We can argue on behalf of becoming a landlord of a mobile home park till the cows come home. The fact of the matter is that the proof will always be in the pudding. And the most convincing argument is to see that someone else has achieved success already.
We have collected four very distinct type of mobile home success stories to show you how broad the opportunities in this investment really are. From a private investment firm to an individual buyer to a luxury park to a community exclusively for convicted criminals. The possibilities are just as broad as real estate investment.
Why mobile home parks could be a good investment
Believe it or not, mobile home parks present one of the best property investments you can make right now. There are many factors spanning the current economy, housing markets, and physical characteristics of a mobile home park that set it apart from a real estate residential park.
Let’s look at reasons why it’s a good investment as well as the benefits of becoming a landlord:
- Static homes and tenants: Mobile homes aren’t really that mobile. They are called manufactured homes nowadays for a reason. Mobile homes are prohibitively expensive to move and risk suffering a lot of damage as well as financing privileges. With most stick-built homes also being outside of these residents’ financial ability, they tend to stay put.
- Relatively low maintenance costs: Mobile homes are usually much cheaper to maintain and their parts to replace than that of stick-built homes.
- Diversification of assets: You will own the park, its amenities, and you will have the option of owning or selling the homes themselves. This represents a good diversification of your investment into it.
- Market-resistant: Because of the unique nature of mobile homes, mobile home parks and the homes themselves tend to be relatively resistant to outside-market forces.
- High capitalization rate: Because of high occupancy rates, low maintenance costs, and the ongoing payment of rent, mobile home parks have an exceptionally high capitalization rate of over 10% per year.
- Low supply: Mobile home parks are rarely being built any longer, mostly due to strict zoning regulations. There’s also a lot of concern from city officials and residents about having a mobile home development in their vicinity. Consequently, there is a finite amount of parks that only get scarcer as they are scooped up by savvy buyers.
Mobile home park success stories
Park Street Partners
Park Street Partners is a private real estate investment firm that specializes in mobile home parks. It’s run by Jefferson Lilly and Brad Johnson. They have invested in (and owned) mobile home parks coast-to-coast right across the U.S.
Lilly and Johnson try to turn a profit by buying undervalued or underutilized mobile home parks. Using their experience in the field, they flip the parks through facility improvements, removing or getting indebted renters to pay, and filling up empty lots.
Most mom-and-pop owners still own a fair share of the mobile home parks in existence. And on average, they don’t run as tight a ship as professionals like Park Street Partners. This is one of the primary ways to turn a mobile home park into a great investment opportunity. The trick is to not be immediately turned off by the current condition of the park. You should look past this and try to ascertain whether the park has the potential to become profitable.
Whilst physically upgrading the park comes at significant upfront effort and cost for long-term profit, just filling up empty lots and getting reliable rental payments immediately boosts the parks profitability.
You can go to Park Street Partners’ official website here to view some of their individual investments and get more information. If you believe in the opportunity that mobile home parks present, you can even invest through them instead of becoming a landlord and owner yourself.
This new mobile home park owner
If you are like most of our readers, you are probably a single individual, not a partner in a real estate firm. In that case, you should listen closely to this next story of Peter Heffernan’s experience when he bought his first mobile home park.
He gives a detailed account of his adventures here, but we will give you a brief overview of the details.
At the beginning
Peter bought a mobile home park with 47 units for $687,000. He put down $125,000 as a down payment and paid off the rest with the first year being interest-only.
There were a lot of downsides to the park at first. Most of the terrain was unusable and unutilized, including a swampy area. The park had also not been properly maintained. Peter had to deal with a dry well in very bad shape. And much of the park’s machinery was not in working order.
However, by putting in some elbow grease, Peter managed to repair or renovate almost all the problem areas. He also managed to fill 14 vacancies in a matter of months. Investing back into the property, Peter put more, newer mobile homes in the unused areas of the property which increased its profitability. He bought these mobile homes through more loans and mortgages.
The one thing the park did have going for it was that the previous owner enforced strict payment procedures so the current tenants were mostly good payers.
Because he received most of his rent in good order from the moment of taking over the park, Heffernan was able to pay for a lot of the renovations and upgrades using this money. The loan payments are also covered by what he earns from the park. In order to not have to work full-time, he hired a manager who lives on the property and manages the daily affairs.
Peter says that he now makes about as much money from the park as he did from his previous job at the cost of a fraction of his time. He also says that the residents are happier since he came in and made the improvements. This should allow him to make some increases in rent in the future without much trouble.
If he ever decides to sell the park, he’ll likely make a hefty profit (he reckons he already added $300,000 in value).
Paradise Cove Mobile Home Park
Although not a product of the current window of mobile home investment, Paradise Cove mobile home park is still a shining example of what’s possible. This idyllic and beautifully located mobile home park will no doubt ignite envy even among residents of upper-class stick-built home residential parks.
Paradise Cove is situated on top of a bluff overlooking the Pacific Ocean with direct access to the private beaches of Point Dume. It was originally developed in the 1960’s. The park’s 71 homes were meant to act as holiday homes for lucky owners. However, the Kissel family saw the potential in this park and added another 200 lots after buying it.
Today, it is one of the trendiest residential areas in Malibu. Period. And, coming from this area, that’s saying a lot. The double-wide homes now sell for millions of dollars. Not only have they been upgraded and renovated time and again by their inhabitants, but the price of property has soared. It’s even home to a few A-list celebrities such as Matthew McConaughey, Minnie Driver, and Barbra Streisand.
We’re not saying that every mobile home park owner should expect to be able to reach these heights. After all, how many properties are located on a bluff overlooking the ocean in an area with high property value? However, it shows that a mobile home park bought at an opportune time with the right mindset can be a huge success.
Palace Mobile Home Park
This one is a slightly unconventional success story. Even though it might not sit well with some people to make a profit from, it’s important to read the context as well as the societal problems that this park solves.
Palace Mobile Home Park is a mobile home park solely for inhabitants who are registered or convicted sex offenders. Yes, let that sink in for a moment first. We know that the law allows you to refuse tenancy to someone with this type of conviction. So why would you want to start a mobile home park filled only with these kinds of tenants?
Reasons why this is a successful model
There are actually a few very good reasons. As part of most parole conditions for sex offender convicts, they have to find a permanent place to live or face going back to incarceration. As they get turned away by most landlords, this results in some being endlessly recycled through the system.
Secondly, these types of offenders need to live a certain distance away from schools or other areas where there are many children.
Thirdly, these tenants know they are in a position where it’s very hard to obtain residency. They are only too glad for the opportunity to have someplace to live and won’t easily move away.
It also provides many benefits for society to have a community such as this. Registered sex offenders or convicts are all located within a single area which makes it easy for law enforcement to keep an eye on them. The park itself is located far from schools or other vulnerable areas, separating them from these tenants. It stops these offenders from being recycled over and over again through the system on taxpayers’ money.
Palace Mobile Home Park also provides counseling services on site in hope to the rehabilitate the tenants or at least prevent future incidents. According to the park owners, there has been no repeat offense by any of its inhabitants which is an encouraging sign. The park also operates at a high occupancy rate, which is not surprising as there aren’t many other options like it.
Tips on being a successful mobile home park landlord
You might have already picked up some tips from the stories we have just shared with you. Here are some pretty basic and succinct tips every prospective mobile home park owner should know:
- Use financing wisely: You would be surprised what you can afford through smart financing. Just look at Peter’s example. However, be careful not to land yourself in a vortex of debt.
- Don’t be too picky: Looks can be deceiving. You should take the property’s potential as well as the market conditions in the area into account before writing off a park’s value.
- Be prepared to put in the work: When you first buy a park, there is no telling what could go wrong. Even if everything looks idyllic on the outside, there might be water pipe problems, malfunctioning equipment, etc. You should put proper time aside to find and fix all these issues as soon as possible (or pick it up before you buy the property).
- Revisit the rent: You would be surprised how behind some mobile home parks on their rent values. Some new park owners have found lot rents that are still stuck in the 1980’s at a little over $100. In this case, you would be well within your rights to drastically up the price. It’s not likely that tenants will find a better deal to entice them to leave.
Are you ready to take on the experience of becoming a landlord?
We hope that you have found some inspiration or excitement at the prospect of becoming a landlord of a mobile home park. These success stories truly show that there isn’t only one type of mobile home park. In fact, there are plenty of opportunities out there for those who are willing, eager and keep an open mind.
History is the best teacher, so try to learn a thing or two from these parks and their owners, and start your own!