Read the blog post that inspired this episode:
When I first got into mobile home investing, it was almost by accident. Up until then, I had only invested in single family residential (SFR) properties, and I was thinking about getting started in apartment investing as a next step. As it turned out, though, I was running a REI networking group at the time, and an outfit looking to raise capital to purchase a mobile home park reached out to me about presenting in front of my group. Later on, I decided to team up with them, mainly on the capital raising side.
Looking back, I see it as a positive experience. Not only did I learn a lot about raising capital, but I also learned quite a bit about the many advantages and disadvantages specific to this type of investing.
Overall, I think mobile home parks can be a valid investment vehicle that may benefit many real estate investors. Based on my experience, here’s how I think it stacks up against investing in apartment buildings.
4 Advantages of Mobile Home Parks Over Apartment Buildings
1. Lower Turnover Rate
With mobile home parks, it’s common that the tenant owns the unit itself, and what they’re really renting from you as the park owner is the land and any membership privileges or additional amenities you may offer. Although they could up and move their unit out of the park, it doesn’t happen very frequently.
With apartment investing, the average apartment dweller stays about two years, but with mobile homes, it can be much longer, mainly due to the cost associated with moving. It can be pretty expensive to move the unit out of the park, disconnect and reconnect utilities, remove and reapply aluminum skirting, etc.
2. Less Maintenance
Also, people who own mobile homes often feel more responsible for their space than the typical apartment tenant, and they’re more likely to maintain their own units. With much less common area to maintain as well, this certainly cuts down on repairs needed at the cost of the park owner.
3. Accelerated Depreciation
Mobile home parks also have different tax advantages since they’re mostly a land-lease operation where the land doesn’t go down in value but structures do.
Since there aren’t as many fixed structures to depreciate, certain improvements (such as roads and sewer lines) can be depreciated over a shorter schedule, as opposed to depreciating larger amounts over longer schedules as you would with apartment buildings. This enables you to accelerate your write-offs.
4. Many Profit Opportunities
Now, when it comes to additional amenities or membership privileges, this is really where you can start to increase your cash flow.
Maybe it’s by selling sheds or offering garages, custom additions, boat and RV parking spots, etc. You may even be able to negotiate deals with the cable company and offer it as a covered (included) utility for increased lot rent, thus increasing the value of the park.
4 Disadvantages of Investing in Mobile Home Parks
Now, although mobile home investing does have some advantages over apartments, there are also some pretty big challenges.
Keep reading the blog post here:
Real Estate Investment Showdown: Mobile Home Parks vs. Apartment Buildings
by Dave Van Horn
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