Kevin Bupp talks to us today about why it’s smart to invest in mobile home parks, from low tenant turnover, to high Return on Investments.
With mobile homes being costly to move, the turnover rate is higher and is a stable investment.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. Now, let’s meet today’s expert host.
Kevin: Hey, guys. Kevin Bupp here, from the MobileHomeParkAcademy.com and the Real Estate Investing for Cashflow Podcast. Today, I’ll be your host of the REI Classroom tip, and today’s show, I’m going to discuss the five reasons why mobile home parks make great investments, and why you should seriously consider investing in them.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
Kevin: Reason number one, there is extremely low tenant turnover, due to high cost to moving in mobile home parks. You see, mobile homes are anything but mobile, thus requiring specialized movers with oversized semi-trucks to transport them, which costs on average about $3,000 to move a single wide home from point A to point B.
Industry data also shows that a clear majority of mobile homes are in the same location today, as they were when they were first delivered. Compared to apartment buildings, where residents can pack up in the middle of the night, mobile home ownership enjoys low resident turnover approach, equals a more stable investment for you, the investor.
Reason number two, there’s practically zero competition from new mobile home park developments, and most areas of the country is difficult to obtain proper zoning, acquire the necessary permits or licenses, and deal with other regulatory hurdles, in order to obtain the necessary approval to build a new park.
In addition to these legal hurdles, mobile home park developers do not generate any cash flow, until substantial amount of the home lots in the park are rented. For these reasons, it makes little to no sense to develop a new park. You’re better off just buying an existing park.
Reason number three, higher return on investment. Mobile home parks, typically deliver higher cash on cash returns, in a typical multifamily apartment investment, and part of this is due to reduce cost. Rather than maintain the physical mobile home, the park owners are only managing the land and associated facilities, including keeping the grounds clean, ensuring the roads are maintained, and providing for any amenities. Park owners are not incurring any cost, like painting, new carpets, new appliances, or any other amenities inside the home itself.
Reason number four, increase depreciation. In a typical apartment building, investors can depreciate it over 27 and a half years. With mobile home parks, depreciable expenses are typically the roads, utility lines, and so on. These improvements are improvements to the land. It can be depreciated over 15 years, which allows investors the benefit from added depreciation in the earlier years of the investment.
Reason number five, this is the big one, there is a growing demand for low income housing. No matter what cycle of the economy, there will always be a need for affordable housing. At the date of this recording, there are over 60 million people earning a household income under $20,000 a year. This substantial group of people can only afford to pay an estimated $500 per month on housing.
This leaves this group with a choice below or between a low rent income apartment or a mobile home park. If you look at a low income apartment complex, a lot of times, they’re filled with drugs, sex, rock and roll, all that bad stuff. So mobile home parks make great alternative choices for that income demographic.
Guys, thanks for listening in. Have a great day. Get out there and make some cash flow happen.
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