One of the big perks of mobile home park investing is the economy of scale. So how does this show up, what tangible advantages does this offer investors in this sector?
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The Economies Of Scale
BY MOBILE HOME INVESTORS ACADEMY
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
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
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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