The Benefits of Owning a Mobile Home Park
When you drive by a mobile home park, what’s the first thing that comes to mind? Is it the popular movie “8-Mile” starring Eminem? Or maybe you just recoil in horror – imagining what life would be like if you had to live there. Well, when I drive by a park, I think of economic security. That’s because I own one.
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The benefits to owning a mobile home park are many – and much more than you can imagine. Here are some of the top reasons you should want to own a park:
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Cash Flow
Mobile home parks make a ton of cash flow. The math is simple. If you have a 100-space mobile home park, and the lot rent is $250 per month, then you have $300,000 per year of cash coming in the door. With an expense ratio that runs between 30% and 40% of the gross, the annual net income is about $200,000 per year. That’s a lot of money coming in off just one property.
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In the world of commercial real estate, mobile home parks are the king of cash flow.
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Appreciation
Mobile home parks pay you twice – once with monthly cash flow and a second time with asset appreciation when you go to sell them. How much asset appreciation in value? The popular book The Millionaire Next Door lists under its chart of most common traits of millionaires “mobile home park owner”. Indeed, the stories are endless of owners who bought parksfor around $300,000 that are now valued at $1,300,000. Why do they appreciate so quickly and significantly? It’s the power of volume again. If you raise the rent in that 100 space mobile home park by $50 per month over a couple years, then you will have created $50 x 100 x 12 = $60,000 per year in additional income. And at a 10% cap rate, that’s enhanced the value of the property by $600,000 with just that one action alone.
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Stability
It costs $3,000 to move a mobile home. Tenants can’t afford it. As a result, mobile homes never move. Since they don’t move, your tenant base and revenue remain constant. When a customer can’t afford to pay their rent, they normally abandon the home, at which time you can ultimately seize it through abandoned property rights.
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The same is true on the expense side. Nothing ever happens in a mobile home park. There are very few line items on the budget, and those are basically the same every month. These expenses include insurance, property tax, water, sewer, electricity and mowing.
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Freedom
Mobile home parks do not require a lot of management attention. Basically, you are renting land and do not have to spend much time watching over what your tenants do with it. The tenant is responsible for maintaining their lot and mowing their grass, so really the park owner only has to worry about the entrance and the common areas, such as a playground.
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What does this mean? It means you have a lot of free time on your hands. You can choose your own hours and take a trip if you want. There are no restrictions. That’s not to say that you can just buy a park, forget about it, and the cash goes to your checking account each month – far from it. But with some intelligent systems – and the right park purchase – mobile home park ownership is not a time intensive endeavor. Because of this, it also makes a great addition to your day job, as you can operate the park at night and on weekends.
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Helping People
Mobile home parks are all about “affordable housing”; essentially housing for people with lower incomes. About 60,000,000 Americans live on household incomes under $20,000 – that’s 20% of the entire U.S. population. These people have no hope of having a detached dwelling other than a mobile home park. A mobile home can provide them with privacy, a yard, a sense of neighborhood. You are actually helping people when you provide a quality mobile home park environment. Think you’re doing good when you recycle your newspapers? Try changing peoples’ lives.
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The ability to do good while making money is a true win/win, and seldom found today.
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Don’t Let The Media Ruin Your Opportunities
The media has for years portrayed mobile home parks residents as a bunch of worthless hillbillies. Jeff Foxworthy has made a living out of furthering such misconceptions. The truth is that people who live in mobile home parks are no different than you and me – they just don’t have as much disposable income. Their kids go to school and college, and they read about world events and go to movies. They are not scary. That is a stereotype that the media has embraced because it works to get you to watch TV and read newspaper articles.
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Don’t let this unfair portrayal ruin your economic performance.
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Conclusion
Mobile home parks mean money. Big money. But they also offer other advantages that money can’t buy. Explore your options regarding the affordable housing industry. You may find that it’s your best shot at financial security and peace of mind. It has been for me.
