In recent years, mobile home parks have grown in popularity. They’ve earned a reputation as an inexpensive asset class for many individuals wanting to diversify their portfolios since then. Mobile home dwellers in the 100 largest US metros spend 20-40 per cent less on housing than non-mobile housing residents. As a result, mobile housing parks are a significant source of unsubsidized low-cost housing in the United States. Furthermore, when selecting a mobile home park there are some things to look for before investing.
Things to Look in Before Investing in Mobile Home Parks
> Review The Track Record of Operator:
There is no substitute for time. The best lessons you gained as an active mobile home park operator have come from operating and owning mobile home communities. There are various distinct business strategies an operator might specialise in within the mobile home park asset class, ranging from stabilised communities to ground-up developments. If you invest with an operator who “stays in their lane” and does not try a new model for the first time, there may be less danger.
> Motivate Yourself to Invest in Mobile Home Park:
As mobile home park investing becomes more widespread, it’s more critical than ever to educate yourself so you can avoid potential hazards. Seminars, podcasts, books, and professional events, can all help you learn more about mobile home park syndication investing.
> Consider Return of Capital Timeline:
How long will your investment capital be tethered? All real estate, including affordable mobile home parks, is naturally illiquid. It’s critical to make sure your operational partner has a clear strategy for a future capital event, such as a sale or refinance if you want to get your money back.
> Determine Property Management:
Mobile home parks management is a high-volume operation, and an operator without a strong property management team is likely to struggle. Good third-party property management organisations are hard to come by, and you have found that they mostly work with larger communities. When investing in a mobile home park syndication, it is recommended that you inquire about the operator’s plans for managing the asset to verify that they have a professional team on hand to assist you.
> Look at The Utility Infrastructure:
In a mobile home park, the utility infrastructure is likely to be the most expensive land improvement. Sewer and Water service in mobile home parks will be either public or private. Because the supplier bears the majority of the service liability, public sewer and water are often the most desirable. Mobile home parks with private sewer and water can be less popular and come with added liability that can be costly to maintain.
> Calculate The Average Age of Mobile Home Park:
As a general rule, it’s a positive sign if the bulk of the mobile homes in a neighborhood has pitched roofs. In comparison to flat and round roof residences, which may require repairs, those homes are generally newer. The age of the mobile homes in a community is significant because when they reach the end of their useful lives, they begin to deteriorate, resulting in higher costs.
> Establish an ROI Expectation:
It’s fascinating to discuss the potential returns on mobile home park investments. Double-digit yearly returns are feasible, but you must ensure that the operational risk is appropriate for your portfolio. Also, because general partner fees can eat into potential profit, it is advised to align these rates with market fees charged by other operators.
> Identify Whether Invest in TOH And POH:
There is a critical distinction between these two abbreviations: who owns the mobile homes on the property? The acronyms TOH and POH stand for “tenant-owned home” and “park-owned home,” respectively. These acronyms are likely to appear in mobile home park investment offering documents. Most operators prefer TOH communities as a rule of thumb due to the cheaper maintenance costs involved with these communities.
If you plan to invest in mobile home parks in Texas, above are the main things that you have to consider before investing.