Why invest in a Mobile Home Park?

Mobile home park investing is one of the highest yielding – if not the highest yielding – form of real estate in the U.S. right now. Mobile home parks make money in two ways: 1) cash flow and 2) capital appreciation from increasing cash flow and the resulting increase in value. There are several reasons why mobile home parks have such a high yield: Demand for Affordable Housing. Around 20% of Americans have a household income of $20,000 per year or less. And this group is growing daily, as the U.S. economy declines. S goof mobile home park will receive around 40 calls per week from people wanting to live in a mobile home.

The Only Affordable Housing Option.

If you assume that a household should not spend more than 28% of their income on housing (that’s the U.S. Government’s figure), then that leaves a monthly budget of around $500 for this 20% of Americans. Yet the average apartment rent in the U.S. was $1,030 per month in 2010. Only mobile home parks can deliver $500 per month housing.

Scarcity of Supply.

Virtually every city in the U.S. no longer allows new construction of mobile home parks. So the supply has been capped. You don’t have to worry about a new park being built down the street – unlike self-storage, apartments, and every other type of commercial real estate.

The Homes Can’t Be Removed.

Mobile homes are anything but mobile. It costs around $5,000 to move one so, as a result, 90%+ of all mobile homes are sitting right where they were delivered from the factory. And because of this fact, you can raise your rent as much as you like and nobody can ever leave.

The Highest Return Levels of Any Type of Real Estate.

Because so few people know about mobile home parks, the levels of return on investment are extremely high. Cap rates of 10%+ are the norm, as are cash-on-cash returns of 20%+. That’s more than double some alternative forms of real estate.

The Ability to Obtain Seller Financing.

Most mobile home park sellers expect that, as a condition of sale, they will have to carry the financing. So you have the ability to escape the entire banking process – no loan application, no loan committee meeting, no credit report. And the seller carry loans normally are non-recourse and offer below-market interest rates.

Huge Upside in Rents and Cost Cutting.

Because most moms & pops are not very sophisticated in real estate management, there are often huge improvements to the return levels available through simple methods such as raising rents and cutting ridiculous expenses.

These are just some of the reasons – not all – that mobile home park investing is the best niche in real estate right now. And the megatrends of the current U.S. economy are only making the industry stronger.

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