Mobile home parks (also known as ‘manufactured housing communities’ and ‘trailer parks’) present a unique opportunity to invest in what may well be the last largely undiscovered real estate niche. Interest in this asset class is increasing, but we believe buying opportunities are likely to remain for another five years or so. The coming industry consolidation may provide a nice tailwind to our exit valuations.
Mobile home parks present a compelling investment opportunity because of the structural dynamics of this industry:
Competition is limited by law, and supply actually shrinking. Over the past thirty or so years nearly every City and County in America has outlawed new construction of mobile home parks. This ‘NIMBY’ attitude of governments mean existing MHP owners are not likely to face additional competition in their markets. And in fact, as existing mobile home parks are redeveloped into higher and better uses, competition actually tends to decrease year-over-year.
Demand continues to grow with population growth. There has always been a significant portion of the population in need of affordable housing. Mobile home parks provide the only path to home ownership for households making $35,000/year or less (approximately 35% of America's population).
Maintenance costs are low. Most mobile home park residents own their own mobile homes. This means the proverbial ‘leaky toilets and leaky roofs’ are the responsibility of the residents to maintain.
Tenant turnover is low. The tenants in this business are really the mobile homes, not their owners. As long as the mobile home is in serviceable condition, the owner will be paying lot rent on it. When MH owners move, they tend to sell their home to a new owner, rather than take it with them. Mobile homes usually have a useful life of 50+ years. This means turnover is in the low single digits, as opposed to 25% - 50% for most multifamily properties.
Our founder has experienced these favorable industry dynamics first-hand having been investing in this niche with his own capital since 2007. His previous funds are generating 8% - 15% annual cash returns to LPs from operations alone (e.g. no portfolio exits so far to boost returns further). Absent an unforeseen change to the manufactured housing industry, we estimate investors in our funds will compound their money at 12% - 16% annually. Of course, no guarantees as to future returns can be made.
Television interview coming soon here https://vimeo.com/97195716