Investing in Mobile Home Parks (Part 1)

We are focused on mobile home park investing, Institutional and private equity firms have also begun to discover the asset class, and sometimes we forget that many people do not understand the concept so we will discuss the basics.

A mobile home park is 1 large piece of land that is sectioned into individual lots that mobile homes sit on. The homes can be owned by individuals who live in the park, the mobile home park itself, or a mixture of the two. Each home sits on a lot that charges rent, or what is called a lot fee, to the park monthly. So If I have a park with 20 lots that I charge a $200 lot fee monthly, and each lot has a tenant owned home, I collect $4,000 per month/$48,000 from renting the land. Depending on the type of the park, we like parks that the each home has their own utilities, expenses such as taxes/insurance/employees can be conservatively estimated at %30 of the total income. So $48,000 x %70 = $33,600 net profit. ($48,000 x %30 expenses = $14,400)

If the same park had 5 tenant owned homes and 5 park owned homes (rentals). Here is another scenario.

20 lots x $200 = $4,000 per month

$4000 per month x 12 months = $48,000

$48,000 x %70 = $33,600 net profit So far all is the same as the above scenario as even rental homes will have a portion of the rent that goes to lot fees. Now we will calculate the rental income.

10 homes x $300 rent = $3,000

$3000 x 12 months = $36,000 Gross rental income Now we must calculate the expenses of the homes ie: home taxes/insurance/repairs and preventative maintenance. This figure can vary widely so we will use the conservative %50 rule.

$36,000 x %50 = $18,000 net rental profit

Now we will combine the two net profits and come up with our total net profits

$33,600 net profit lot rental + $18,000 net profit rental income + $51,600 total net profit.