subject: How To Find Stability And High Returns In Commercial Real Estate Through Mobile Home Parks [print this page] America is in its worst crisis since the Great Depression. A simple drive around town reveals vacant big-box retail, see-through office buildings and self-storage where they will virtually pay you to move in. Yet hidden behind all these items is a real sleeper that has shown spectacular returns during recessions in the past, yet is still virtually ignored by modern real estate investors. And that one bastion of performance is the old-fashioned mobile home park. It alone is the refuge of real estate investors who demand a return on their investment in good times and bad.
Constant Demand
Everyone is a lower socio-economic level wants to live in a mobile home park. Why? Well, mainly because the alternative is apartments - and people hate living in lower-end apartments. They are the drug and crime capital of America, not to mention the constant problems of noise on all sides and above or below you. In a mobile home park, these same customers have no other individual in contact with their walls, ceiling or floor, and they also have a small yard that allows for landscaping, kid's toys and a dog.
A simple advertisement in the newspaper under "mobile homes for sale or rent" will yield ten or twenty calls a day, year-round. That's how strong the demand is to get into detached housing. You can test this theory during your due diligence on a park - run the ad and see what your call quantity is. It amazes most investors that there is so much demand for mobile homes.
The Customer Can't Leave
It costs about $3,000 to move a mobile home, if they can be moved at all. This creates a whole new concept in customer retention. Basically, your tenants can't ever leave. As a result, you can set the rent levels wherever you want and never have to worry about price competition. About the only thing a tenant can do is abandon their house, and then you re-sell it through abandoned property laws and move on.
That's one reason that mobile home park rent rolls are so incredibly consistent. About 90% of mobile homes are only moved once in their entire lifetime - from the factory to the first mobile home park - so they tend to stay in the same park forever. Can you think of any other form of real estate that can claim that?
There's No More Being Built
Unlike self-storage, which can suddenly go up on any corner in America, mobile home parks are constrained by city and state ordinance and their continued lack of popularity by neighboring land owners. In any given year, in the entire United States, only a handful of new parks are built, and most of those are way out in the country where they actually can obtain a permit (although there's no access to municipal water or sewer). Since there are no new parks being built, the demand in the market remains high and stable, and you don't have to worry about new competition.
Rent Is Affordable
The average mobile home park lot rent is about $200 per month. This is a price that is affordable even for residents making minimum wage. As a result, your collections are steady since the bill can be paid by the average tenant. Compare that to the performance of higher-end apartments or condos where the rent can exceed ten times that amount.
It is also important to note that mobile home parks are the last frontier of truly affordable housing. It is the only form of housing that works with minimum wage income in the absence of social programs like Section 8 and subsidized housing. As a result, as America gets poorer, demand gets stronger for mobile home parks.
Conclusion
If you want to invest in real estate that offers a high and steady return, then mobile home parks are virtually your only option. Sure they aren't that pretty to look at - but the steady returns sure are!
Shouldn't you give this niche some consideration?
by: Frank Rolfe
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