Mobile Home Investing – Don’t Fall for the Pretty Loser

mobile home investingThe prettiest parks are best for mobile home investing, right? Come on, you should know a loaded question by now. The truth is that superficial appearance is one of the last things you should be concerned about. Since mobile home parks are rated by the star system, an unsuspecting investor might automatically think the 5 star park a superior investment to a 1 star park. Maybe it is and maybe it isn’t.

To find out you’ll have to dig deeper. In the mobile home investing game, the only thing you, as an investor, should be concerned about is cash flow. Parks that make money are beautiful – those that don’t are dogs. The rest is just window dressing. In our experience, the mobile home parks with the dandified entrances are harder to make money with. Here’s why:

1. They cost too much to buy compared to the cash flow they generate.

2. More repossessions: Newer (nicer) parks come with tenants paying both space rental and a mortgage on the mobile home, amounts which might add up to $700 – $800 monthly or more. In this foreclosure climate, expect a significantly higher number of defaults when compared to older parks with tend to not have home mortgages – only space rent.

3. They’re already at full market rent: When you’re at the top of what the market will bear, what can you do to increase cash flow? Can’t raise rents.

4. Cost more to maintain: Think maintenance fees take much away from the bottom line? Don’t find out the error of your thinking the hard way.

This is not to say pretty parks are a bad deal. They’re a great deal for the guy who bought them twenty years ago and is able to sell them to some sucker today for CD type returns. This is not the smart way to do real estate. The bottom line is that, when it comes to mobile home investing, keep your eye on the bottom line and not the tree line.

The Mobile Home Park Listings Team

MHPListings.com

Flickr / tibchris

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