How to Grade the Condition of a Mobile Home Park Investment
Evaluating mobile home parks can help investors make informed decisions about their investments. A systematic grading approach allows you to assess a […]
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Interested in learning more about Passive Mobile Home Park Investing?
Interested in learning more about Passive Mobile Home Park Investing?
Investing in mobile home parks can potentially provide strong returns, yet older trailer parks with small lots and older homes may introduce unique risks. Understanding these challenges can help investors make informed decisions that ultimately impact their cash flow, tenant retention, and maintenance needs. Here, we cover some of the top risks associated with buying mobile home parks that have smaller lots and older mobile homes, along with factors to keep in mind for potential long-term success.
Small Homes Are Less Desirable: Mobile home parks with smaller, older homes often experience higher tenant turnover. While some might enjoy the simplicity of a one-bedroom home, the typical tenant profile often prefers larger spaces. For example, a small one-bedroom home may appeal to a single occupant, such as an older individual with no dependents. However, many renters or buyers seeking mobile home parks are families or couples, and they may need more space than these small homes provide.
The limited appeal of smaller homes can make it much harder to fill vacancies when they arise. This can result in longer vacancy periods and potentially lower cash flow. Additionally, finding buyers for these smaller units often requires a specific demographic fit, which may not be readily available in certain areas, especially outside of urban markets where smaller homes might be more popular.
Difficulty Finding Replacement Homes for Small Lots: Older mobile home parks often come with smaller lot sizes, originally designed for smaller, narrower homes that are no longer common in today’s market. New homes coming from the factory are usually 14–16 feet wide, which can be challenging to fit into smaller lots. Additionally, current setback requirements and fire codes might prevent newer homes from being installed in these tight spaces. Even finding used homes in the narrower 12-foot width is increasingly difficult, leaving few options for replacing old homes as they age out.
These limitations may force owners to settle for less desirable options, such as park-model RVs, to fill vacant lots. However, these smaller units often lack widespread appeal, making it harder to attract long-term tenants and contributing to higher vacancy risks.
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Limited Lifespan of Older Homes: The average lifespan of a mobile home is around 50 years, according to manufacturers. When considering mobile home parks with homes from the 1960s or 1970s, the age of these homes often means they are nearing the end of their usable lives. Mobile homes from this era often require significant repairs, and in some cases, it may be more economical to remove and replace them entirely. However, as mentioned, replacing these homes is often easier said than done due to lot size limitations.
Homes from different decades have distinguishing features that can help investors identify potential challenges:
Homes from the 1960s and 1970s may require frequent repairs, and they often carry a much higher risk of vacancy. Investing in trailer parks with many of these homes could lead to frequent vacancy turnover and expensive maintenance costs.
Zoning Issues with Older Mobile Home Parks: Zoning regulations can complicate the ownership and management of older mobile home parks. Many older trailer parks operate under “grandfathered” zoning laws, allowing them to continue functioning as mobile home parks despite not meeting current zoning requirements. However, this can limit the ability to replace older homes when they are removed or become unlivable. Some cities and towns may enforce a rule stating that if a mobile home leaves, it can only be replaced by a home no older than ten years.
For investors, securing a zoning certificate that outlines any restrictions is critical. This documentation should confirm the mobile home park’s status and whether it allows for home replacements. Trailer parks operating under “legally nonconforming” use face stricter replacement rules. Without knowing this information, investors may face significant hurdles when they attempt to bring in new homes, especially if the mobile home park’s lot sizes don’t support larger, newer models.
Another common regulation in some areas is a vacancy period rule. This means that if a lot remains vacant for a certain time, such as six months, it loses its grandfathered status, and the investor may not be allowed to replace the home at all.
Increased Turnover with Older and Smaller Homes: Small, older homes generally have higher turnover rates. This increased turnover can result in added maintenance costs and lost revenue due to vacancies. High turnover typically disrupts consistent cash flow, one of the primary goals of mobile home park investing. Frequent vacancies often require resources for repairs or home removals, adding to the operating costs and overall strain on the property.
Older homes, especially those with smaller layouts, may not retain tenants as reliably as larger, more modern units. This is especially true when there are more attractive housing options available in the surrounding area, which may appeal to tenants seeking greater stability and better living conditions.
Fire Risks in Densely Packed Properties: Older mobile home parks were often designed with closer lot spacing, which could pose safety hazards, especially if a fire breaks out. In newer developments, building codes enforce wider spaces between units to reduce fire risks, but older mobile home parks may lack these safety measures. If a fire occurs in a densely packed area, it can easily spread to neighboring homes, increasing the potential for severe property damage and safety concerns for residents.
To mitigate these risks, investors should consider fire safety improvements, such as installing fire hydrants within the trailer park or adding fire-resistant landscaping. While such upgrades can help improve safety, they may also require significant upfront investment.
When investing in mobile home parks with older, smaller homes and small lots, investors must remain mindful of the potential challenges these properties bring. Older homes near the end of their life expectancy may demand constant maintenance and replacement, which could strain resources. Zoning restrictions can add complexity, limiting the ability to modernize the trailer park or introduce new housing. Additionally, higher tenant turnover, safety risks from close lot spacing, and limited options for replacement homes all contribute to the potential instability of such properties.
For those pursuing reliable cash flow and tenant stability, it may be wise to evaluate these factors carefully during due diligence. A mobile home park with newer homes and more modern amenities will likely offer more consistent returns, while older trailer parks with smaller lots might carry higher risks and potentially fewer rewards.
Are you looking for MORE information? Book a 1-on-1 consultation with Andrew Keel to discuss:
- A mobile home park deal review
- Due diligence questions
- How to raise capital from investors
- Mistakes to avoid, and more!
The information provided is for informational purposes only and is not investment advice or a guarantee of any kind. We do not guarantee profitability. Make investment decisions based on your own research and consult registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.
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