Some things require the owner to be there 16 hours a day to succeed, such as a restaurant. Others mandate that the owner be there 8 hours per day, such as a law firm. But in the world of real estate, no sector requires less time on the part of the owner than the mobile home park. Why is that? There are several reasons.
The owner offers no value-add, except for the vision
When you own a mobile home park, you don’t personally offer any value-add except for the overall vision of where you want to take the property. If you are there 16 hours a day, like the owner of a restaurant, your revenues will not increase, nor will your costs decrease – in fact, your costs will increase because you have to pay for your own travel and lodging. Renting land is a low impact endeavor, and the owner is simply getting paid for owning the property, not because their association with it is worth any more money to the resident.
High customer retention and low revenue elasticity
It costs $5,000 to move a mobile home from point A to point B. This cost is too high for any resident to even begin to think about moving their home. On top of that, any home built before 1976 does not have the HUD seal required to be moved into most any city in the U.S. When you add these two together, what you get is an industry in which an estimated 98% of all homes have never left the spot in which they were first delivered. You might then say “why is the word mobile even in the name?” That’s because they do come out of the factory on wheels – but nobody said they could travel twice.
You only rent the land
Unlike apartments – in which you have to repair toilets and replace roofs – mobile home parks just rent land. And land needs little management or capital expense. The average mobile home park owner simply fixes potholes annually and mows the common areas throughout the summer. And that’s about it unless there’s a water or sewer line stoppage. What the residents do on their rented land is their problem, as long as they meet the park’s rules guidelines, which are easily enforced by the manager without any help from you.
A simple business model with established management systems
Owning a mobile home park is not like owning a factory that produces smart phones. Nothing new ever happens and there is no technology shift to worry about or consumer taste changes. Renting land is a very simple business model, and one that does not require much thought on the part of the owner. In addition, there are established management systems that the owner can use to gauge performance and make sure that their investment is on-track and that the on-site manager is doing their job.
Technology helps a lot
Modern technology has also made it easier to manage a mobile home park from afar. You can “virtually drive” your property monthly using an HD Polaroid or GoPro cube camera shot by your manager. You are always available by cell phone or email in the event of emergency. You can even install video cameras in your park and see that everything is functioning smoothly from your laptop.
Conclusion
The mobile home park business model works well for the distant owner who is looking to invest in a different state or region of the U.S. – or even another country. Renting land coupled with the affordable housing crisis makes it a unique sector of U.S. real estate. And we practice what we preach – nearly our entire portfolio of parks is in over 25 states that we do not live in.