- There has always been and will always be a need for
affordable housing. The typical mobile home park is just that…
- It is typically accepted that the average operating
expenses for a mobile home park are usually around 35-40% of the gross income
as compared to apartments which have in the 50-60% expense ratio. One of
the biggest advantages of mobile home park ownership is not only this
decreased operating expense margin but the reasoning behind it.
Mobile Home Parks in which you rent the land to the
home owners have a much lower turnover ratio as compared to apartments. In
most cases, once the home is moved into your park, that home will stay in there
for 25+ years and when people are ready to move they will just resell the home
in the park and you will have a new homeowner.
The biggest reason
for the low home turnover is that it costs so much to break down, move, and set
up a home. In most cases this is going to cost at a minimum of $2,000 for
a singlewide and $4,000 for a doublewide. In an apartment, your renters
can pack up and leave in the middle of the night.
In most cases a mobile
home will not move out in the middle of the night (especially legally).
There are those cases where someone will hire someone to come in and move a home
in the middle of the night but it is rare.
actually had someone who was a few months late on rent, decide to hook up to
their 14 x 70 home with their ¾ ton pickup in an attempt to move it down the
road a few miles to a different park. They made it out of the park with
the home but about a mile down the road the mobile home separated from the truck
and they not only flipped the home but destroyed a truck. All of this to
avoid about $800 in lot rent.
- When you raise the rent by $10, $15, $20 or more in
a mobile home park, it is less justifiable for a renter to spend several
thousand dollars to move their home to save $10 or $20 per month. In
addition there is no guarantee that the mobile home park that they move their
home to will not follow suit with a rent increase of their own.
- Another reason for the lower operating expense
ratio for mobile home parks is that you are not responsible for painting,
cleaning carpets, fixing windows, and all the fun jobs of the apartment
maintenance personnel. You are typically only responsible up to where
the home connects to your utilities and the maintenance of the common
- As far as depreciation, apartments have a large
value attributable to the building itself and the building portion is
generally required to be depreciated over 27.5 years However, for mobile
home parks, the depreciable costs are typically the roads, water lines, sewer
lines, electric poles and so on. These are considered land improvements
and are typically depreciated over a period of 15 years. This increased
depreciation over the first 15 years is a major tax benefit for many
- Another hidden benefit of mobile home parks are the
barriers to entry for competition. In most areas of the country, it is
difficult to get the proper zoning, meet all the requirements to build a new
community and actually make a profit. Face it, once you get all the
permits and licenses and have the curbs, roads, driveways, utilities, pads and
everything else built out, you will have a carrying cost until you actually
get enough homes into the project to break even, let alone start making a
Mobile Home Parks are in limited supply and the barriers to
entry as far as costs, regulations and government restrictions make developing
new parks unfeasible in most areas. State and local governments restrict
new mobile home park developments for many reasons, including: bad reputation,
existing owners allowing parks to deteriorate, less property tax base to fund
schools, police, fire, and other government services.
- Another benefit of mobile home parks is that in
most cases you have individuals that own their own homes and will tend to take
care of the home as well as their lot. Since you are renting basically
the land and the utility connections, there is not near as many things that
your renters can do to cost you major repairs. Sure they may flush
things down the sewer and let the water run, but they will not be putting
holes in the walls and floors or spilling things on the carpet as they will in
your apartment rentals. You rent the land and do not have to fix leaky
kitchen faucets or toilets.
- Another benefit of owning mobile home parks is that
you are often in a good position to buy and sell new and used mobile
homes. You can often buy homes that people sell in your park, in nearby
parks, repos, or even new homes from the manufacturers and place them in your
park and sell them at a profit.
the situation, you may be able to sell them for cash, on terms, or with new
financing. As the park owner, every time you sell a home and fill a vacant
lot in your park you have just increased the monthly lot rent income as well as
the value of the park.
If each occupied lot is worth an additional $10,000
then in addition to the profit from the home sale itself you have just made an
extra 10k in equity.
A mobile home dealer makes money on the spread
between the purchase and sale price and thus needs to have good profit margin to
stay in business. As the park owner you can live on a much smaller or even
a break even on the home sales and thus save your buyers thousands of
Mobile Home Park Investing
For the past decade, Dave
Reynolds has been involved in most aspects of the manufactured
housing industry, from buying and selling mobile home parks to running the
industry's most popular website for buyers and sellers of Mobile Home Parks,
MobileHomeParkStore.com. Mr. Reynolds has authored several books and cd's on
investing in and operating Mobile Homes and Mobile Home Parks. If you are
looking to buy or turnaround a mobile home or park, he is available for
consultation at 800-950-1364
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