12 reasons that make mobile home parks the best sector for investing in real estate.
By Chad Freeman.
Many people overlook mobile home park investing because the industry carries an outdated stigma. I understand that investing in a “trailer park” doesn’t sound glamorous, but it is a strong business.
The stigma is outdated, created by shows like Cops and Trailer Park Boys and by unfair media portrayals. This negativity works to the advantage of investors because the sector remains relatively undiscovered. Even so, that is changing quickly, and the industry’s reputation continues to improve.
When I come across an asset class that is cheap, hated, undervalued, in high demand, shrinking in supply, and difficult for new entrants to access, I want to dive in immediately. The “trailer park” industry checks every one of those boxes. The sector is misunderstood and often looked down upon, but it contains incredible opportunities. If you want to capitalize on this contrarian niche before it becomes fully discovered and prices soar, now is the time. We also face a limited window since many communities are changing hands and the industry is consolidating.
Mobile home parks offer benefits that other real estate sectors simply cannot match, and several major economic megatrends give the industry additional tailwinds. Below are some of the biggest reasons why mobile home parks stand out as one of the best real estate investments available today.
MEGATRENDS
The Great Reshuffling
More Americans are moving to suburbs and exurbs, which boosts local job growth and demand for affordable housing. Because most mobile home parks sit in suburban locations rather than major metro cores, this migration trend drives demand even higher.
20 million baby boomers retiring in the next 10 years
Roughly 10,000 baby boomers retire every day, and many of them own “mom-and-pop” manufactured housing communities acquired decades ago. A large wave of these communities is now hitting the market for the first time. This shift creates a once-in-a-lifetime buying window. At the same time, many retirees lack pensions or retirement savings and rely heavily on social security, which pushes more of them toward mobile home parks as an affordable living option.
IIJA (Infrastructure Investment and Jobs Act)
Much of this federal spending directly benefits the mobile home park sector. The top 10 states receiving the largest funding allocations also rank among the top 8 states with the highest number of mobile home parks. These investments will create new jobs, many of which pay modest wages and increase the need for affordable housing.
A nation of low earners
About half of all jobs created since the Great Recession pay $10 per hour or less. With the average single-family home now costing more than $300,000 and more than 70 million Americans earning under $30,000 per year, affordable housing demand continues to surge. In many of our markets, used mobile homes often sell for under $30,000.
OTHER ADVANTAGES
Government-backed barriers to entry / Low competition
Both Warren Buffett and Sam Zell recommend investing in businesses with strong “moats,” and mobile home parks have exactly that. Local governments rarely approve new mobile home parks—only about ten per year nationwide over the past 30 years. Local officials push back because mobile homes are titled as vehicles rather than real estate, which limits tax revenue despite the need for city services. Residents also resist new park developments through NIMBY opposition. These factors create a powerful barrier to entry and protect existing assets.
Better product
No other housing sector can compete with the price-to-value ratio offered by mobile home parks. Homeownership becomes affordable at a fraction of the cost of apartment living. The average U.S. apartment rents for about $1,300 per month, while the average mobile home lot rent sits around $280 per month. Residents also gain privacy with no shared walls, floors, or ceilings—plus their own yard and parking space.
Better residents
Our company rents land, not homes. We essentially operate large parking lots where most “vehicles” never move because relocating a mobile home costs $6,000 to $8,000. Most homes simply change owners and stay in the same community. Since residents own their homes, they have a strong incentive to maintain the community and stay long term. On average, mobile home owners remain in a park for 14 years.
Massively undervalued assets
Most parks are still run by mom-and-pop owners who never raised rents to keep pace with inflation. When you adjust the typical 1960s lot rent to today’s dollars, fair market rent comes out around $600 per month. A recent study by Duke University economist Charles Becker confirms this. Anyone can look up his research with a quick online search.
Diminishing supply
Because many mom-and-pop operators kept rents artificially low, large numbers of parks are being repurposed for more profitable land uses. We adjust rents to fair market levels—not to gouge residents, but to preserve the long-term viability of these communities. Without fair market pricing, many parks will disappear, pushing residents into lower-quality apartments and government housing programs. About 100 parks are repurposed each year. Owners of assets with high demand and shrinking supply stand to benefit from future appreciation.
Consolidation has begun
Only about 10% of the 45,000 U.S. mobile home parks are institutionally owned, but that figure grows each year. JLL reports that manufactured housing community transactions reached $4.2 billion in 2020, up from $1.2 billion in 2013. Major players such as The Carlyle Group, BlackRock (which invested $550 million in 2020), and GIC continue to pour capital into the sector. In the past five years alone, Sun Communities bought Carefree, Brookfield purchased RHP, and GIC acquired Yes! Communities—each deal exceeding $2 billion.
Lowest default rates = more attractive debt
Market data from 2021 shows that lenders now offer mobile home park operators lower interest rates than even Class A apartment operators—nearly 40 basis points lower.
Inflation protection
Inflation reached 7% in 2021—the highest rate since 1982—and continues to rise. Cash loses value quickly; for example, $1,000,000 in cash loses about $70,000 in purchasing power at a 7% inflation rate. Income-producing real estate protects investors because rents rise with inflation and property values typically follow.
America’s mobile home parks are iconic, uniquely American, and making a strong comeback.
Mobile home parks let us improve whole communities, boost the economy, create jobs, and take pride in our impact.
We help hardworking Americans achieve affordable homeownership in safe, high-quality communities at much lower costs.
MHPinvestors, LLC — changing the world, one community at a time.