Research

MOBILE HOME PARK INVESTMENT HIGHLIGHTS

Haven Affordable Housing Fund LLC believes that Mobile Home Park investments offer its investors some of the most attractive risk-adjusted cash yields available in the current real estate market. Mobile Home Parks (MHPs) have two unique investment characteristics that differentiate them from apartment investments:

  1. Mobile home parks are residential subdivisions – the investor owns the land and property infrastructure (streets, utility connections and common areas) and typically only leases the land to the homeowners.

  2. High tenant switching costs – it costs $5,000-$10,000 for a homeowner to move and reinstall their home into another community.  

These two factors translate to:

  • Lower tenant turnover: 10-15% annual turnover vs >60% for apartments

  • Reduced operating expenses: ~30% operating margin vs. ~50% for apartments

  • Pricing power: Ability to raise rents without realizing vacancies (loyal customers)

  • Minimal Ongoing Capital Expenditures: The value of roads, clubhouses and other common area improvements can be maintained with periodic capital expenditures averaging $130/site annually.

 

Higher Cap Rates Than Apartments:

Mobile home park investments tend to trade at a capitalization rates (net operating income divided by purchase price) anywhere from 1-5 percentage points higher than comparable quality multifamily assets.  The combination of the higher going-in cap rates with comparable financing terms provide significantly stronger cash-on-cash yields than currently available in multifamily.  For those investors seeking immediate cash flow returns, mobile home parks are likely to be an attractive option. 

 

Compelling Demand / Supply Imbalance:

Demand for quality affordable housing often outstrips supply of mobile home park properties.  Affordable housing is in high demand from young families, middle-aged people in transition, and seniors on a fixed income.  Approximately 23.5% of American households earn $25,000 per year or less (1), which allows for roughly $500 per month in total housing costs.  The average apartment rent is over $1,100 per month and is smaller than a typical mobile home. Our mobile home park investments offer tenants a superior combination of quality and price than comparably-priced site-built homes or apartments and provide residents with a sense of community. 

While demand for quality, affordable housing increases, the supply of mobile home parks is diminishing.  It is estimated that approximately 1% of mobile home parks are redeveloped every year into higher and "better" uses.  Furthermore, we expect little to no new mobile home park developments adding to supply as use restrictions and local economic environments have made it difficult to acquire appropriate zoning for new parks, thereby eliminating new competition for existing mobile home park investments. 

 

Barriers to Entry:

99% of municipalities nationwide will not issue permits for new mobile home communities. Many have zoning laws that don't allow new manufactured housing communities or make it difficult to develop them. Combine this limited supply with the increasing demand, now exceeding 2% annually, and the declining supply, over 1% annually and you can see the upside potential for existing communities

Tremendous Tax Benefits - Accelerated Depreciation:

From an accounting perspective, the majority of a mobile home park's value is comprised of land improvements (roads and utility lines), which can be depreciated at an accelerated schedule.  Mobile home park depreciation schedules typically average 15 years compared to apartments of 27.5 years and commercial properties of 39 years.  This unique tax feature often translates to tax free operating cash flows to the mobile home park investment owner. (2) 

 

Conclusion:

We believe mobile home park investing offers outsized cash flow returns (relative to inherent investment risk). Experienced acquisition and knowledgeable mobile home park operators such as NextGen Capital Group, are uniquely positioned to capitalize on this misunderstood asset class. If you are interested in learning more about the Haven Affordable Housing Fund and its investment strategies please email us or 

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  1. Source: U.S. Census Bureau. (2018).

  2. If the property ever sold, the investor would be subject to 25% recapture taxes on the cash flow sheltered via depreciation.

 

Nothing herein constitutes an offer or solicitation of securities for sale in the United States or any other jurisdiction where it is unlawful to do so.  The Securities have not been, and will not be, registered under the Securities Act, or the securities laws of any State of the United States or other jurisdiction.

NextGen Capital Group LLC

Haven Affordable Housing Fund LLC

5633 Strand Blvd, Ste 304

Naples, FL 34110

©2020 by NextGen Capital Group LLC & the Haven Affordable Housing Fund LLC