Investors in real estate are constantly seeking novel business opportunities. People invest in single-family houses, multifamily buildings, and mixed-use sites. The mobile place is one investment form that should be taken into account. Discover the benefits of investing in mobile home parks.
What Are You Investing In?
When you buy a mobile home park, you buy land designated as being rented out as individual lots to various mobile homeowners. After that, you will charge the owners of mobile homes a monthly or yearly rental fee for these lots. While the homeowners own their mobile homes, you own the mobile home park.
Pros of Mobile Home Park Investing
- Lower Per Unit Cost- An actual asset that you can rent to a renter is what you buy when you buy a rental property. A mobile home park island that you may purchase and rent to tenants who can then erect their physical asset, a mobile home, on it. When you buy a rental property, the cost per unit is greater than the cost per unit of the land in a mobile home park since you are paying for an existing building. For instance, the price per unit would be around $167,000 if you spent $1 million to buy a six-unit property. When purchasing a mobile home park, you could pay $1 million to have 100 available lots to rent out, making the price of each unit $10,000.
- Low Tenant Turnover- Any lease that is signed binds the tenant. A renter must transfer their belongings into or out of a rental home. Moving a sofa and a few clothing items is far simpler than driving a complete mobile home. As a result, a mobile home park has a far lower tenant turnover rate than a regular rental business. Compared to traditional rental properties, turnover in mobile home parks ranges from 10 to 15% annually to 50 to 60% annually.
- High Demand- According to statistics from the 2017 US Census, there are over 8.5 million mobile homes in the US, making up about 6.4% of all dwelling units. These mobile home tenants must select from a small number of existing mobile home parks since it can be challenging to obtain zoning authority to develop new ones, enhancing demand in these parks.
- Risk Decreases With Additional Units- Your danger is lower if your lot has more mobile homes. If one of the five mobile homes on your property becomes vacant, you will lose 20% of your revenue. In contrast, you would only lose 2% of your payment if you had 50 mobile homes on your lot and one tenant moved out.
Cons of Mobile Home Park Investing
- Repairs and Maintenance- The remainder of the park may appear dilapidated if renters do not maintain and restore their property. This can lead other mobile homeowners to search elsewhere for their permanent dwelling instead of staying in your park. Even if the lease you and your renter sign should specify maintenance obligations, it might be challenging to convince the tenant to carry them out.
- Repairs and Maintenance- Depending on the size of your lot, you are only legally permitted to have a particular number of mobile homes in your park. Make sure the present owner of the mobile home park is adhering to this legal limit if you want to purchase the property.
- Demand in Specific Area- Make sure there is a real market for mobile homes in the nation where you are planning to invest. Mobile homes are more prevalent in some parts of the country, such as the South. A state’s desire for mobile home parks may vary from town to town; one town may have high demand while another in the same state may not.
- Filling Vacancies- Only 6.4% of the nation’s housing units are mobile homes, making them a niche sector. You are not marketing to the general renter population when there is a vacancy. You must direct your marketing efforts toward renters interested in renting a mobile home from the owner or toward mobile home owners.