A family’s financial security comes from ensuring enough resources to go around — now and in the future. Earnings through employment or business ventures fund the here and now. But when securing enough for the times ahead, building wealth through investments is usually the way to go.
Real estate holdings, including mobile home parks, can help families increase the value of their investment portfolios over time. While mobile home parks might not instantly come to mind as a valuable investment, they’re an attractive opportunity for several reasons. Five of them are outlined below.
1. Lower Acquisition Costs Per Unit
Yes, purchasing real estate is expensive. And for a family starting to build its investment portfolio, the initial expense of rental properties can make them seem impractical. The median price of a U.S. home reached $412,000 in September 2023. With this initial expense, you get one property to rent out to a single tenant at a time. This reality increases your risk while lowering the potential rental income you’ll recoup.
Buying multifamily dwellings instead can lower the sticker price per unit. However, you might spend just as much as you would on a single-family property — and probably more. You increase the number of units, but your potential profits are nonetheless limited by the number of separate properties you can purchase. Sometimes, you might only be acquiring two or three units to rent out.
With mobile home parks, the number of rentable units you get for your initial investment dollars increases significantly. Essentially, you’re buying land divided into multiple lots where mobile homeowners “park” their trailers. The number of lots in a single mobile home park can run into the hundreds, lowering your per-unit cost. By being able to rent to more tenants, you’ll spread out your risk while potentially boosting per-unit profit.
2. Increased Demand for Affordable Housing
Because housing costs are on the rise, it’s putting a squeeze on the budgets of America’s working and middle classes. You’ve probably heard the age-old advice not to spend more than 30% of your gross income on housing costs. Those expenses might be rent, HOA fees, insurance, utilities, and maintenance. Typically, the bigger the property, the bigger the expense.
Yet the data shows trimming housing costs to fit within the 30% “rule” isn’t feasible for most lower-earning households. Sixty-four percent of households earning less than $50,000 a year spend more than 30% of their incomes on housing. At the same time, homeowners usually spend less than renters.
Since mobile homes cost less than single-family dwellings or condos, they’re in demand at a time when many are struggling due to inflation. This high demand makes mobile home parks nearly recession and inflation-proof. Lifestyle Investing expert Justin Donald says, “During inflationary periods, commodities and real estate tend to perform well, preserving purchasing power.” Also, the appeal of mobile homes may span more demographics as finding affordable housing becomes more challenging.
3. Fewer Operating Costs
When you invest in a property, you’re responsible for its upkeep. Ongoing operating costs can eat into your profits, especially if you can’t recoup those expenses. The costs of keeping a home or multifamily building in tip-top shape might be more than some investors want to take on.
But with mobile home parks, you’re usually only responsible for maintaining the land. The mobile homeowners themselves are in charge of everything else. You won’t have to hire as many service providers to help make repairs and keep the land looking nice. Depending on the size of the park and its shared amenities, your family might be able to perform the necessary chores.
Lowering your operating expenses means your family can keep or reinvest a significant percentage of the rental income. You might be able to build wealth more efficiently than if you invested solely in other types of real estate. Lower overhead also comes with less risk. You won’t have to chase down as many contractors and deal with multiple increasing maintenance expenses if you can do maintenance tasks yourself.
4. Tenants’ Tendency to Stay Put
One of the risks associated with real estate investments is finding reliable tenants. Ideally, you want your vacancy rates to be as low as possible. When units sit empty, you’re losing income. Plus, you’re still incurring the expenses for those units. With apartments, condos, and single-family homes, you also take over some of the costs tenants typically pay.
Utilities are a standard example. You’ve typically got to keep the heat and water on regardless of whether someone’s living there. Empty units and unreliable tenants can reduce your overall profits, potentially eroding the wealth in your family’s portfolio.
As a rule, tenants in mobile home parks tend to stay longer. It’s inconvenient to move a mobile home from one park to another. A tenant will spend thousands of dollars to relocate the home, which will likely not make as much financial sense as staying put. More long-term tenants who pay their rent on time means more steady income (and profits) for your family.
5. Tax Benefits
Usually, owning real estate comes with some tax benefits. Those benefits include deducting monthly maintenance expenses from your taxable income. You can do this with mobile home parks as well. However, most of your tax deductions are more apt to come from depreciation.
A mobile home park’s depreciation includes the improvements you make to the land. These improvements could be upgrades to the common areas and installing additional hookups for mobile homes. Similar to a car, the assumption is these improvements incur wear and tear over time. They depreciate in value and the costs of upkeep increase.
In recognition, the IRS lets you deduct depreciation as an expense on your taxes. Reducing your taxable income maintains more of your family’s growing wealth. Some mobile home park investors choose to set aside some of that wealth for future park improvements. Alternatively, they may use it to grow their portfolios by investing in more properties, including available mobile home parks.
Securing Your Family’s Financial Future
Building wealth for your family ensures the future financial needs of family members will be met and opens up different lifestyle possibilities. You might be able to retire early, send your kids to college debt-free, or pay elder care costs more easily.
Whatever your goals are, investing in real estate is one way to accomplish them. Mobile home parks, in particular, offer the financial benefits of owning real estate without many hassles. These investments’ lower costs and risks make adding them to your portfolio worthwhile.