Over the last seven years we have seen an explosion of price increases for single- family homes and as a result it has created a great opportunity to invest in affordable housing for families.
This can be done in several ways, a single wide or a double wide; a single wide is usually a better investment than a double wide. The reason is simple. If the mobile home is in a park and it’s a double wide, it takes up two lots to accommodate and the lot rent is usually higher.
Cities and counties typically won't approve of putting in a new mobile home park so that brings out the necessity to look at existing mobile home parks or lots that are in a county suitable to place a mobile home on. Some counties have a 5-acre restriction on mobile homes so it’s perfect for a rural setting.
When buying existing mobile home parks an excellent strategy is to be on the outskirts of a major metropolitan area. For example, Washington DC has very expensive real estate but in the suburbs of southern Maryland and northern Virginia existing mobile home parks are affordable housing for individuals.
There are two strategies to look at. One is you own the park and rent the mobile homes to people. The second strategy is to sell the mobile homes to individuals in the park. You own the land and you rent the lots to individuals that have their own mobile homes or renters you have previously sold to. This can be one of the best strategies for an individual to employ.
Mobile homes are not always built with as high of standards as a stick-built house. Maintenance issues could incur a large cost if you owned a large mobile home park. If you rent the units, you will have to hire a permanent maintenance person and you can give them free housing which will save you money on wages.
Once somebody moves a mobile home into a park or buys an existing mobile home typically, they don’t move. Moving a mobile home and having it set up professionally could cost as much as $5000.
Mobile home park sizes can range from seven or eight units all the way up to 400-500 units. A nice thing about a larger complex is you can hire a full-time manager, which minimizes your actual work. When buying a property of this nature please understand that when you get the financials on the property, they may not be accurate to your situation. Often people will give you a capitalization rate but it’s not accurate because your expenses and costs may be different than the person, you’re buying the property from. Sometimes when you buy properties the tax assessor will reevaluate the taxes based on your purchase price, which will make your property taxes go up. This could also make your insurance go up if you’re going to manage the property yourself, resulting in your management fees going down. In short, don’t go off what their expenses are, it’s going to be based on your expenses and your profits. Often, after buying a property of this nature based on the lot rent being increased it will greatly change the capitalization rate.
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