When you think of investing, what’s the first thing that comes to mind?
Probably Wall Street stocks and funds. That’s the case for most people because stock investing firms market pretty aggressively. On television, radio, print, and online, consumers are bombarded with attractive offers to invest through this company or that one.
Or, perhaps the first type of investment that comes to mind is the single family home (SFH) investment. Investors all over America have discovered the power of real estate investing as a superior alternative to Wall Street investing.
But many investors are becoming frustrated at both types of investments: Stocks and other paper investments are no longer attractive because of their unpredictability; single family homes aren’t as attractive as they once were because house prices are rising and investors are learning that it can take a lot of work to be a landlord of a tenant in a rental property.
Fortunately, you have options – and more options than you probably realized! Real estate investing continues to be a superior and attractive alternative to the paper investments of Wall Street, but there are far more investments out there than the single family residence investment that springs to mind.
The Problem With Stocks And Single Family Homes
Stocks are an obvious market, with thousands upon thousands of financial planners and investment bankers making deals daily to put money where it will perform the best. The average investment banker can produce a cash-on cash return around seven percent annually (but it can and does fluctuate vastly from year to year). A stellar investment banker can produce higher, but at a greater risk to your money.
The stock market is fickle. In order for your portfolio to operate at its top capacity, you need to pay close attention to its performance. Selling and buying need to happen at a moment’s notice, and all for a modest return of seven percent annually? There has to be a better option.
For single family homes, the upside is a steady stream of cash flow monthly. However, if your tenant vacates the home, you are left in a negative cash flow for a period. Renovation and maintenance costs are never certain when purchasing a rental property and can deplete funds and negate positive cash flow even when occupied. These rentals can and do regularly produce ten percent cash-on-cash returns annually thus are a popular choice.
The Surprise Investment That Flies Under-The-Radar
Mobile Home Parks (MHPs) aren’t usually at the forefront of an investor’s mind, but they should be. Here’s why:
Better cash flow: As a real estate investment, they are all too often overlooked as a steady stream of cash flow that is really a single asset with multiple streams of cash flow, very much like a multi-family residence. But unlike a multi-family residence, you can often add more units or even additional income streams!
Lower purchase price: Many mobile home parks are still managed by their original owners who are looking to retire. This means they’re not fully utilized and not always effectively managed, giving you a rapid upside when you invest. And because they’re often overlooked, you are less likely to enter into a bidding war with other investors (which happens in single family homes a lot these days).
Lower costs: Some investors may assume that MHPs are a lot like multi-family residences but that’s not true. Along with the ability to increase cash flow (mentioned above), the costs are lower because MHP owners simply own the ground and they rent out individual lots to homeowners. Therefore, homeowners are responsible for the care and maintenance of the structure while the MHP owner is not.
Growing trends: Investors who love to invest with the trends should know that MHPs are trend-supported investments: As the number of minimum wage jobs in America increase each year, new homeowners still want to own their own home but can’t afford larger suburban structures, so mobile home parks are ideal for them. And there’s another growing trend at play: baby boomers who are retiring and re-evaluating how much they can afford in their retirement are now looking to the comfort and community of a mobile home park to enjoy in their golden years.
Supply versus demand: The supply/demand fundamentals are strong as well: While the demand is growing (see Growing Trends, above), the supply of mobile home parks remains stagnant – in short, it’s difficult to build a new mobile home park so they’re not keeping up with the need. As well, expanding cities are buying up mobile home park land, further reducing the availability of this affordable housing space.
Little-known: Mobile home parks fly under the radar because there aren’t very many of them, and, investors often mistake mobile home parks for trailer parks or for RV parks (both of which are VERY different). Mobile home parks are made up of manufactured homes that are primarily permanent structures that are owned by low income earners.
When you think of investing, chances are you think of stocks or single family residences. But both of these top-of-mind investments have their challenges – from inconsistency to time-constraints.
Savvy investors are looking elsewhere to find investments that are affordable, in-demand, with plenty of upside. Consider a mobile home park as an investment property. Let everyone else fight over the single family rental properties. Leave the stock market up to the gamblers. Mobile home parks are an investment to put on your radar.