Did you know Warren Buffet has invested in mobile home communities? Mobile trailer parks are not exactly what comes to top of mind when a person considers passive income from real estate. They may think of single family homes or apartment complexes, not necessarily trailer parks, since trailer parks are a special kind of investment when it comes to real estate – you will own the land, not the home. Because of this reason, you should research and handle it differently than other real estate investments. Read on to find out about the upsides and downsides of investing in a mobile home park, as well as how to get started in six steps.
What Makes Mobile Home Community Investments Different Than Others
Like I stated earlier, you will own the land as opposed to the homes. This means your approach to buying, marketing and maintaining the park is going to be different compared to buying a single home and renting it. However, just because it’s different doesn’t mean it’s more work. Some may argue owning a park is even less work than other forms of real estate investment.
For example, you don’t need to maintain their homes. Instead, you just have to maintain the grounds of the park. That means you save money from contractors, plumbers, etc. Parks are also low maintenance because there is less turnover in comparison to other investment opportunities. Again, this is thanks to the majority of trailer park residents owning their home as opposed to renting it and are simply renting the “pad” their mobile home sits on.
There’s less competition when it comes to mobile home parks. According to US. News and World Report, only 20% of mobile home parks are owned by professionals. That means you have the opportunity to buy from the 80% – from the current “mom and pop” owners. Buy a park that already has been developed and has homes on the property will take away half the work.
Last but not least, it’s lucrative. Since you’ll be owning the land you are able to fit in many homes as opposed to investing in just one structure. The demand is also high for mobile park communities. Therefore you can expect a higher cash flow compared to other property types.
The Downsides of Mobile Home Park Investing
There is a certain stigma when it comes to mobile home parks. However, one man’s judgment is another man’s opportunity. These are simply people who need affordable housing. If anything, you are making it much easier for those who are in economic distress to have a place they can come home to.
While you deal less with the problems of the physical homes, you are responsible for the water, power lines, internet and roads. So you need to be conscientious when choosing a spot for your park that will allow you access to these materials.
And while you are able to fit many homes on your land, certain states have certain laws regarding how many structures you can have per acre. This is something else to consider when choosing where exactly you’d like to purchase your park.
Mobile homes have a hard time battling the elements. They can easily be thrown around in a storm, like a hurricane or a tornado. For this reason it may be more difficult for you to get insurance because of its location. This is something to consider when you’re figuring out the location of your park.
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Getting Started in 6 Steps
1. Research
The first step is to look into locations. Once you’ve chosen a location for your mobile home, you can now determine which parks to extend an offer to or pick the exact spot to build your park. It’s important to consider a location where you’re not fighting with apartments or homes for pricing. If a person is deciding between a brick and mortar home and a mobile home, they’ll choose the brick and mortar.
Be sure to get an idea of the competition, the local economy, the age of both the homes and the park before placing a bid. Of course, this is advice to follow no matter the form of the real estate investment. Reminder: be sure to look into state laws regarding density per acre, etc.
2. Update
If you buy a park that is already established the next step is deciding if you want to update it or not. Updating a park might include buying homes for the property to replace old ones that have been left behind or updating the trailer park clubhouse for residents. Updating will allow you to ask for more rent and will make your park more desirable to prospective residents, but it will involve investing more money upfront.
3. Market
When marketing your park, it’s important to consider your audience. The majority of mobile home owners are between the ages of 18-29 and the average income of those living in a manufactured home is $28,400. This means that if you want to reach potential residents, use channels that have a large millennial following. For example social media, websites and apps. Highlight the affordability of living in your park as that is the best selling point for these homes.
4. Interview
Just like any real estate investment, pay attention to who you are letting live on your property. Make sure to look into their background thoroughly to avoid future payment issues and possible eviction.
5. Manage or Hire a Park Manager
If you want this investment to be as passive as possible it’s crucial to hire a park manager. A mobile home park manager will take care of all resident issues and keep the place running. Many owners hire a resident that has lived in the park a while, that way there is less education needed, the resident understands the community and there’s an established trust.
6. Receive Checks
And just like that, you can start making the money back on your mobile home investment and then make a profit after. Mobile home residents rarely leave the park, so steady growth from your investment is highly feasible.
In Conclusion
This investment is one of the more unique ones when it comes to gaining passive income from real estate. There is demand and not many new parks are being built, thus there is less competition. Buy an old park or build a new one, it’s up to you. A slight learning curve may be involved for some with this kind of investment but serious money can be made with investing in mobile home communities.
Have you ever considered investing in a mobile home park? Share with me in the comments!