Mobile Home Parks
Misconceptions
Mobile Home Parks often come with many negative stigmas and the belief that they are undesirable places to live. The reality is many mobile home parks are in great locations and are filled with high quality residents that bring a pride-of-ownership mentality to their home.
Business Model
Investing in Mobile Home Parks typically means owning the land and the infrastructure and renting out the pads or lots to residents that own their own mobile homes
Recession Resistance
Mobile home parks are the most affordable housing option and counter-cyclical with demand increasing during an economic downturn. In addition, supply is constrained and therefore the asset class is likely to continue to perform during a recession.
Investment Thesis
In the Recession Resistant Fund we target mobile home parks that are in desirable locations and have a value-add component. We focus on opportunities where we can optimize the land, increase rental income, reduce expenses and grow Net Operating Income. This strategy benefits investors’ income and cash flow and steadily increases the value of the underlying property.
Baby Boomer Demand
Many Baby Boomers live on a fixed income with little savings and look to mobile home parks as an affordable housing option during retirement. Demand for manufactured homes began to increase in 2013 when the first wave of baby boomers began retirement.
Supply and Demand Forces
Today, even while the US economic expansion continues, demand for affordable housing is surging - this includes demand for mobile homes. The supply side is very limited as most city zoning regulations do not allow for the development of new mobile home parks. Owning an asset with high demand and fixed supply is a good economic trade for the long term.
Tax Benefits
Recent changes in tax law have increased the already attractive benefits of real estate depreciation. Non-residential property depreciation schedules have been reduced from 39 years to 25 years. The reduction allows investors to realize the tax benefits of the capital expenditure on property acquisitions more quickly. In addition, Mobile Home Park land improvements (roads, utility lines, etc.) enjoy the benefit of accelerated depreciation as these items are depreciated over 15 years.
See a table comparing taxable income vs. cash flow here >
