Potential Benefits of Investing in Mobile Home Parks vs Apartments

Introduction to Investing in Mobile Home Parks vs Apartments

In the diverse world of real estate investment, mobile home park and apartment investments represent two distinctly different paths. Each potentially offers unique opportunities for cash flow, asset appreciation, and portfolio diversification. However, investing in mobile home parks are increasingly recognized for their historically distinct advantages, particularly when it comes to accelerated depreciation schedules, lower maintenance costs, and unique market dynamics.

Potential Benefits of Investing in Mobile Home Parks vs Apartments

Potentially Streamlined Operation and Lower Maintenance Costs

Mobile home parks generally stand out for their operational efficiency. Unlike apartments, where the owner is responsible for all aspects of maintenance, mobile home park tenants typically own their homes, shifting the burden of interior maintenance and repairs onto them. This setup tends to significantly reduce the operational overhead for investors. Moreover, common area maintenance is generally less intensive than that of apartment complexes, further easing the operational burden.

Accelerated Depreciation: A Likely Tax Efficiency Game-Changer

One of the most compelling financial advantages of investing in mobile home parks is the opportunity for accelerated depreciation. Unlike traditional real estate assets, certain components of mobile home parks can be depreciated over a shorter period, usually around 15-17 years. Apartments typically follow a depreciation schedule of 27.5 years, further solidifying mobile home parks as the often preferred choice of investment. This accelerated schedule can substantially enhance the investment’s tax efficiency, potentially providing investors with significant annual tax deductions that can typically offset income not only from the mobile home park but also from other sources.

Historically Stable Demand and Lower Turnover Rates

The demand for affordable housing is perennial, and mobile home parks serve a critical segment of this market. Economic downturns often see a spike in demand for mobile home park residencies, as they generally offer a more affordable housing option. Additionally, because tenants own their homes, turnover rates are typically lower than in apartment complexes.
The average apartment turnover rate has been reported at around 47.5%, while specific turnover rates for mobile home parks are recorded at around 65%. This increased stability can potentially lead to more predictable cash flows for investors.

Potential Barrier to Entry and Limited Supply

Regulatory hurdles and zoning restrictions have significantly limited the development of new mobile home parks, effectively capping the supply. This constraint, coupled with the growing demand for affordable housing, potentially positions existing mobile home parks as valuable assets with potential for appreciation and cash flow. Moreover, the limited supply generally creates a barrier to entry for new competitors, possibly offering a level of market protection for current investors.

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By Andrew Keel
Potential Benefits of Investing in Mobile Home Parks vs Apartments

Community Engagement and Value-Add Opportunities

Mobile home parks often foster a strong sense of community among residents, contributing to their overall desirability and stability. Investors have the opportunity to enhance this aspect further through community-focused improvements and amenities. Such enhancements not only have the potential to improve the quality of life for residents but can also increase the property’s overall value and attractiveness.

Comparative Flexibility and Possible Diversification

Investing in mobile home parks typically offers flexibility not commonly found in apartment investing. For instance, mobile home parks can accommodate a range of housing options, from RVs to manufactured homes, allowing investors to adapt to market demands. Additionally, the investment can likely serve as a valuable diversification tool within a broader real estate portfolio, possibly spreading risk and potential returns across different asset types.

Navigating the Challenges

While the advantages are compelling, prospective investors should approach mobile home park investing with a thorough understanding of the sector’s unique challenges. These can include navigating zoning laws, managing infrastructure upgrades, and addressing community concerns. Success in this niche market often requires a hands-on approach and a willingness to engage with the community and regulatory environment.

Concluding Thoughts

Mobile home park investing presents a unique opportunity in the real estate landscape, offering historical advantages such as lower maintenance costs, accelerated depreciation benefits, and stable demand. While it comes with its own set of challenges, the potential for significant returns, coupled with the satisfaction of providing affordable housing, makes it an attractive option for many investors. As with any investment, due diligence, market research, and a clear understanding of the operational intricacies are often key to unlocking the full potential of mobile home park investments.

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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.

Tristan manages Investor Relations at Keel Team Real Estate Investment. Keel Team actively syndicates mobile home park investments, with a focus on buying value add, mom & pop owned trailer parks and making them shine again. Tristan is passionate about the mobile home park asset class; with a focus on affordable housing and sustainability.