Much of the Southeastern U.S. has not been taken seriously by mobile home park buyers – or commercial real estate investors, in general – for decades. Even Groucho Marx made jokes about the region in 1930. But all that is changing now. What’s at issue is the simple fact that Alabama has made enormous strides to become an economic force to be reckoned with, and housing prices have followed suit. So what do mobile home park buyers need to know?
Recession-resistant economic construction
Let’s take, for example, Tuscaloosa, Alabama. Here are the top ten employers of this metro area:
- The University of Alabama
- Mercedes-Benz
- DCH Regional Medical Center
- County Board of Education
- City Board of Education
- Warrior Met Coal
- Michelin
- City of Tuscaloosa
- VA Hospital
- 1Phifer
We have long talked about the necessity to try and invest in areas that are predominantly focused on education, healthcare and government jobs, as these don’t suffer cut backs regardless of recessions and depressions. And Tuscaloosa is exactly that, an economy that is well-built to withstand U.S. setbacks. And this construction can be found in many of Alabama’s largest metros.
Aggressive Chamber of Commerce
The reason that Tuscaloosa and other Southeastern U.S. metros share these strong economic constructions is that they have rebuilt their job market piece-by-piece through ingenuity and hard work. The dominance of the Southeast in securing huge, new auto manufacturing deals – such as the Mercedes-Benz one named above – ties back to their very effective and aggressive “machine” in bringing in these employers: the Chamber of Commerce. The site of the Mercedes-Benz plant was competed for by many states but Alabama won after a lengthy contest. That was around 1997. A decade later Tuscaloosa was ranked in the November 2009 issue of Fortune magazine as one of the "50 Best Places to Launch a Small Business".
Strong housing metrics
In Tuscaloosa, the median home price is a healthy $114,033. And the average three-bedroom apartment rent is $1,092 per month. These are exactly where you want to be positioned for a successful mobile home park purchase: 1) single family homes of $100,000 and up and 2) 3-bedroom apartment rents of $1,000 per month and up. At this level, there is always a clear and abundant demand for affordable housing, and that’s what makes mobile home park office phones ring off the hook. Indeed, most of the southeastern U.S. shares these type of stats, which are a stark contrast with the stereotype that many mobile home park buyers hold.
Lower investor competition creates higher yields
The simple fact that many U.S. investors have overlooked the Southeast creates an unusual supply/demand anomaly that creates high cap rates and returns in many cases. Additionally, most park owners in the Southeast have not been on the radar for buyer contact and are often more responsive because you might be their first call or direct mail recipient. Similarly, most brokers have not worked these areas as aggressively, so there are plentiful deals for those who look for them.
Conclusion
If you have not looked at mobile home home parks in the Southeastern U.S. – in places like Tuscaloosa – you may be missing out. Don’t use Groucho Marx as your market expert. Stay attuned the significant market strengths that have developed in this region. There may be strong opportunities here.