3 Things No One Tells You About Mobile Home Park Investing

Everyone talks about mobile home park investing as a cash cow business. And there is a lot of money to be made in mobile home parks. This article is a bit different though. I want to highlight three things no one talks about with mobile home parks.

Good ones are hard to find

It’s basically 2022. Money is everywhere. Real estate values are high. CAP rates are compressed across the board. As you might know, CAP rates in commercial real estate determine the property value based on a given net operating income of the asset. The lower a CAP rate, the higher the price you must pay for the same net operating income. Often investors are interested in mobile home parks because they haven’t had success finding single family homes or apartment buildings. I do still think profitable mobile home parks are easier to find than apartments. But buyers beware. Overpriced mobile home parks are everywhere! Make sure you really understand the underwriting and are confident in your numbers before moving forward.

People above all else

Value-add commercial real estate is where a lot of wealth is created. And it’s amazingly powerful. It made me a millionaire at the age of 35. That being said, as real estate investors, we have a huge role in people’s lives. This couldn’t be more obvious than in the mobile home park world. Tenants typically live in mobile home parks because they can’t afford to live anywhere else. It’s very important as an owner to establish rules and expectations - to train your tenants like in all asset classes. Rent is due on the first, etc. It’s also important to plan value-add strategies with a bit of empathy. Can you go in and take $150 per month lot rents and turn them into $350 per month lot rents on day one? Technically, yes in most states. Should you though? And will you be able to sleep at night if you do? It’s good to think about these things before jumping into a low income housing asset class.

Experts are rare

Plumbers, septic servicers, electricians. We need them in the mobile home park space! It’s surprisingly difficult to find experts who are good and who will work on mobile home parks. A local surveyor where we have a few parks told us recently he wouldn’t survey the mobile home park we have under contract. His reason was basically that he had better jobs. In the mobile home park space, get used to this! There is a bit of a stigma. The old owner of the park plays a role in the new owner’s ability to get good contractors. How they treated contractors and how quickly they paid (or didn’t pay) those contractors play a role in their willingness to work with you!