Done well mobile home park investing offers a lot of security, passive income, can leverage a highly motivated workforce of others invested in your success. And the timing couldn’t be better.
Mobile Home Park Investing: The Economies Of Scale
By mobile home Investors academy
One of the big perks of mobile home park investing are economies of scale. So how does this show up, and what tangible advantages do these offer investors in this sector?
Sophisticated investors and heavy-weight funds have long been known for investing in larger properties with multiple tenants. Whether these are office buildings, multifamily apartment buildings, or mobile home parks, these investors understand, and seek out economies of scale. Properties with multiple units offer this advantage. This is in stark contrast to buying one single family home.
A single family residence can be a good investment. However, trying to manage a portfolio of single family rental homes can be a completely different story. What happens when you have a single unit income property that goes vacant? It starts costing you money every month!
Contrast this with holding a mobile home park with 10 or more lots and tenants. Even if 30% of those tenants leave or stop performing investors ought to still be generating a positive monthly income. The chances of 10 units in a mobile home park all going empty at the same time is far lower than a single family home going vacant at any time. This not only ensures positive returns, but consistency in cash flow month after month.
The return on improvements for multitenant properties is far greater. An improvement to community property can raise the value and rent on all units. For example; putting in a swimming pool can raise the value of 25 or more units in a mobile home park. Contrast that with spending almost as much to put in a pool for a single family home, or having to fork out for 25 pools for a whole portfolio of single family properties!
The most obvious and significant benefit of scale that mobile home parks offer is when it comes to property management. Having multiple units on the same lot means dramatically slicing down the time and costs of property management. This applies to the number of team members and vendors you need to recruit and manage, and their workloads. This also rolls over to researching acquisitions, marketing for tenants, and screening tenants. With a mobile home park just one $15 sign can be used to market for multiple tenants repeatedly whenever there is an upcoming vacancy. To compare; multiply the marketing and due diligence costs by each single family home that you own.
There are great advantages in economies of scale when it comes to financing too. Having 10 or more units on one property means fewer loans. Needing just 1 loan versus 10 can definitely reduce acquisition and operating costs. That increases your income and bottom line. Just as importantly is reduction in workload and risk. Managing ten sets of loan documents, property taxes, invoices, and insurances for just 10 units is much time intensive than one.
Being able to acquire 10, 20, or 100 units at a time dramatically increases efficiency when it comes to sourcing and acquiring investment properties. That also applies on the flip side when liquidating assets and restructuring portfolios. Do not underestimate the importance of this. In a recent radio address, speaking on his new book ‘Money’, Tony Robbins highlights the fact that fees make a massive difference in profits and wealth building. Even a 1% difference in costs can add up to being hundreds of thousands of dollars over the years. Seize the benefits of the economy of scale, and put them to work for you.
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