While many short sale investors have dealt with isolated mobile home sales, few have ventured into the commercial mobile home market. It's certainly not for the novice but it does provide an attractive alternative for those investors interested in transitioning from residential real estate into a commercial segment. Find out if mobile homes make sense for your personal portfolio with these quick considerations. 1. Mobiles Homes as a Commercial Investment. Mobile home parks come in all shapes and sizes ranging from small "mom and pop" type parks to major resort type properties making them a viable option for investors at all levels.
2. Make Money a Multitude of Ways. Mobile home parks can generate cash in so many ways it can make the average investors head spin with ideas. Buy a park with existing mobile homes then sell either the lot or the mobile home (or both), lease the land, lease the mobile home, add or enhance income streams via coin operated laundry and other assets plus much more.
3. Tax Advantages. Mobile home parks are treated very favorably for IRS purposes; 15 year depreciation schedules (compared to 27.5 years for single family residential) with a 70 percent land improvement ratio.
4. Low Maintenance. Earlier this week we discussed the advantages of triple net leases but mobile home parks may be a more affordable option for beginners in the commercial arena. Reduce cost and maintenance by "hiring" site management in exchange for free lot rent.
5. Density. The rate of return can be phenomenal; for example, an average five to ten acre mobile home park usually has roughly 40 spaces with an average lot rent of $300 to $400 per month excluding ancillary income sources such as laundry or recreational facilities (ie, wi-fi, part-time RV park rentals, etc.). Secondary sales of mobile homes as well as unit rentals are other common ways to increase total ROI in addition to standard appreciation and cash flow.
7. High Desirability. Tough economic times are increasing the demand for affordable housing options. Mobile homes are an especially attractive alternative to low income earners and others on a fixed budget.
8. Multiplier Effect. A small increase in lot rental rates can create major earnings due to the multiplier effect; for example, increasing the lot rate by just $25 per month on even a small park with only 40 lots still results in an additional $1,000 per month profit.
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See you at the top!
Martin Crawford
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