Some parks are in poor shape and get torn down. Others have the good fortune of a great location, and are being redeveloped. Some end up retired due to pressure from the governing municipality. And some owners are just tired of running a park and are aiming to shut down and do something else. Either way, it leads to a tight supply with huge demand, and it only gets higher every year.
Supply & Demand In MHPs
The current economy mixed with the events of 2020 have proven to be a whirlwind. More people are sizing down and being out-priced in the traditional housing market. Here’s where our industry shines! Mobile homes on average are about $50,000, to $60,000, while homes on average are around $300k. This explains why we have near zero vacancy at most of our parks. But what does this high demand mean overall?
The supply of our asset class is very limited. There are around 40,000-50,000 parks in all the United States, with 7.5 million people living in MHPs. Juxtapose this with the fact that we’re not building new parks faster than we’re losing them. This gives us a yearly net loss of overall MHPs. This isn’t a bad thing, though. The constricted supply chain leads to high demand, which is great for business. A nice park that’s taken care of is likely 100% full with a waiting list. Parks in the turn around stage will be occupied once the turnaround is done. The bad parks will likely stay bad, with more vacancies than their well-kept counterparts. This also leads us to our next on our list of pros: rapid rent growth.
Rapid Rent Growth
MHPs far outpace multifamily and other residential housing options when it comes to rents. They’re so low across the board that there’s a lot of room to grow. Most apartment rents are already more or less at their greatest from the beginning. After that, they’ll only grow a percent or two a year for the most part. Some may be able to balance against a cost of living adjustment, increasing the figure to 5% or 6%.
But MHPs, on the other hand, can grab brand new tenants, and bring them all the way up to market. They can sometimes reach up to three times the amount of rent charged to legacy tenants living in the same park. That’s a big deal, and it appears it won’t slow down until the entire market stabilizes from a rent standpoint. Compare this to an apartment’s figures. If an apartment cost 100%, right now lot rents that have been maximized may only cost 50% of that. A lot of parks are even closer to 25% from a lot rent standpoint of what an apartment would be.
The MHP Expert
While that’s it for now, there’s still so many more pros of MHP investing. Stay tuned for future articles on the topic! In the meantime, check out the rest of our site for information!
