and upkeep to avoid overhead costs. Instead of a coat of paint and new lights, a park might need utility upgrades, road repairs, or decent landscaping. Derelict parks are a disservice to the residents and the broader community. With professional management and ongoing capital improvements, residents can see a dramatic increase in their quality of life and the parks are situated to thrive for the long term. Investors get rewarded for capital improvements with higher lot rents, an enhanced asset, and a stabilized community. A post on SMK Capital Management’s website notes that on average, apartment accommodations are “30%-60% more expensive than living in a mobile home.” Americans who have a need for affordable housing are undersupplied. The pool of potential residents is large, but only around 10 new mobile home communities are built a year. Restrictive zoning surrounding the construction of new parks makes it difficult to build, so the supply is largely restricted to what exists. Recession and high inflation are top of mind for Americans, and the need for affordable housing grows. Many mobile home communities across the country can fill that need. With the necessary management, operations, and improvements, mobile home communities can be transformed into a great place to live for residents and a home run for investors. •
manufactured housing producer in the U.S.); billionaire Sam Zell who founded Equity Group Investments; and Blackstone Group, which has acquired large amounts (notably $550 million in 2021) of mobile home investments. While institutional investors have grown more interested in the mobile home space, the fractured nature of the market makes it especially attractive for nimble investors. THE HOT UGLY DUCKLING In 2020, the total transaction volume for manufactured housing “was around $4.2 billion,” according to a report from JLL’s capital markets group. Although mobile homes fall outside the “core four” of commercial real estate (office, industrial, retail, and multifamily), they have the financial returns to match or outperform traditional investment assets. Mobile home communities have historically performed well in recessions and with “cap rates often over 10%, and cash-on-cash returns
of 20%,” Frank Rolfe (who with his partner, is the fifth largest mobile home park owner in the U.S.), argues they have the “highest yields in commercial real estate.” Savvy investors know that investing in mobile home communities is not about owning the units; it’s about the land underneath. In most cases, the unit is owned by the resident, who pays monthly to lease their pad. If you are just buying the land, your cost to acquire is relatively low, and repairs and maintenance are limited to the upkeep of the park rather than for each unit. Mobile home communities are a value-add rich environment. According to a September 2022 article by Paul Moore in The White Coat Investor, an estimated 85%-90% of mobile homes belong to “mom-and-pop” investors who often run these communities with minimal structure. These operators may own a handful of parks, but they largely neglect to provide sufficient maintenance
Neil Timmins is an author, investor, and educator. After spending years investing in houses and $300 million in transactions, he graduated to investing
in commercial real estate. Now he educates others on how to do the same. Neil’s first book “Unicorn Hunting for Real Estate Investment Companies: The Complete Hiring Funnel” was released in 2021. He hosts the popular podcast “Real Grit.”
20 :: INVESTOR REVIEW :: MAR-APR 2023
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