Real Estate Marketing & Beyond
Telling the well-healed that you invest in mobile homes and trailer parks doesn't sound sexy at an upscale cocktail party. However, people that used to be big time investors and lawyers on Wall Street are turning to mobile home investing as profits continue to escalate. The attraction is the 20% return on investment that trailer parks spin off each year.
There is a low level of competition in the trailer park industry because most communities either ban additional trailer parks or heavily discourage them. The reason being is that they are perceived to attract drug addicts, criminals, and the poor that consume resources without adequately adding to the tax base. Billionaire, Sam Zell, recently told an investment conference “We like the oligopoly nature of our business”. An oligopoly is much like a monopoly. However, instead of only one company controlling the industry, two or a small number of competitors control it.
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Dan Weissman previously worked at Goldman Sachs and for a hedge fund says that, he didn't used to have to worry about meth addicts chasing his employees with a metal pipe or having a SWAT team barge into a manager's office looking for an arsonist but in the trailer park business these become realities.
Still, there are safe havens in the trailer park business. In years gone by, buying a mobile home was an economic step up for most people when they were finally able to own at least the mobile home even if they still had to rent the dirt it stood on. Today, although new trailer parks are discouraged, the demand has never been higher. New people moving in aren't moving up economically. These are people that never recovered from the recession and are being forced to move down the economic ladder. Because of high demand and low supply, by doing background checks and checking references it's possible to keep stable and non-criminal clients in your trailer park.
Another strategy for a trouble free trailer park is investing in a 55 and older park. Many of these parks have other rules such as requiring dogs to be under 20 pounds. Another common requirement is that owners be present when guest are staying at the home and limiting the number of days a guest can stay. People willing to comply with a few sensible rules typically aren't going to be people that cause trouble and attract the police.
The past three years have seen trailer lot spaces increase rents an average of 30%. In parks where the trailers are mostly owned by the tenants, these tenants are willing to endure annual rent increases rather than try to come up with the $3,000 it costs to move the mobile home to another park. Another tactic that big time investors are employing is offering park managers a monthly bonus for collecting 100% of the rents on time. There is a substantial amount of money to be made in the mobile home business. That's probably why Warren Buffet bought Clayton Homes Inc., the largest manufacturer of mobile homes, more than a decade ago.
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Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.
