Investing in Mobile Home Parks - Alternative Investment Success in 2023
Managing a large commercial building or apartment complex sounds daunting for many investors. Everyone wants the steady return of leasing multiple units, but no one wants to manage all of those units (and tenants). What if there was a way to gain multi-unit income without as much work?
One option for commercial real estate that is increasingly attractive to Canadian investors is mobile home parks. They represent an investment that carries lower maintenance costs, low tenant turnover, smaller initial and ongoing investments and locations that are all over the map. Mobile home parks are an opportunity for aspiring real estate investors to get their feet wet in a relatively low-risk segment of the market.
So if you are interested in learning more about how to finance mobile home parks and similar properties click the link below to book a free strategy call with our team at LendCity.
Why mobile home parks?
Mobile home parks are a draw for real estate investors for several reasons. A primary draw is that they represent lower costs over time. Commercial property investments can be uncertain endeavours, but mobile home parks stand at the less risky end of that spectrum. Mobile home park owners are essentially a form of the landlord rather than owners of housing units. Each park is divided into small “pads,” or plots of land. Prospective park owners are then able to lease that land from the park owner and move their rented or owned mobile home on to the pad.
Mobile home parks are also very affordable housing for the general population and so represent an investment that is typically resistant to economic downtown and recession. This is an attractive piece for any investor to have in their portfolio since it all but assures a steady stream of income even in the most bearish economy.
Mobile home parks fill a need for the general population, especially as retirees have less and less in savings as wages stay flat over decades. They are a low-cost option that provides an attractive opportunity for quality home-ownership. Other benefits of owning a mobile home park range from enticing financial incentives to decreased risk via larger amounts of units.
Smaller initial investment
The initial investment in owning a mobile home park is a relatively cheap one. You are acquiring more potential housing units for less money than in any other class of real estate investment, meaning mobile home parks represent a chance to minimize your risk. More residents in more units mean that the hiccups of tenancy that always occur will have less of an impact on your bottom line.
The fact that you are not buying actual constructed units is also an enticing piece of the economic pie. Since you are investing in land rather than expensive constructed units, less money is needed to begin a venture. Mobile home parks also do not require expensive, premium plots of land - so you can hunt for bargains on land that will only increase your margins.
Lower tenant turnover
There is a degree of continuity in mobile home parks that does not exist in many sectors of real estate. Once mobile homeowners arrive in a park, they do not usually leave. Low tenant turnover is a huge benefit of owning a park. Any landlord can tell you that it takes significant effort to find new tenants, and mobile homes remove a large portion of this headache.
You can forget about lost rent during vacancies, cleaning vacated units, and other obligations. Tenants in mobile homes like to stay where they are, not least of all because moving a mobile home is an expensive proposition. Most owners and renters of mobile homes want to stay put. Providing them with good management and a well-maintained park only sweetens the pot for them.
Opportunity is everywhere
Mobile home parks exist all over every province in Canada. Most are run by independent operators rather than large, professional organizations. These are simple operations where services might have been minimal for quite some time. This provides an opportunity for driven investors to purchase these parks, invest in improvements and service upgrades and attract tenants who will repay the investment with loyalty and stability.
These amateur owners might not have recognized every opportunity that existed for revenue. Perhaps they were apportioning the land inappropriately or failing to provide tenants with premium services that many modern tenants expect. No matter what, there is likely a chance for investors to provide new value to mobile home park tenants.
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Reduced maintenance costs
When you own a mobile home park you can essentially forget about having to deal with unreliable and expensive contractors – since you only own the land, you are not obligated to worry about repairs to units. Ask any landlord of a multi-unit building, and he or she will tell you that forgoing this daily occurrence might be enticing enough on its own.
Mobile homeowners are responsible for their units, limiting your financial liability and costs of maintenance. That said, they are paying you rent, and will expect some amenities that you should plan on providing. You can expect to organize some services such as sewer hookup and trash removal, but both the upfront and ongoing costs will almost certainly be far lower than if you had purchased a multi-unit building.
Mobile home parks are a hidden opportunity
One final reason that investors might want to look into mobile home parks is that they are largely unknown as investment opportunities. Most people likely think of commercial real estate investing as purchasing businesses or high-rises, but the truth is that the term is a large umbrella that covers many types of commercial and residential properties.
Mobile home parks have been a sleeping sector for years, which only increases the chances of finding deals and getting a good return on your investment. Large investment firms typically don’t bother with the hyper-localized and smaller dollars world of mobile home parks, creating more prospects for smaller investors to make their mark. For the right type of savvy individual with the right level of commitment, mobile home parks represent a real chance for investors to make their mark.
So if you are interested in learning more about how to finance mobile home parks and similar properties click the link below to book a free strategy call with our team at LendCity.