Investment Thesis
We believe mobile home parks (aka ‘manufactured housing communities,’ ‘trailer parks,’ and ‘trailer courts’) to be the best real estate investment available today for the following reasons:
Competition is ‘illegal.’ Over the past 30-or-so years nearly every city and county government nationwide has outlawed construction of new mobile home parks. Governments have changed zoning to be ‘apartment only’ multi-family, or have changed density such that only single-family housing may be built. This growing ‘NIMBY’ attitude (Not In My Back Yard) among government leaders is the result of we believe unfounded bad publicity of mobile home parks, and the fact that as (mostly) unimproved land, mobile home parks can not be taxed as highly as apartment buildings and traditional residential dwellings and do not generate as significant a tax base as traditional real estate.
Tenant turnover is much lower than in traditional multi-family properties. Residents of apartment communities move out approximately every 2 years (e.g. 50% annual tenant turnover). Residents in mobile homes parks tend to own their mobile homes. They show pride of ownership, and if and when the time comes to move, they usually sell their home to a new resident rather than pay $4,000 - $8,000 to move it. This means as long as the mobile home is cared for, someone will be paying rent on it until it ‘end-of-lifes.’ We estimate mobile homes to have a 50-year useful life, which means turnover should be around 2% annually, perhaps a bit higher due to a few move-outs. Lower turnover means lower vacancy and lower marketing and move-in/out costs.
Finally, an additional implication of tenants owning their homes is reduced Repair & Maintenance for landlords. By virtue of owning their mobile homes, residents own the proverbial ‘leaky toilets and leaky roofs.’ Frankly neither roofs nor toilets leak as much when a responsible tenant owns their dwelling and cares for it as an owner. Landlords are left with Repair & Maintenance costs primarily for the land (mowing, paving, tree trimming, plumbing). We estimate R&M expenses for a mobile home park landlord to be 60% - 75% less than comparable costs for apartment landlords.