Things CRE Brokers Should Know About Mobile Home Parks

Commercial real estate brokers love to focus on high-end properties with huge income potential. So you may be surprised to learn that mobile home parks, a sometimes belittled investment, offer you excellent income potential with few management demands. 

People have long put down “trailer parks” as an unsophisticated place to live, but that vision of this type of housing is outdated. Mobile home parks often contain modern, well-kept units with many amenities. Living in a manufactured home gives people flexibility and comfort. Also, many parks are tight-knit and safe communities that are excellent for family life. As a CRE broker, you should investigate this investment opportunity and present it to more of your clients or invest in one yourself. 

Reasons to Invest in Mobile Home Parks

Financial analysts agree that investing in mobile home parks can be an excellent choice. While you may decide to buy some units to rent, most of your investment potential is in lot development and rental. In that situation, you rent individual lots to mobile homeowners who place their own homes there. This process means your overhead remains low over the years.

If you decide to buy some homes, you’ll pay a reasonable price for each unit. The average cost of a mobile home is $55,000 for a single-wide and nearly $100,000 for a double-wide. The cost of the lots, of course, is far less. You will tap fewer financial resources to invest in a mobile home park than you would to invest in other types of housing. 

As a park owner, you will enjoy other benefits as well. Some of the biggest benefits are: 

Increased Demand

Middle and lower-income housing are in great demand right now as those groups are being financially squeezed. For many, manufactured homes are the answer to their housing needs, which promise to become more urgent in the coming year. Plus, the demand for lots stays constant since relatively few mobile home parks are built each year due to restrictive zoning practices in many communities. You will not be battling a glut of mobile home lots.

Low Turnover

Mobile home park tenants tend to stay put for years. In fact, many stay for 25 years or more. Since they generally own the actual home, your renters are satisfied to find a lot they like in a friendly home community. If they do decide to leave, they often sell their home to someone else who will stay in your park. The income stays steady over the long term.

Low Operating Expense 

Your operating expense for a mobile home park will be significantly less than for an apartment complex. In general, your operating expense will be 35 – 40% of your gross income, while it would be 50 – 60% of gross income for an apartment complex. If you need to raise the rent to maintain your profit margin, your renters will probably accept the increase without much complaint. They would rather pay $20 extra each month than spend thousands moving their mobile home. As long as you are a fair and responsible owner, your tenants will not leave you.

Accelerated Depreciation

You will also benefit from accelerated depreciation, which strengthens your tax position. You can claim much of your purchase price as capital improvements because you will be building roads, improving drainage, creating underground utilities, etc. The timeframe for this depreciation is 15 years instead of 39 years for other types of commercial real estate, another attractive investment benefit.

Reduced Maintenance

Your tenants are invested in keeping up their own units, so the grounds are your biggest maintenance expense. In most cases, you will care for the rather small common areas and maintain utility and plumbing systems. Your time and financial commitment will be limited, unlike the considerable efforts you make with apartment communities. 

Additional Considerations

Seasoned mobile home investors suggest that you practice due diligence before you buy. You need to consider what size park will work for you as well as what type of financing you should get and how much profit you can reasonably accept. Also, you should understand that banks have preferences when it comes to your investment.

Many banks want you to focus on land rental income versus buying homes and lots. Mobile homes do depreciate quickly, limiting your long-term income when you rent them. Rookies in this arena often place too much faith in home-owned income. They pay too much when they purchase the park, only to find their expenses soar in just a few years.

You do have the opportunity to enter this real estate investing niche now. However, sophisticated investors who have so far avoided mobile home parks are beginning to appreciate their income potential. Since the number of parks is limited, you cannot afford to wait too long.

Finding Mobile Home Park Investment Options

You can find these investment opportunities in several ways. One way is to use public listings or consult an agent. You could also research your local area and call individual park owners who may be looking to sell. Or, you could use ProspectNowDatabases, one of the most extensive platforms for commercial real estate.  

In fact, ProspectNow has been around for over a decade and offers expert help in locating lucrative mobile home park investment opportunities. You can use competing databases, but you will not get the breadth of data that ProspectNow offers. 

The success of real estate brokers depends on the quality of their data. Sign up now to get access to 40 million commercial real estate properties and 100 million residential ones. By using ProspectNow, you will close more deals and make more money. Get started on your property investments today!