Mobile Home Parks and Potential Cash Flow

Here is some great information that shares why investing in a mobile home park is just the best:

The key to understanding mobile home park investing is to look at the raw power of affordable housing and how it relates to today’s consumer. The household income for 20% of all Americans is under $20,000. That’s 60 million people.

Based on the government’s suggested ratio of housing costs to total income — about 33% — these families can afford around $500 per month. But the average apartment rent in 2010 was over $1,000 per month. So where can you live for $500 per month? There are only two options: low-rent apartments and mobile home parks.

So who wants to live in a mobile home? Just about everyone, as it turns out. Low-rent apartments have many characteristics that tenants find appalling, including high crime, constant noise on all sides and above and below, no outside play space, inability to have a pet, and no sense of community.

Mobile homes, however, offer the chance to have privacy, a small yard, a pet, and a neighborhood feel much like a subdivision. A mobile home in a mobile home park is infinitely more desirable than its multifamily alternative. Perhaps that’s why 8% of all Americans already live in a mobile home.

And here are some ideas for retiring based on the cash flow from a single mobile home:

Most mobile home park owners tend to amass a portfolio of several parks, simply because, after acquiring the skill sets, it seems wasteful not to buy “just one more”. But, in reality, they only need to buy one mobile home park to be set for life. How can this be?  There are several reasons.

Sufficient scale.

A mobile home park is a mass of different income units. Because of this volume, small improvements in revenue or expenses on just one lot are multiplied by the sheer volume of lots. For example, a small $20 lot rent increase in a 100 space mobile home park yields a cash flow improvement of $2,000 per month.

In a single family home, or a duplex or four-plex, by comparison, a $20 rent increase yields under $100 per month in cash flow…

No future obsolescence.

The nice thing about mobile home parks is that they are incredibly low-tech. There is no great invention coming down the pike to derail them. If you owned a record store in 1960, and thought you could retire on it, you’d have been mistaken when they brought out the CD, internet and ipod. But there is nothing that can alter the need for affordable housing. And the market just keeps getting larger as America gets poorer.

In addition, since you only own the land in a mobile home park, you do not have to worry about saving for building upgrades like replacing roofs or siding. There are few big capital hits you have to save for (or borrow for).

Great information, right?




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