Commercial real estate brokers adore focusing on luxury properties with enormous profit possibilities. So it may be a surprise to hear that mobile home parks, an investment that is sometimes undervalued, have significant revenue potential with few administration requirements.
People have long viewed “trailer parks” as simple places to live; nevertheless, this perception of this sort of living is no longer accurate. Many mobile home parks include modern, well-maintained apartments with numerous amenities.
A modular home offers residents flexibility and comfort. Additionally, many parks are safe, close-knit communities ideal for family living. As a CRE or mobile home park broker, you should research this investment possibility and either provide it to additional clients or invest in it yourself.
Reasons to Invest In Mobile Home Parks
Analysts concur that investing in mobile home parks can be a wise decision. Although you may choose to own specific rental units, most of your investment opportunity lies in lot development and rental. In this case, you would rent individual lots to mobile homeowners, who would then place their own homes on those lots. This procedure ensures that your operating expenses remain minimal over time.
If you opt to buy some properties, you’ll pay a respectable sum for each unit. The average price of a single-wide mobile house is $55,000, while a double-wide mobile home is over $100,000. The cost of the lots is significantly cheaper. Investing in a manufactured home park will require fewer financial resources than investing in other housing types.
As a park owner, you will enjoy additional advantages. Among the greatest benefits are:
#1: Enhanced Demand
Middle- and low-income housing is in high demand since these income brackets are experiencing financial strain. For many, manufactured houses are the solution to their housing needs, which are expected to intensify over the next year. In addition, the demand for lots remains consistent, as few affordable mobile home parks are constructed annually due to restrictive zoning regulations in many cities. There will not be an abundance of mobile home lots.
#2: Low Turnover
Tenants in mobile home parks typically remain for years. Many stay for at least 25 years. Since they usually own the real property, your renters are content to select a lot they enjoy in a friendly neighborhood. If they decide to leave, they frequently sell their home to someone who will continue to reside in your park. The income remains constant throughout time.
#3: Few Operating Costs
A mobile home park will have much lower operating costs than an apartment building. On average, your running expenses will account for 35 to 40 percent of your gross income, but an apartment complex’s operating expenses will account for 50 to 60 percent of its gross income. If you must raise the rent to retain your profit margin, your tenants will likely not object. They would rather pay an extra $20 monthly than move their mobile home for thousands of dollars. As long as you are a responsible and fair landlord, your tenants will not leave.
#4: Enhanced Depreciation
Additionally, faster depreciation will help your tax situation. You can deduct a significant portion of the purchase price as capital improvements because you will be constructing roads, enhancing drainage, installing underground utilities, etc. This depreciation period is 15 years as opposed to 39 years for other types of commercial real estate, which is an additional financial advantage.
#5: Lower Maintenance
Your tenants are responsible for maintaining their units. Thus your largest maintenance spends for the grounds. In most cases, you will be responsible for maintaining utility and plumbing systems and relatively minor common areas. In contrast to apartment communities, your time and financial commitment will be limited.
These investment opportunities can be discovered in a variety of ways. Using public listings or consulting an agent is one option. You might also conduct local research and contact individual park owners who may be interested in selling.