For decades, the phrase “mobile home garden” was unwelcome when it came to real estate investing. Although mobile home parks and manufactured housing have served as a bridge between low-to-middle-income buyers (or renters) and quality housing for decades, “trailer parks,” as they are often known, conjured up a lot of images, which weren’t beautiful.
The stereotype of mobile home parks as a living symbol of rural poverty, rife with drug abuse and broken cars, exists as the mobile home parks themselves. However, this stereotype does not accurately reflect the reality of manufactured housing. Many manufactured housing communities across the country are well maintained, attractive places to live where it is easy to see the pride of ownership.
This is a big part of why the concept of mobile home parks is starting to change among investors. With apartment rents, home prices and mortgage rates continuing to spiral out of control, mobile home parks are becoming popular targets for investors large and small alike. The recent rise in the popularity of mobile home parks with investors is due to many factors.
Related: Real estate investment offer for the manufactured housing community in Las Vegas
Why mobile home gardens are an attractive investment
Almost all of these factors boil down to some investor-friendly economics. Mobile home parks have lagged behind traditional multi-family developments when it comes to value, which translates to investors getting a lot more for their money. The cost of purchasing a mobile home garden is much lower than buying a traditional multi-family residential community with a similar number of units.
The cost of moving mobile homes from one park to another means that mobile home park residents are more likely to stay put, even after new owners raise the cost of renting space within the park. When priced renters move in, their space is usually quickly replaced by a nice, modern homeowner who is willing and able to pay a higher rent. So, in addition to affordability, you may have a more stable tenant base in mobile home parks than in condominiums.
As buyers of traditional single- and multi-family homes find themselves outside the current housing market, many are turning to manufactured homes as one of the last bastions of affordable housing. This fact creates a demand for mobile home garden living among a middle-class demographic that perhaps just a generation ago would have turned its noses up to live in a manufactured home community.
For investors, upward pressure from renters and buyers who have been frozen out of traditional housing markets with the relatively low purchase cost of mobile home parks are combining to create the best of all worlds. Although they can purchase gardens for less than the cost of purchasing an apartment complex of the same size, they have a near-combined opportunity to increase both the property’s total revenue and its market value by increasing rents.
In many cases, with a few upgrades and rent increases (which existing tenants are more likely to pay or be easily replaced by new renters who are able), mobile home park investors can ship their stock in a matter of months rather than years.
To get similar rent increases from apartment buildings would require renovations that could cost thousands of dollars per unit, while in mobile home parks, tenants are responsible for upgrading and maintaining their units. However, they are happy to pay higher space rental fees than anyone could have imagined just a few years ago.
For all these reasons, mobile home parks and manufactured homes have become one of the most important real estate investment opportunities. If you want to get in on the action but don’t have the capital to purchase a mobile home garden entirely on your own, there are still options for you. A number of institutional funds across the country are raising capital to purchase mobile home gardens.
The best part is that they have done all the due diligence, which means that you as an investor can invest your money and benefit from passive income and appreciation value without the hassle of day-to-day management. If you’d like to learn more about where you can invest in manufactured homes and mobile home parks, take a look at Benzinga’s favorite offerings of current investment options.
Photo: Courtesy of RealtyMogul
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