Myths BUSTED about investing in Mobile Homes
Jul 21, 2019
I want to bust some myths about investing in a mobile home park!
by Tim Kelly
One misconception about Mobile Home Park ownership is that Mobile Home residents frequently move compared to a traditional multi-family property or a single family residence.
This misconception came about because of the term "Mobile Home."
However, these properties should be understood as "Manufactured Homes."
What other images come to mind when you think of the phrases "trailer park" or "mobile home park?"
Another massive misconception people have on this highly productive market is the generalization our society has (and most likely what your initial thoughts were) when they think about the tenant-type or demographic who would occupy these units.
"Low-income," "dirty," "drugs," "loud," disrespectful," "alcoholic’s," "redneck’s…" are just a few that come to mind.
Our team has found that most of that is simply untrue.
Regardless of where you live, there will be some unpleasant rule-breakers who don’t fit the perfect citizen image…
However, most residents who occupy these parks are typically good, hard-working individuals who simply earn a below-average household income.
They are proud and committed to the pride of homeownership!
Instead of causing you pain, having the ability to own their own homes, take care of their own lawns, and raise their families in the best way possible increases their investment in the situation.
When compared to their higher-earning counterparts, mobile home park residents carry about their business as usual but on a slightly smaller scale.
👉🏼 Investor competition:
Here’s how this applies to you as an investor…
Due to the misconceptions, many investors aren’t willing to dive into the mobile home niche.
Smart investors who are educated about this asset type typically do not hesitate and it’s growing fast!
👉🏼 Low resident turnover:
Mobile Home ownership enjoys low resident turnover.
Parks with mostly owner-occupied residents (vs. renters) have a higher pride of ownership, less turnover, and fewer problems in general compared to renter parks.
👉🏼 Affordable housing crisis:
MHPs are exactly what our country needs to resolve the affordable housing crisis in our country.
Out of every 10 US residents who require affordable housing, only 2 to 3 are being provided safe housing they can afford through a mobile home.
According to a Harvard Affordable Housing study:
"...the number of low-cost rental units increased just 10 percent in 2003–2013 while the number of low-income renter households competing for that housing rose by 40 percent."
The crazy thing is that unemployment is down and our economy is stronger than it has been in years!
However, right now new home buyers don’t want to buy a big old house… They realize they don’t need it!
The average apartment unit across the country is about $1000 per month and many hard working Americans are either not willing to pay that much or cannot afford it.
Currently, there are over 60 million people earning household incomes under $20,000, with more than half of Americans making less than $30,000 a year.
Can you believe that?
In turn, the demand for affordable housing is rising dramatically!
Mobile home parks solve this travesty of a problem!
👉🏼 New age (Millennial) lifestyles:
How many millennials do you know who are pursuing the "American Dream?"
You may know quite a few; however, the homeownership rate is lower than it has ever been because those entering or leaving the workforce are getting smarter and smarter—or more bold— and putting freedom and lifestyle flexibility as priority over owning a home!
They are looking for something smaller and as affordable as possible.
Something they can take on the road of life!
👉🏼 Baby Boomer demand:
Many mobile home park communities are transitioning into beautiful and quiet neighborhoods that hit every requirement for a senior living community.
Retirees are leaving the workforce with lower and lower incomes which puts them in a category that needs more affordable housing situations.
Especially when the average retirement/senior living communities are over $5000 per month!
With the sense of ownership, simple and convenient maintenance and repair systems, amenities such as pools, laundry facilities, recreation centers and local transportation, many senior-living and retirees are searching for the perfect mobile home community.
👉🏼 True affordability:
The average lot rent for mobile home parks is roughly $285 per month.
Compare that to the typical American home mortgage or the average apartment unit rent of $1000 per month…
If you were someone living off a lower income; what would you choose?
👉🏼 Massive upside:
That $285 monthly lot rent average won’t last long!
As we continue to purchase under managed parks from Mom and pop owners who have been afraid for years to increase lot rents, the average lot rent will be going on a slow steady increase for years to come!
👉🏼 Most cities love these!
Many major metropolitan cities and their surrounding jurisdictions understand the benefits of having nice and clean mobile home communities available to their residents.
More cities are offering grants and other incentive programs for rehabilitating and managing mobile home parks within their city limits.
It might be difficult to establish a new development where new zoning will be required… simply due to the major tax hit cities take with MHPs.
However, cities love when investors come in and add value and beautify OLDER parks and create much more liveable communities.
👉🏼 Lessons learned from Residents:
They enjoy privacy.
Love having a living situation where they do not share walls.
Their other options are too expensive.
They value parking close to their unit instead of walking through what could be a long distance in inclement weather.
They enjoy having their own yard for patio furniture, a grill, and a place for pets to run around.
They enjoy owning their own place.
Residents in a MHP typically all get to achieve a sense of community.
TIME mag said it’s the "home of the future."
Neighbors share tasks, skills, and carpooling, and spend time together like a large family.
Most people in America have way too much house and cannot truly afford where they live.
If anything, residents in Mobile home communities are smarter because they can have extra income to save or spend in other areas to benefit their families.
I hope this opened your eyes to this asset!
As an investor, it’s important to understand the different types of assets at your disposal.
Remember that what’s popular is not always what is right for you…
Oftentimes there’s money to be made in the lesser known opportunities like investing in owning a mobile home community.
Tim is an active duty Chief Petty Officer in the United States Navy. He is a certified Command Financial Specialist, the Financial Freedom and Syndication Chief at Active Duty Passive Income (ADPI), and is the Senior Managing Partner of both Kelly Housing Group and ADPI Capital.