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For example, if you can calculate or estimate the average electrical cost per day of an RV in the park, then you can take the actual power bill from the electrical company and divide through to see how many nights of occupancy there really was. You then multiply by the nightly rent and you should have a number that ties to that on the financial statements. CBRE Manufactured Housing encompasses investment sales, debt & structured finance and appraisal services nationwide for both manufactured housing and the closely related RV resort sector. I rode the MHP investing wave to the top, until inevitably the cat was officially out of the bag that MHP investing was highly profitable, proven, sustainable, reliable and repeatable. Prior to 2018 I was one of the only MHP Investors at any given real estate meet up or networking events, to which I heard a common response to this asset class “MHP’s are profitable?
Mobile home parks provide a unique array of revenue streams. As we’ve seen in recent times, even during bullish markets, consumers are in a constant search for affordable housing. This may even contribute lower occupancy volatility during a variety of market climates down the road. Part of this resilience may be attributed to EGI’s large stake in mobile home parks. This is because, unlike multifamily and commercial, a majority of mobile home park value comes from land improvements. These land improvements include things such as roads, utility infrastructure, and park design.
Mobile Home Parks: An Overlooked Gem in Real Estate
Mobile home parks are residential subdivisions – investor owns the land and property infrastructure and typically only leases the land to homeowners. You will find some sellers that expense everything and then find the opposite where owners capitalize as much as possible to make the bottom line look better. Spend some time going through all the expenses and estimating future capital improvements.
With most multifamily projects, a majority of the operating income comes from the tenant rental income. However, mobile home parks’ income can come from a variety of sources. In today's economy, many financial institutions, investors and owners are faced with non- or under-performing MH/RV Communities, particularly in the wake of the ongoing credit crisis. MHG satisfies these unique client needs with a fully-integrated platform that specifically addresses the valuation/broker opinion of value, management, workout, restructuring and recovery of distressed MH/RV loans and assets. #1 is 4 to 5 star MHP’s that people choose to live in for non-financial reasons. These parks are often gated, even guarded communities that have paved streets with curbed gutters, amenities such as pools or community event center, and lot rents typically above $500 a month.
DON’T: Apply Cap Rate to Mobile Home Rent
I knew I had to laser focus on one asset class and one asset class only if I was to have the highest possibility of success. So, I looked at as many real estate asset classes as possible and looked at real life profit and loss statements for each of the main asset classes and noticed an unfair advantage that MHP’s had over other asset classes. Due to the incomparably high cash flow while owning a MHP, and the exciting proportionality-large equity payouts at the end of a MHP investment cycle it became clear very quickly that MHP investing was a wise move. When purchasing a mobile home park that has vacant lots which are ready to be occupied, what value, if any should you place on these lots?
But since that time, both have created their own business model with little shared between the two. And one big difference is that many RV parks have a 2-point higher cap rate – but potentially for good cause. However, this issue can be used to your advantage if you buy the right RV park.
Investing in Mobile Home Parks
First is the fact that he, along with his partner Frank Rolfe, is the 5th largest owner of mobile home parks in the U.S. with over 20,000 lots spread out over 25 states. But he is equally well known for his ownership of MobileHomeParkStore.com - which was the first mobile home park listing service in the U.S. - and features between 750 and 1,000 mobile home parks for sale at any given time. Another factor in determination of an acceptable cap rate has to do with the requirements of your lender as well as the interest rates on the loan you use to purchase the property. If you are borrowing 80% at a 10% interest rate and are trying to buy the property at a 7% cap rate, you will have a large negative cash flow. On the flip side, if you are borrowing 80% at a 4% interest rate on a 7% cap rate, you should have a positive cash flow.
Ultimately, the two phrases refer to different iterations of the same concept and in many cases they are used interchangeably. I have worked as a commercial mortgage banker for the past 25 years and have encountered many surprises. But nothing that equals the call I got last week from a client that was making an offer on a 36-unit, C Class property in Greenville, South Carolina.
Our team has over 30 years of experience and we have built industry connections over the years that allow us to offer our clients access to properties that are not even listed on the market. These off-market properties are often much more reasonably priced than on-market properties are in the current seller’s market. Commercial real estate agents at TFS Properties are here to help.
This may sound counterintuitive, but while depreciation is a negative for single family homeowners, it’s actually a positive for real estate investors. That’s because depreciation allows the investor to deduct a portion of the real estate asset’s value from the operating profits each year, while your more or less fixed income from the property remains steady. Low Interest Rates – Cap rates have been coming down on apartment buildings pushing values up at a rapid rate since the recovery phase of the great recession in 2010, and even more so during the corona virus recession of 2020. During both recessions the Feds purchased an unprecedented amount of treasury and mortgage-backed security bonds that kept long term interest rates artificially low. These record low rates supported a much higher loan amount which made it feasible for buyers to get financing at a much higher sales price. Dave Reynolds is a household name in the mobile home park business for many reasons.
Yes, the homeowner can lose their home to the mobile home park if they are often in default for more than one month. Therefore they have a large incentive to pay their rent on time. Large Potential Equity Payouts at Sale of Asset – MHP’s have historically had high purchase caps in the double-digit range. This means those who purchased at 15% caps could later sell at 12% caps, those who purchased at 12% caps, could later sell at 9% caps and so on. Manufactured housing parks boast consistently higher tenant occupancy rates than multifamily investment properties like apartment buildings.
It’s not that I didn’t like education, in fact, I’m obsessed with growth and education. It’s just wasn’t a fan of traditional schooling which I felt held me back from my creativity and full capabilities. I wasn’t excited about option #2 either, although that seemed the less of 2 evils, so I chose one of the top paying blue-collared professions, steel fabrication & welding. For example, there may be a pad minimum – commonly 15 pads or more are required to be eligible for financing.
These loans require a minimum of 50 pads and cannot have more than 25% park owned homes. Frank Rolfe has been an active investor in RV parks for nearly two decades. As a result of his large collection of RV and mobile home parks, he has amassed a virtual reference book of knowledge on what makes for a successful RV park investment, as well as the potential pitfalls that destroy many investors. By utilizing a 1031 Exchange an investor is able to defer that capital gains taxes owned by utilizing the funds from the sale of their existing investment property to exchange into the purchase of a new one.
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