Mobile Home Park Investment Funds vs Syndications: Choosing the Right Strategy

Introduction

Investing in mobile home parks has gained popularity as a unique real estate investment strategy. It offers the potential for high returns and diversification. Two common structures for investing in mobile home parks are through mobile home park investment funds and individual syndications. This blog post explores both passive investing options, discussing their key characteristics, typical advantages and disadvantages – to potentially help investors determine which might be better suited to their investment goals and preferences.

Mobile Home Park Investment Funds

Mobile Home Park Investment Funds offer a strategic avenue for investors aiming to diversify their portfolio within the real estate sector, specifically in the affordable housing market. By pooling resources from multiple investors, these funds enable the collective purchase and management of a variety of mobile home parks, typically handled by seasoned real estate professionals. This approach not only potentially mitigates the direct management responsibilities for investors but also likely capitalizes on the expertise of fund managers in identifying and optimizing lucrative investment opportunities.

The key appeal of these investment funds lies in their likely ability to spread risk through diversification across different properties and geographical locations, coupled with targeted value-add strategies to potentially enhance the asset’s value and maximize returns. This structure often provides investors with a balanced mix of passive income and potential for capital growth, making Mobile Home Park Investment Funds an attractive option for those looking to invest in a niche yet historically resilient segment of the housing market.

Advantages:

Diversification: Funds typically invest in multiple mobile home parks across different locations, spreading the risk and offering more stability in returns. You know the saying don’t put all your eggs in one basket? Well, this principle aims to follow exactly just that.

Professional Management: Investors likely benefit from the expertise of professional fund managers who handle all aspects of the investment, from acquisition to day-to-day management. Investors typically wire their funds, and sit back as the operator looks to execute the business plan.

Passive Investment: This is a hands-off investment option, ideal for those who prefer not to deal with the complexities of direct property management. It could also be a lucrative option to potentially add passive income to your investment portfolio.

Disadvantages:

Limited Control: Investors have little to no say in the specific investments made by the fund or in the operational decisions.

Fee Structure: Investment funds usually charge high management fees and performance fees, which can eat into the overall returns.

Liquidity: Investments in funds are typically less liquid, with investors often required to commit their capital for a fixed period.

Mobile Home Park Syndications

Mobile Home Park Syndications represent a more targeted investment approach within the real estate market, allowing investors to pool their financial resources to acquire specific mobile home park assets. Unlike investment funds that manage a broad portfolio of properties, syndications focus on individual or a select few properties, often offering investors a clearer, more direct line of sight to their investment. This model generally grants each investor a proportional ownership stake in the property or properties acquired, potentially aligning their investment more closely with the asset’s performance.

The appeal of mobile home park syndications lies in the opportunity they offer for investors to engage more directly with their investment, potentially leading to higher returns due to the focused nature of the investment and the operational improvements that can be implemented. Syndications often allow investors to benefit from the expertise of a managing partner or sponsor who oversees the acquisition, management, and eventual sale or refinance of the property. This can bring professional oversight and strategic value-add initiatives to the table. This arrangement typically provides a blend of hands-on investment with the benefit of expert management, making it an attractive option for those looking to actively participate in the real estate market with a potentially higher degree of control and transparency.

Advantages:

Targeted Investments: Investors have the opportunity to evaluate and choose specific mobile home park projects they want to participate in, on a per deal basis. This usually gives them more complete control in the investment decision as opposed to the fund model for example.

Potential for Higher Returns: Direct investment in a specific project can lead to higher returns, especially if the project performs well, as there are typically fewer layers of fees compared to a fund.

Transparency: Syndications often offer greater transparency regarding the investment’s performance, as investors are directly involved in the specific project and updated on the performance throughout. Funds typically offer the same transparency, however they tend to look at the whole portfolio holistically rather than the performance of each asset within.

Disadvantages:

Higher Risk: Investing in a single property or a smaller number of properties can expose investors to higher risk, as the investment’s success is more dependent on the performance of fewer assets. This is why it is crucial to partner with an experienced and seasoned operator that has a clear track record of turning their investments around, while achieving strong returns for their investors at the same time.

Management Involvement: While some syndications are managed, investors may need to be more involved in decision-making, which can be a drawback for those seeking a passive investment. This could also be an advantage for those that prefer that setup.

Liquidity: Similar to funds, investments in syndications are not highly liquid, and investors may have their capital tied up for several years.

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By Andrew Keel

Which is Better?

The choice between investing in a mobile home park investment fund and a syndication depends on an investor’s specific goals, risk tolerance, and desire for involvement in the investment.

While investment funds provide a passive investment route with the historical advantage of diversification across a broad portfolio, thereby potentially diluting individual property risk, they may not always cater to those seeking more substantial, direct influence over their investment’s outcome.

On the other hand, Mobile Home Park Syndications stand out as a particularly attractive option for investors aiming for potentially higher returns. still allow investors to participate in a passive manner, leveraging the expertise of professional operators or sponsors who manage the day-to-day operations and strategic decisions.

Moreover, syndications provide a level of transparency and control that is generally unmatched by broader investment funds. Investors in syndications can have detailed insights into the operations, financials, and strategic plans of their investment, making it an ideal choice for those who prefer to be closely involved in their investment journey and have a clear understanding of how their capital is being deployed.

What do we Prefer?

At Keel Team, we mainly invest in mobile home park assets through individual syndications, raising capital from Limited Partner investors on a per project basis. We have found that this suits our overall model better. It allows us to be more opportunistic and only take on deals that really make sense for our investors, penciling out at least a 15% annual cash-on-cash return. The fund model is a bit different as they have a certain amount in their portfolio that they need to allocate within the year, meaning that they may take on deals they wouldn’t necessarily take on if it was an individual, syndicated investment per say. We only want the best of the best, aiming for quality over quantity and strong returns for our limited partner investors.

Conclusion

Both mobile home park investment funds and syndications have their place in an investor’s portfolio, depending on their investment strategy and preferences. It’s crucial for investors to conduct thorough due diligence, understand the fee structures, and assess their own risk tolerance and investment goals before committing to either investment structure. As with any investment, diversification across different types of investments, including within the intricacies of real estate, is key to potentially managing risk and achieving a balanced portfolio.

At Keel Team Mobile Home Park Investments, our commitment extends beyond mere investment. We strive to improve the quality of life in our mobile home communities while simultaneously delivering substantial returns to our limited partner investors. For more information on our investment strategy or to learn more, please feel free to contact us using the provided details below.

Disclaimer:

The information provided is for informational purposes only and should not be considered investment advice, nor a guarantee of any kind. There are no guarantees of profitability, and all investment decisions should be made based on individual research and consultation with registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.