[fa icon="calendar"] 07.21.2016 / by Rory Williams
One of the more obscure niches in real estate investing is the buying of mobile home parks. Although this is often overlooked as unglamorous, it is actually one of the more stable and sure-fire ways to turn a profit. Here are a few reasons why you might consider investing in mobile home parks.
Little to No Competition
One of the main reasons that mobile home parks make good investments is the simple law of supply and demand. Most cities have very few mobile home parks and aim to keep it that way. In fact, almost all major cities have ordinances in place that make it impossible to build new parks. At the same time, existing mobile home parks are being torn down all the time. This means that the value of your park will actually increase year after year while the competition is kept at bay. No other type of property has this advantage.
There is – and always will be – a steady demand for low rent housing. No matter what shape the economy is in, people will always need affordable housing options. A substantial amount of people in the U.S. can’t afford to pay more than $500 per month on housing. This leaves them with limited options of a low rent apartment or mobile home.
Mobile home parks have a very low rate of tenant turnover. This is because the cost of taking down, moving and re-installing a mobile home costs about $3,000. Due to this high cost of leaving, tenants often have no choice but to put up with rent increases. No other type of property investment has this advantage.
Low Maintenance Costs
Another major reason why mobile home parks make good investments is the low cost of upkeep. Unlike with apartments or retail spaces, owners of mobile home parks are renting the land, not the structure itself. This means there are very few maintenance expenditures such as replacing roofing or paint. The average mobile home park only has a laundry room and clubhouse; many parks do not have either.
Income Tax Depreciation
Another benefit of investing in mobile home parks is that they do not depreciate the way other types of properties do. A mobile home park’s value is based on land improvements such as roads, utility lines, electrical poles, etc. These items all depreciate at an accelerated schedule of 15 years versus 27.5 years for apartments and 39 years for commercial properties. This translates into huge tax benefits for mobile home park owners.
When you look at the consistency of the tenancies and the amount of income they can generate, mobile home parks are one of the more attractive real estate investments available. They require very little maintenance and tenants are often there for the long term, making this one of the most secure and profitable types of investment.