Let’s examine three reasons to invest in mobile home parks from the long-term cash flow angle:
1.Low Rent – Americans have downgraded their homes and lifestyles due to the recession and other factors. The low rents in mobile home parks make it appealing to renters. How does low rent boost profit margins? By calculating the total revenue of all the homes within the park, as well as the land space, the figures add up to a significant amount. Experts agree that pricing rent low contributes to sustained high-demand.
2.Low Supply and High Demand – There are over 50,000 mobile home parks within the United States. In addition, construction of new mobile homes are somewhat at a standstill. This means that old and available supplies are met with high demand.
3.Success Rates – One of the best ways to become financially successful is to gain the wisdom of those who have already accomplished the feat. Warren Buffet, unlike Donald Trump, is reportedly the biggest investor in mobile home parks, whereas Donald Trump invests in luxury real estate. Which market do you think is easier to tap into? Another Fortune 500 maven, Sam Zell, made his riches through mobile home park investments. Average men and women also have the opportunity to succeed in this market through due diligence research.
Despite these appealing factors, investors will need to exercise business savvy to get a good return on investment.
Jason Hartman advises:
- Buying in a Central Location – This key tip is the difference between having a large vacancy or full occupancy.
- Keeping Prices Reasonable – A low-price strategy contributes to long-term clients. Consider this: What would make a consumer remain in a mobile home park if they were able to relocate to a bigger home for the same price? The key to keeping mobile home park renters is low rates.
- Cutting Expenses – Despite keeping rental prices low to secure a low-income target market of renters, mobile home park owners should additionally seek ways to reduce expenses on their end. A good example is researching the most affordable utility companies in the area, verses sticking with the most popular service provider.
- Securing Insurance – In the event of a natural disaster, make sure you’re covered. In the same breath, ensure that the location is one that isn’t prone to hurricanes or a popular route for natural disasters.
- Cooking Up An Exit Strategy – For mobile park owners who are not satisfied with the investment, the alternative would be to sell for a tasty profit.
Ultimately, lucrative mobile home park investing boils down to accessibility for the target market in terms of low price and convenience to the metropolis. (Top image: Flickr | KOMUnews)
The Commercial Investing Center Team