, right? With years of research and experience, looking at all types of investment real estate, MAN Holdings has identified Mobile Home Parks one of the BEST INVESTMENTS available today. And here’s why:
1. HIGH DEMAND & DIMINISHING SUPPLY – Very few new mobile home parks are being built anymore. Many states, like California, effectively banned new construction of Mobile Home Parks in the late 1980’s. Yet millions of Americans own and/or live in Mobile Homes. And new Mobile Homes are still being sold by dealers every day. So demand remains high. But the supply of available space in Mobile Home Parks is not only low, it’s actually shrinking. Parks close for a variety of reason, but there are no new ones coming on line to replace them. In addition, during strong real estate markets, builders and developers hungry for scarce land to build homes on will often buy Mobile Home Parks, level them then build homes or apartments on them. Some simply couldn’t find a suitable replacement. The same thing is happening all over the U.S. today. Parks close all the time, for various reasons, but few reopen once they’ve been deactivated, and virtually no new ones are being built. This short supply creates a built-in demand for space in Mobile Home Parks. It also creates demand for Mobile Home Parks themselves as places to live, and as Mobile Home Park Investments with savvy investors who like the high returns. And this demand is bound to increase over time.
2. EASIER TO MAINTAIN THAN MOST REAL ESTATE – Think about it: what is a Mobile Home Park anyway? Mostly just land with some underground utilities, some streets, fences and some pads. Not much to break or wear out or maintain. Compare that with almost any other type of real estate. Lots of things can go wrong with an apartment building or a rental house, for instance: the roof, structuregoes on and on. And disgruntled tenants can do tre goes on and on. And disgruntled tenants can do tremendous damage to the property before leaving. With a Mobile Home Park, the living unit, the Mobile Home, is often owned, insured & maintained by your tenant. That leaves much less for the park owner to maintain.
3. EASIER TO MANAGE THAN MOST REAL ESTATE Again, because of the high demand and low supply, there is less turnover in most Mobile Home Parks. But it goes beyond that. Because Mobile Homes are not really very mobile. An average single-wide Mobile Home costs $2,000-$5,000 or more, to move, and many parks won’t take older Mobile Homes being pulled out of other parks. So there is literally nowhere for them to go. If they want to leave, their best option is usually to put their Mobile Home on the market and sell it (with the park owner having final approval of the new buyer), all the while having to maintain their space rent. All of these factors drastically reduce turnover, which makes Mobile Home Park Management much simpler. Generally speaking, onsite management duties are less demanding (require fewer hours) than those of Apartment Managers, and because of this, they often are paid less also, saving the park owner more money.
4. EXCELLENT SECURITY – YOU WILL GET PAID YOUR RENT As many apartment owners will tell you, it’s one thing to rent your units, it can be quite another to actually COLLECT THE RENT. Tenants can fall behind, then leave owing money that can never be collected. While nothing is 100%, Mobile Home Parks offer far better security for the park owner that they will actually get their money. Again the reason is that your tenants own that Mobile Home that’s sitting in your park. In apartments, tenants often stop paying the rent, trash the place then skip out owing you money. But they’re not going anywhere in a hurry here, not with that Mobile Home. Again, it will cost them several thousand dollars to move, will require several days of prep, and they will have great difficulty finding another park that will take them (especially with an eviction on their record). They have 3 choices at this point: A. Sell Mobile Home and settle their bill; B. Sign it over to the park owner for past due rents, or; C. Wait until they lose it to the park in a Lien Sale. Either way, you get your money. In many cases, the park ends up owning the unit, then either sells it (thus creating a new long-term tenant in the park) or rents it out. One way or another, properly done, in the end the park always gets it’s money.
5. LOW OPERATING COSTS– When compared to other types of real estate, Mobile Home Parks are relatively inexpensive to operate and maintain. Again, they’re mostly dirt, underground utilities, some streets and pads, and some fencing. The low turnover and high demand keep vacancies down. The nature of Mobile Home Parks ensures a very high collection rate. Mobile Home Park onsite managers generally earn less than comparable apartment managers. Insurance also costs much less because there’s so little to insure, in fact many parks carry only Liability Insurance. Mobile Home Park Operating Expenses generally run around 25%-35% of Gross Income, where apartments and other types of real estate can run 35%-55% of Gross. That’s a big savings that drops directly to the bottom line, in the form of Positive Cash Flow, High Returns & great Upside.
6. GREAT UPSIDE POTENTIAL Mobile Home Parks offer many opportunities to increase their value for big profits. Since the Value of Commercial Property is directly tied to its Net Operating Income (NOI), the higher the NOI the higher the value of the property. Increasing the NOI can be accomplished in two basic ways:
A. INCREASING INCOME; and/or
B. LOWERING EXPENSES.
Part of what we do offer is what we call VALUE ENHANCEMENT, which is the process of doing whatever it takes to raise NOI through increasing income, decreasing expenses, or some combination of the two. Each property is different, of course, but the goal is to make the property worth more so that it can be resold (or refinanced) at a profit. From our experience, this is easier to do with Mobile Home Parks (not that it’s easy) than with just about any other type of Investment Real Estate. A tenant can do tremendous damage to the property before leaving. With a Mobile Home Park, the living unit, the Mobile Home, is often owned, insured & maintained by your tenant. That leaves much less for the park owner to maintain.