Mobile home park (or manufactured housing community) investment is one of the areas least affected by COVID-19. Since the first of the year, aggregate real estate values are down 11%, and malls and lodging properties have fallen 25%, while industrial, mobile homes and life sciences only saw a 5% dip.
But should you invest in mobile home parks during COVID-19?
Benefits
There are quite a few benefits to mobile home park investment.
The demand for affordable housing is high and inelastic for the most part, which provides a veritable power over rent prices. Only 20% of mobile homes are owned by professional investors. It is also the lowest cost per unit investment of any real estate class. This leaves a large part of the market available for those looking to diversify their investment portfolio.
Mobile home parks are a great source of affordable housing for low wage earners and baby boomers looking to downsize during retirement, which means the owners and tenants of these properties aren’t heavily affected in times of economic downturn.
Moving a mobile home from one park to another is very expensive, so tenant turnover is very low. Many tenants who choose to move out will opt to resell the home instead, mitigating the hassle of finding a new tenant to fill the vacancy.
Buying mobile homes for resale is also a way to increase value-add potential. Other avenues to explore include: increasing curb appeal, installing water meters, and billing tenants back for water, sewer, and trash. Because many mobile home parks are not professionally-owned, adding value in these areas will be fairly straightforward and immediately create a standout effect for the property.
Things to Consider
As the market for large single-family homes declines, more and more people who wish to move away from renting are seeing mobile homes as a viable option. While this demand is increasing, inconvenient zoning laws prevent many investors from building new manufactured housing communities. There is still hope – if the push for mobile homes grows through 2021 as it is expected to, these laws may change to accommodate the growth possibilities of this sector of the real estate market.
Banks prefer land-lease income (made from lot rent – leasing the land a mobile home sits on) over park-owned-home income (made from renting the mobile homes themselves). This is less of a drawback and more a best practice to keep in mind when looking through investment options.
Is It Time to Consider Investing?
Many benefits of manufactured housing communities remain strong and true despite the current pandemic, so investing in this sector is a great way to diversify even during these difficult and uncertain times.
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