High Rates of Return Through Mobile Home Park Investing
Updated: Jul 18, 2020
Welcome to the first episode of the Passive Mobile Home Park Investing podcast, hosted by Andrew Keel.
This episode discusses the first reason suggested as to why you should invest in mobile home parks. Reason #1 is due to the potential to receive a high rate of return on your investment capital. This episode will discuss why this reason is my favorite reason you should invest in mobile home parks, it will also dive into how operators can create strong returns very quickly using the BRRR method. Also, tune in to find out what type of returns investors can expect through passively investing in mobile home parks!
Would you like the pre-investment checklist that I use to review mobile home park deals before I invest in them? We are offering this as a free gift if you will go to iTunes or wherever you get your podcasts and leave a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email at PassiveMHPinvesting@gmail.com. In the email, please tell us who you are and what screen name you used to leave that review and we’ll send the pre-investment checklist, directly to your inbox.
00:22 - Hello and Welcome
00:37 - Reason #1: The potential for high rates of return
01:33 - Wall Street Journal’s article on one of the greatest returns since the Great Recession
03:00 - How operators can increase value to pay back investors quickly
04:16 - Conclusion and teaser for next week’s episode
04:30 - Pre-investment checklist
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Links & Mentions from This Episode:
Keel Team's official website: https://www.keelteam.com/
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Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel
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Welcome to The Passive Mobile Home Park Investing Podcast with your host Andrew Keel. This is the podcast where you can get the education you need to invest 100% passively in a highly profitable niche of mobile home parks.
Hello and welcome to episode one of The Passive Mobile Home Park Investing Podcast. I’m your host, Andrew Keel. Today, we are starting our first series on the 12 reasons why you should invest in mobile home parks. The number one reason why you should be investing in mobile home parks is due to the potential to earn high rates of return.
Higher cap rates equal higher returns for investors. The capitalization rate or net operating income divided by the purchase price for manufactured housing communities are roughly three percentage points higher than any comparable multifamily investment.
In today's favorable financing environment, this allows for significantly higher cash-on-cash returns compared to any other real estate investment.
Most mobile home parks typically sell anywhere from 8%–12% cap rate. This can yield investors 20% or higher cash-on-cash returns, which again, are some of the highest yields in all of real estate.
In February 2020, the Wall Street Journal titled an article on the mobile home park industry with the following: This stock has returned 4100% since the housing crash. Obviously getting a ton of views and trending online with a boastful title like that, the article explained how one publicly-traded company, Sun Communities, provided its investors with a 4100% return since the great recession, while at the same time the S&P 500 returned only about 10% of that number.
One of the reasons for the high rates of return are the low acquisition cost per unit. Mobile home parks allow investors also to acquire more units for less money upfront. Therefore, you gain economies of scale quicker. As a multifamily or single-family home investor, one could easily expect to pay $100,000 or more per home or apartment complex unit, versus only paying around $10,000–$20,000 per lot in a mobile home community.
Creative value-added deal structures by operators can also allow for investors to get their capital back quickly, ultimately skyrocketing returns. Since mobile home parks have fantastic income growth opportunities the ability for an operator to increase value through filling vacant lots, modest rent increases, and billing back utilities (for example) could increase an asset’s value by 50%–100% in as little as 12–24 months. With the higher asset value, operators have the option to quickly refinance and pull out all of the initial equity, to pay back investors with very healthy returns. After that point, investors have zero left in the game, creating an infinite rate of return on the initial capital.
Operators also have the option to sell after the initial improvements are made since now the stabilized mobile home community can demand a lower cap rate, again creating very high returns for investors. This is my favorite reason as to why you should invest in mobile home parks. Higher return means you can retire faster and ultimately do more upon retirement.
That does it for this episode. Make sure to check out our next episode to find out why the number of mobile home parks in the United States is shrinking each and every year. Thanks for tuning in.
Would you like the pre-investment checklist that I personally used to review mobile home park deals before I invest in them? We are offering this as a free gift to those of you who go to iTunes and leave our podcast a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email to firstname.lastname@example.org. In the email, please tell us who you are and what screen name you used to leave that review, and we will send out the pre-investment checklist directly to your inbox. It’s that easy. Once again, that email address is email@example.com. Thanks again for tuning in.