Why Mobile Home Parks…

Why MHP

Lack of Affordable Housing

The Unites States is in the midst of an affordable housing crisis where an estimated seven plus million affordable units are needed to meet the country’s over 11 million extremely low-income households according to the National Low Income Housing Coalition (NLIHC).

Supply and Demand Imbalance

Given the negative stigmas about the industry, municipalities have made it virtually impossible to build a new mobile home park today through unfriendly and foreboding zoning ordinances. As a result, only about ten new parks have been built since 2000 while thousands have been razed for redevelopment over that same period.

Tenant Stickiness

Where the typical apartment renter stays on average 24 months, research suggest that residents of manufactured home communities remain residents for over 8 years. This low turnover results in significantly less capital expenditure per unit than that of an apartment building.

Limited Competition

The barriers to entry created by local governments ensures virtually no further competition in the industry. While an apartment or shopping center owner can expect continued growth of competitive assets in the from of newer apartments and retail centers, a mobile homeowner almost never has to worry about competing with a newer park.

Fragmented Industry

Unlike many other assets types, the mobile home park industry is not yet highly consolidated by a small number of highly capitalized players. While the industry continues to move that direction, there are still a large majority of parks owned by ma-and-pa’s. This inefficient market place allows for greater opportunities and returns compared to other investments.

Recession Resistant

Mobile home parks have historically prospered through recessionary periods. While other asset classes are plagued by lower occupancy and declining rents, mobile home operators typically see increased demand for their product as people’s wallets get lighter. Mobile homes were one of the only assets types to thrive during the Covid-19 pandemic.

Limited Maintenance

The goal of park ownership is to be in the land business, not the home business. The ideal park is one where its tenants own their homes, pay their own utilities, and only pay the landlord a monthly “lot rent” for use of the land. This makes for significantly less repair and maintenance needs compared to apartments. Bringing a neglected park to this standard can result in significant value creation.

Rapid Value Creation

Significant value creation can be unlocked by simply filling vacant lots in a park. Depending on the park’s lot rents, filling an unoccupied lot can result in anywhere between $20,000 and $70,000 in instant value. This coupled with bringing under-market rents to market can considerably increase a park’s value in as little as 12-36 months.