As a real estate investor, you’re looking for an investment that holds a greater likelihood of profitable returns, consistent cash flow, and lower risk. And you’re looking to avoid investments that may create negative cash flow and higher risk.
Unfortunately, investors are making a costly assumption that two seemingly identical investments are indeed the same. They invest in them the same way and are shocked to discover that the terminology they thought was interchangeable is actually very different.
I’m talking about Mobile Home Parks versus trailer parks. A lot of people use these terms interchangeably. Indeed, anyone from the park owners themselves to the people who live in the parks, to the media… nearly everyone uses these words as if they meant the same thing.
But they are not the same thing. Mobile Home Parks are very different from trailer parks and only one of these investments provides the returns, cash flow, and lower risk that investors want while the other investment provides exactly the opposite!
Both of these types of parks hold groups of manufactured dwellings that people can live in, and they’re “parks” in the sense that these homes are grouped together with (usually private) roads for the people who live there. But that’s where the similarity stops:
Mobile Home Parks contain mobile homes that are permanent dwellings. In fact, studies show that 95% of mobile homes remain in the same location where they were first installed.
These buildings may resemble trailers (some of them are long and narrow) and some look like more traditional stick-built houses. Whatever they look like, they are permanently installed in their location with complex electrical and plumbing hook-ups, external levelling (sort of like a specially built foundation), and out-buildings.
Moving these “mobile” homes can cost anywhere from $2,500 to $7,000, requires special permits, and multiple vehicles. The “mobile” part of “mobile home” comes from the fact that the structure was assembled elsewhere and was moved to its permanent location.
Pictured below is a truck moving a manufactured home into place. This effort required this truck plus usually the help of at least one other vehicle, hired at a high price. The structure is moved into place and secured to the area… permanently.
Then the resident will move in – they own the house and they rent the space below. When they’re ready to move, they’ll sell their house just like someone would sell any stick-built house.
Trailer Parks are very different. These may have structures that look similar to the building above but more often they are semi-permanent dwellings that are built on a trailer. To move these trailers, one only needs to hook up a truck to the front, unplug the simple connections for electrical and plumbing, and move the trailer.
Moving the trailer requires very little effort and can easily be done by one or two people and a modest pick-up truck. In fact, trailers SHOULDN’T be parked for very long or else the built-in transportation components (such as wheels, transaxle, and the electrical system for the turning and brake signals) may wear out from lack of use.
People who own these trailers are able to leave whenever they want. When these people want to move, they don’t sell their trailer, they just move it. Not surprisingly, these residents are more transient and much more like apartment dwellers.
Fooled by how often these words are interchangeably used, investors make the mistake of thinking that Mobile Home Parks and trailer parks are the same. But the difference is this: Mobile Home Parks are (most permanent) structures while trailer parks are (mostly transient) towed vehicles. It’s like comparing a residential subdivision with a parking lot of cars. You’d never mix up one for the other – and the difference between Mobile Home Parks and trailer parks is the same.
Put your investing hat on and think about how this fundamental difference impacts your investing: A Mobile Home Park resident will live in a Mobile Home Park for a very different reason than a trailer park resident will live in a trailer park.
Mobile Home Park residents are typically low- to middle-income people who don’t want to rent but rather want to own their own home and raise their family in a quiet neighborhood of homeowners. There is no expectation that they’ll move – they see themselves as homeowners of a permanent dwelling.
Meanwhile, trailer park residents own their trailer and are content to rent a piece of land for a period of time in one location before moving on. Unlike the mobile home resident, the trailer resident’s choice of living location is based on convenience of hook-up and ability to relocate.
To draw a comparison to other types of properties: The Mobile Home Park resident is much more like someone in a rent-to-own situation or someone who buys a property from a developer – they have an expectation of ownership and permanence; whereas the trailer park resident is much more like an apartment dweller who will live in one location as long as the rental unit suits their needs.
Frequently considered to be the same investment with interchangeable labels, these are two very different investments. And while investors may find profit by investing in one or the other, investors need to be cautious that they don’t invest in one expecting to find the other.