How Mobile Home Parks Make More Money than Single-Family Home Investing Montrose CO

Just about anybody who watches late night TV, receives email, or reads for that matter, knows that there are hundreds of people promoting concepts to make money in single family homes. “Buy foreclosures,” “profit from short sales,” “wholesale houses” – there are at least 1,000 different concepts. Unfortunately, the only people who actually make money in many of these ideas are the promoters. There are so many people chasing after single-family homes to invest in that the market is beyond saturated, and any profitability has been extinguished.

How about looking at something that few people are involved in and that actually generates money for the investor – not just the promoter? That real estate niche is mobile home parks. And they have offered superior returns to the lucky few who understand them for several decades.  

It’s all about the cap rate   Single family homes suffer from low, or often negative, “cap rates.” A “cap rate” is the actual return on the debt and equity of the investment. A typical single family home investment, let's say a $100,000 house, might rent for $900 per month. However, before you think that it’s a $900 per month return on your $100,000 investment (which is about a 10% “cap rate”), remember that you have to take out property tax (about $200 per month), insurance of about $100 per month, and repair and maintenance of another $200 per month (I’m including those big-dollar repairs like roofs, etc. averaged over time too). So your net income is really only $400 per month, or a 5% cap rate.   Mobile home parks make at least double that amount. Good mobile home parks typically have a 10% cap rate or better.   So right off the bat, mobile home parks make about 100% more per year than single-family investments.

  It’s hard to push rents in single family homes   Single-family homes are plentiful. Your local newspaper is bursting with homes for sale or rent. As a result, it is very hard to increase rents – in fact, the norm these days is to decrease rents with single-family homes. In many markets, there is a terrible downward spiral in rents as investors are effectively bidding against each other to attract tenants.   Mobile home parks are in very limited supply, by comparison. In most cities, you cannot obtain permits to build mobile home parks – and you have not been able to for decades. Because of this, the supply is limited, and there are few competitive forces to contend with.   Another important point to note is that it costs $3,000 to move a mobile home from point A to point B. That’s why 95% of mobile homes only move one time – from factory to mobile home park – in their entire lives. As a result, you can raise your rent level 5% to 10% per year and not lose a single tenant. Few tenants are willing, or able, to spend $3,000 to...

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