Few people nowadays see a mobile home or a mobile home park as good options for making money. This is because they’re often thought of as “affordable housing” and not meant to last long. For a while now, most people have believed that the only investments worth considering are things that are permanent as real estate. However, mobile homes and mobile home parks prove that this isn’t always true and for a number of reasons.
Without a doubt, if you’re smart about business and investing, you can actually make a lot of money from a mobile home park. But before you dive in completely, there are some important things you need to know. We’ll explain these things as we go through this article.
What is a mobile home park?
Also referred to as a manufactured home park, a mobile home park is a designated space where mobile homeowners or travelers can park their home. The park is subject to regulations set by state and local authorities. In accordance with California Housing and Community Development (HCD) guidelines, it is defined as a piece of land or property containing at least two mobile homes, manufactured homes, recreational vehicles, or lots that are available for rent or lease. Mobile home parks that fall under HCD’s jurisdiction also encompass subdivisions, cooperatives, condominiums, homeowner’s associations, and other forms of resident-owned properties.
Typically, a mobile home park provides basic utilities such as water and electricity. However, it’s possible to create mobile home parking with additional features like green spaces, swimming pools, community rooms, or landscaping services. It also serves as a trailer park for short stay users who usually come with a trailer – a mobile home that is designed to be moved by everyday SUVs or trucks, or as others call it a “traveling home”.
According to the United States Census in 2021, there are 6,628,556 occupied mobile homes. This increased the demand for mobile home parks as people need a space to park their homes and enjoy electricity and running water. And since this became popular not only to people who prefer to stay in manufactured homes but also to travelers who enjoy moving from one place to another – embracing the modern day nomad life , mobile home parks have emerged along numerous national highways across the nation. This also includes certain parks catering to tourists, such as those near Yellowstone. This trend has experienced a significant surge in recent years due to the population growth and the increasing scarcity of resources, rendering it a feasible choice for a considerable number of people.
Advantages of Starting a Mobile Home Parking Business
Prominent institutional investors and well-known real estate companies are placing significant bets on mobile home investments in the United States. Key players like Warren Buffet are expressing confidence in the market’s future potential. So, here are some of the reasons why you should start investing in a mobile home park.
- Favorable Market Outlook. The demand for affordable housing options is consistently high, and mobile home parks cater to this demand. As housing costs rise and the economy is facing challenges, traditional homeownership becomes less attainable for many individuals and families. People often seek more affordable living arrangements, making mobile home parks an appealing option. This sustained demand creates a favorable market outlook, providing a stable foundation for your business.
- Low Competition. Investing in mobile home parks remains a concealed gem in real estate investing. Contemporary restrictions imposed by governmental zoning, gentrification, and altered zoning regulations have deterred the establishment of new mobile home parks. With nearly every U.S. city prohibiting their development, except in remote areas, this effectively erases the threat of oversupply. This unique landscape is a great chance for investors to find good deals without having to compete with lots of other buyers who are all after the usual real estate options.
- Better Returns. The mobile home park industry has consistently delivered the most impressive profit margins among all segments of real estate. This is essentially linked to the balance between how many of these properties are available and how many people want them. In comparison to other specialized areas of real estate, only a small number of investors understand or invest in these kinds of properties. In fact, there’s likely just a single mobile home park investor for every million individual investors focused on single-family homes. Furthermore, the scarcity of mobile home park buyers compels sellers to provide more substantial returns on investment.
- Stable and Predictable. Mobile home parks are pretty stable places to invest in. When people set up their mobile homes in these parks, they usually stay put because moving them is expensive and complicated. Even when someone sells their home, they tend to sell it to someone else who wants to keep it in the same park. Moving a mobile home can cost around $6,000, which is a big expense, and this makes it unlikely that people will leave the park just because the rent goes up a bit. Furthermore, the stability of mobile home parks is anchored in the fundamental human need for shelter. But more than just a shelter, mobile homes in parks enable residents to enjoy their personal yards, avoid shared walls, ceilings, or floors with neighbors, and can conveniently park right in front of their homes.
Different Ways to Invest in a Mobile Home Park Business
Mobile home investing presents a unique opportunity within the real estate sector. There are multiple strategies to consider, each with its own risk and reward profile.
- Direct Ownership: This involves purchasing a mobile home park outright. It’s a hands-on approach where the investor takes on the role of a landlord, responsible for property maintenance, tenant management, and all operational aspects. Exploring options like a mobile home park loan can further facilitate entry into this promising investment landscape.
- Partnership: If you don’t have enough capital or prefer to share responsibilities, consider forming a partnership. It can be with other individuals or existing park owners, thereby leveraging combined resources and expertise.
- Mobile Home Park Funds: Some real estate investment groups specialize in mobile home parks. By investing in these funds, you gain exposure to the business without the need for direct management.
- REITs (Real Estate Investment Trusts): Some REITs focus on, or include, mobile home parks in their portfolio. This offers a more passive investment opportunity where you can earn dividends from the business’s profits.
- Lease Option: This involves leasing a mobile home park with an option to purchase later. It provides a way to control and potentially own the park without immediate large capital outlay.
- Lonnie Deals: Named after Lonnie Scruggs, this involves buying older mobile homes at a low cost, fixing them up, and then selling them on terms while they remain in the park. It’s a way to earn from the homes themselves, rather than the land they sit on.
- Investing in Ancillary Businesses: These are businesses that support mobile home parks, like mobile home manufacturing, financing, or supplying parts. It’s a more indirect way to benefit from the industry’s growth.
- Digital Platforms: Some online platforms connect investors with mobile home park sellers, and these platforms might allow for crowdfunded investments or fractional ownership opportunities.
Things to Consider When Starting a Trailer Park Business
Starting a trailer park business requires careful planning, research, and consideration. So, how to start a trailer park? Here are key factors to keep in mind:
Location
Selecting the right location for a trailer park is the key to ensuring its success and profitability. Research the local demographics and housing market to identify the demand for mobile home living. Consider factors such as population growth, employment opportunities, zoning regulations and local ordinances related to mobile home parks in the area, and the presence of potential tenants who would be interested in mobile home living.
The park should be conveniently accessible to major roads, public transportation, and essential amenities like grocery stores, schools, and medical facilities. Proximity to urban centers or job hubs can also enhance the park’s appeal. Furthermore, make sure the location has adequate infrastructure, including water, sewer, and electricity. The cost and feasibility of connecting to these utilities should be factored into your decision.
Size of Property
The size of the property influences various aspects of the park’s layout, capacity, and overall success. It directly affects the number of mobile homes or lots that can be accommodated. A larger property can accommodate more units, which translates to higher potential revenue. However, having a larger property also means higher operating costs for maintenance, utilities, and amenities. Balancing the size of the property with its associated costs is crucial to maintaining profitability.
Amenities
Providing amenities is a strategic approach in the trailer park business that goes beyond simply offering a place to live. Amenities are not just perks; they are key elements that can significantly enhance the appeal of your trailer park and contribute to resident satisfaction, retention, and overall success.
Amenities such as laundry facilities, Wi-Fi, and well-maintained landscaping enhance the quality of life for residents. Access to laundry facilities eliminates the need for off-site trips, saving time and effort. Wi-Fi connectivity is increasingly important in today’s digital age, allowing residents to stay connected and engaged. Landscaping not only beautifies the surroundings but creates a welcoming and comfortable environment.
Funding
Determine how much capital you’ll need to start and run the business. Explore funding options and choose the most suitable funding option for your needs such as personal savings, loans, investors, or grants. Sufficient funding is essential to cover initial setup costs, ongoing operational expenses, and unforeseen contingencies.
If you’re contemplating how to buy a mobile home park with no money, creative strategies such as seller financing, joint ventures, lease options, and unconventional financing methods are some of the options that you can explore.
Workload
The workload associated with managing a trailer park business ranges from property development and tenant management to financial oversight, legal compliance, customer service, marketing, and emergency preparedness. Effective time management, organizational skills, and delegation are essential for handling these responsibilities. Prioritizing tenant satisfaction and proactive problem-solving contribute to the successful operation of the trailer park and the creation of a thriving community
Mobile Home Park FAQs
Can I hire a team to manage my mobile home park?
Yes, you can certainly hire a team to manage your mobile home park. Many mobile home park owners choose to delegate various responsibilities to a dedicated team of professionals to ensure the efficient and successful operation of the park.
Do I need to become a real estate agent or property manager to own a mobile home park?
While being a real estate agent or property manager can provide relevant skills, they are not mandatory requirements for owning and operating a mobile home park. Owning a mobile home park primarily involves property ownership and management, along with a deep understanding of the mobile home park industry.
How much does it cost to build a mobile home park?
The startup expenses for establishing a mobile home park vary based on factors like size and location. Typically, the initial investment falls within the range of $250,000 to $1,000,000. This encompasses expenditures such as land acquisition, site development, and promotional efforts.
Breaking Boundaries: Diverse Revenue Streams in Mobile Home Parks
Mobile home parks exhibit a dynamic revenue generation model that extends beyond traditional rental income. By catering to the needs and preferences of residents through diverse offerings such as lot rentals, home sales, on-site amenities, and optional services, these parks create multifaceted income streams. One way to do this is by offering onsite amenities such as laundry facilities, swimming pools, and clubhouses that residents can use for additional charges. Some parks also provide paid services such as cable TV and internet.
This adaptability not only underscores their potential profitability but also emphasizes their ability to provide a well-rounded living experience for residents. As investments that bridge affordability with revenue diversity, mobile home parks showcase their capacity to defy expectations and deliver financial stability.
KEY TAKEAWAYS
- The demand for affordable housing options is consistently high, and mobile home parks cater to this demand.
- Mobile home parks can yield substantial returns for investors as they offer a unique and valuable service.
- If you lack specific skills or time, you can hire professionals or teams to handle tasks in your mobile home park.
