why mobile home parks?
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Demand for Affordable Housing
The demand for mobile homes rapidly grew in the 1980s when the federal government cut funding for affordable housing. Currently, the national average monthly lot rents and housing contract for a mobile home is approximately $280 and $600, respectively, as compared to roughly $1,100 for a 3- bedroom home or apartment. Therefore, mobile homes offer the greatest opportunity for unsubsidized affordable housing. In fact, the US Census Bureau reports that one in eighteen Americans currently live in a mobile home.
Restricted Limited Supply
Due to a restricted and limited supply, mobile home parks have less volatility in rents and reduced competition. Strict zoning laws make them nearly impossible to build, so there is essentially no new supply of mobile home communities. Comparatively, more than 300,000 new apartment units were built last year, creating increased competition for existing apartment owners.
Attractive Capitalization (CAP) Rates and Financing Options
The demand for affordable housing as well as the clear and consistent returns from mobile home communities makes this niche market very favorable. Mobile home communities have some of the highest CAP rates of any real estate investment, often in the range of 7-10% or higher nationally. 5 Why Mobile Home Parks? Historically, mobile home park owners also have the lowest loan default rates compared to any other asset class. This is due in part to the stability of these communities and their long-term tenants.
Stability of the Tenant (Low Turnover)
Tenant turnover is a major expense for both multifamily and single-family investors. The cleaning, vacancy, and advertising expenses associated with tenant turnover can quickly cost investors thousands of dollars each year. However, most mobile home park tenants own their own mobile homes; these owners simply lease the land from the park owner. Tenant turnover rates are roughly 1 in 50 compared to 1 in 5 for apartment renters. In addition, the cost to move a mobile home is in the range of $3,000 to over $5,000. Compare these high relocation costs to a security deposit in a more traditional rental unit and it is no wonder why tenants in a mobile home park often stay for years.
Low Cost per Unit
There is a high cost per unit in traditional investments in large multifamily properties and single-family homes; recall the demand for affordable housing? However, Johns Creek Capital seeks to own the lots i.e., the land, not the individual mobile homes in our communities. Therefore, the cost to acquire the same number of rental units in a mobile home park is significantly less expensive when compared to other multifamily properties.
Low Expense Ratio
A mobile home community with predominately tenant-owned homes are very attractive, primarily because the tenant is responsible for their maintenance, and the appearance and upkeep of their individual lot. The park owner is still responsible for maintaining the land, common areas, and additional park-owned structures such as laundry and storage facilities, however, the mobile homeowner carries the costs of all repairs. Expense ratios for mobile home parks average 30-40% whereas most other asset classes can easily exceed 50%.
According to the research and advisory firm Green Street Advisors, the manufactured home sector is the only major real estate asset class that has not experienced a year-over-year decline in net operating income in any year since 2000. Even with the onset of COVID, less than 15% of our tenant base was affected; primarily due to a large percentage being classified as essential workers. This stability is one of the mobile home park investment attributes anticipated to continue throughout the next several years.
ACQUISITION TO DISPOSITION
Our team will help you stay the course with your property. We provide you with a monthly statement and reports as one of the forms of communication.
Our team is knowledgeable and will help you step-by-step through the necessary steps. We’ll be available to guide you through the process.
EDUCATION IS THE KEY
We are not only an investment company but also an educational company. Whether you learn the model and invest on your own or with our team, we want you to be empowered to take action!