Lenders love them for their cash flow. Whether you call them mobile home parks or manufactured home communities the individual living units are larger, more attractive, and more comfortable than ever. There has always been and will always be a need for affordable housing and the mobile home park is just that. The manufactured home is clearly the most efficient, practical and affordable housing available today.
Compared to Apartments
Investors are attracted by the steady cash flow, low maintenance and strong appreciation. When compared to apartment buildings, mobile home parks have distinct advantages. First the mobile home and the tenant generally are not very mobile. The cost to move the unit is high and mobile home owners usually sell rather than move. A second advantage is that the owners tend to take better care of their units. And since the owner of the park is renting the pad and the utility connections the per unit maintenance costs are much different and much lower. There is no need to replace tenant appliances, water heaters, carpets or roofs. The majority of mobile home park owners’ expenses relate to infrastructure – common areas (parking, play areas, or pool), common buildings (laundry room or clubhouse), paving, utilities, etc. Although I am not an expert in taxation, historically the depreciation period for land improvements (roads, water lines, sewer lines, utilities, etc) is shorter than for the period allowed for the structure portion of the apartment building. Many investors appreciate this extra “write-off” or deduction.
Lastly, when compared to apartment buildings mobile home parks benefit from the barrier to entry for new competition. State and local governments tend to discourage new mobile home park development for a variety of reasons (past reputation, lower tax base, increased services, etc). So while the supply is dwindling, there are few parks being created to meet demand. Without new competition parks near cities will continue to experience significant appreciation.