When you think of investments to add to your portfolio, mobile home parks might not be near the top of your list. However, the land these communities sit on has the potential for profitable returns and fewer headaches than other real estate types. As an investor (and potential landlord), you don’t have as much upkeep since the residents own their homes.
And there are syndication or real estate investment trust options if you want to completely remove yourself from the landlord equation. While the investment opportunity mobile home parks present may no longer be entirely under the radar, it’s still somewhat overlooked. However, big-name investment firms are now getting into the game, so there must be something there.
As an investor looking to unlock money-making opportunities, a mobile home park could be your next hidden gem. No matter your level of involvement, you don’t want to miss out on a reliable way to build wealth. Below, we’ll examine five secrets of mobile home park investing and how you can benefit from them.
1. Zoning Restrictions Can Work in Your Favor
You don’t see many mobile home communities when you drive around a new area. Instead, you’re more likely to see many neighborhoods with single-family homes, apartment buildings, or — if it’s a bustling city — high rises. You may not have wondered why mobile home parks are less prevalent, but it all comes down to zoning laws.
You’re doubtless aware that a municipality’s zoning laws determine how land can be used. Those stipulations dictate what developers can build on the land, including the types of buildings. A piece of land zoned as high-density residential can have townhomes and apartments. But land designated as low-density residential will have single-family homes. Zoning laws and restrictions can limit land availability for mobile home parks.
When a city allows less land for mobile home park development, it means there are fewer places for current tenants to go. Once you have an ownership stake in one of the few pre-existing developments, you have a corner on the market. As Lifestyle Investing expert Justin Donald notes, “When homes can’t move, you have owners who will stay in the area.” Mobile homeowners might theoretically be able to take their house anywhere, but when parks are scarce, tenant turnover stays low.
Number one, it’s more expensive to relocate a mobile home to another park than it is to pay a slight rent increase. Second, zoning restrictions may say additional parks can’t be built. This means whatever mobile home parks already exist are pretty much the whole story. Unlike other types of real estate, there won’t always be a new up-and-coming development to lure tenants away.
2. Mobile Homes Provide Affordable Housing
A 2023 National Low Income Housing Coalition study unveiled a troubling revelation. Currently, no U.S. state has enough affordable homes for low-income renters. Finding affordable housing is a growing concern across many income brackets as mortgage rates and home prices have shot up. The median U.S. home price in 2023 is $431,000, which is a significant bump from 2020’s median price of $329,000.
With mortgage interest rates hovering near 8%, it’s easy to see why many would-be homebuyers are getting priced out. Nor is renting an apartment always a sure way to navigate the housing affordability crisis. Across the nation, the average monthly rent is nearly $1,400. Monthly housing costs can be a stretch for those in retirement and living on fixed incomes. Mobile homes can be affordable solutions when other options are too much of a financial burden.
In addition, mobile homes typically don’t have the duplicate square footage as single-family properties. Owners have less house to maintain, which translates into lower utility and overall upkeep costs. Mobile home parks may provide homeowners with a yard, but they’re also likely to be modest in size. A smaller yard likewise means fewer maintenance costs and chores.
Investing in a mobile home park ensures local residents continue to have access to affordable housing. Depending on someone’s financial situation, they may be able to purchase a mobile home outright since costs are lower. Even if they have to finance it, their down payment will stretch further. The mortgage payment will probably be feasible and perhaps even lower than apartment rent. In other words, demand for affordable housing options like mobile homes will likely increase.
3. You Don’t Have to Go All In
One factor that prevents people from investing in real estate is the idea of becoming a landlord. Some investors don’t want to deal with tenants and lease agreements. They also don’t want to face the cons of property management, including having to repair damaged properties and handle evictions.
Hiring a property manager is one way around these unattractive tasks. A property management company will step in to assume most of your landlord duties. But this service will come at a price, eating into a portion of the profits you make from your investment. Plus, there’s the time it will take to find a property manager you can trust. You likely won’t be 100% hands-off, as you’ll want to monitor the manager’s performance. You’ll also need to stay up-to-date with what’s happening at your park.
For some investors, even this is too much. They don’t have the time for status meetings, check-ins, and property manager oversight. Or they don’t believe they have the expertise to handle those responsibilities. Real estate investment trusts are a way to invest in mobile home parks without taking on any management duties.
REITs work similar to stocks and mutual funds. You can purchase them over time, investing as much as you want. While mobile home park REITs may not be as abundant as other kinds, there are some you can purchase publicly. Mobile home park REITs invest in manufactured home communities. Some also invest in RV parks and properties with houseboats.
4. Mobile Home Parks Are a Less Volatile Investment
With most real estate investments, you know values can fluctuate. It depends on the economy and demand in the area. There might always be buyers and sellers negotiating real estate transactions, but the prices can shift from year to year. Those values can fluctuate more rapidly during periods of economic uncertainty.
The real estate market experienced this during the Great Recession and the recent pandemic. During the Great Recession, home values plummeted, while the pandemic boosted demand more than inventories could accommodate. Even though real estate values tend to appreciate over time, most properties are vulnerable to volatility.
You could buy a property when prices are high, thinking it’s a great deal when you do so. But an unexpected economic downturn could mean you lose out when you need to sell. Because demand for mobile home parks tends to be steady, there’s less volatility involved. Mobile home park investments are sometimes dubbed recession-resistant, meaning values don’t necessarily follow market indicators.
As a result, mobile home park investments come with predictable cash flows. You won’t face as much risk, regardless of the economic conditions. There will always be a high demand for affordable housing, even more so during a recession. Therefore, you aren’t as likely to see a mass exodus of tenants from a park or experience issues with rent collection.
5. Your Expenses Are Lower
When you own a mobile home park, you must maintain the land. Tenants are in charge of maintaining their homes, just like owners of other housing types. Unlike landlords of apartment buildings, you’re not responsible for keeping up a unit’s interior and exterior. If the dishwasher breaks, it’s the mobile homeowner’s responsibility to fix or replace it. The same goes for painting the home’s exterior and fixing or replacing its windows — all these tasks fall on the shoulders of the mobile homeowner.
As the investor, you’ll instead maintain the park’s common areas. These areas usually include the community’s roads and shared facilities, such as playgrounds, swimming pools, and community gathering places. For you, this means you’ll have far less overhead.
In some mobile home park communities, residents also take on the maintenance costs of their yards. So, all you’re budgeting for are the expenses associated with the common areas. Consequently, you can keep more of the lot rent you collect as the park owner. You’ll also have more funds available when you need to shell out money for repairs.
Even when you decide to take a hands-on approach to mobile home park investments, there are fewer responsibilities to worry about. Mobile home parks can be a way to get your feet wet as a landlord/property manager. If you want to make real estate your full-time gig, it’s a less complex way to enter the game.
Unlocking Wealth Opportunities With Mobile Home Park Investments
A mobile home park may not seem the most obvious way to build wealth. Stigmas and misperceptions about these communities will probably persist for some time. But as the affordable housing crisis grows, the demand for mobile homes and the lots these homes sit on will only increase. Unlike other real estate investments, mobile home parks are considered more resistant to recessions and market volatility.
With a mobile home park investment, you claim an ownership stake in the land, not the homes. Less upkeep and fewer overhead costs add to your ROI potential. And if you want an entirely hands-off approach, you can always buy a few mobile home park REITs. There are few reasons not to add mobile home parks to your investment portfolio, especially if you’re looking for steady returns.
Featured Image Credit: Photo by Melike Benli; Pexels