Mobile Home Parks are a niche asset class, often overlooked by traditional commercial real estate investors. The demand for affordable housing is skyrocketing. Patriot has delivered a solid investor IRR of 25.1% + on Mobile Home Acquisitions to date.
Typical MHP Size
Affordable housing it the country’s biggest problem. Mobile Home Parks are the cheapest non-subsidized housing option in the U.S. With house prices skyrocketing, the demand for affordable housing is booming.
There are approximately 45,000 Mobile Home Parks in the USA, with demand increasing year on year. Many cities have little or no zoning for Mobile Home Parks, meaning that demand far outstrips the ability to develop new supply.
In addition to the high acquisition cap rates, Mobile Home Parks can be purchase with a high cash-on-cash return. The operating expense ratio is typically 35% to 40% (far below Multifamily) allowing for a very high return on investment.
Although in theory, rent increases could cause a tenant to move, in practice 95%+ of Mobile Home's never leave the MHP they are located at. A typical lot rent is $300 to $500+ per month, while moving out of a MHP could cost a tenant $5,000 to $10,000 or more. As a result, the asset is stable and allows for rent increases in line with market demand.
85%+ of Mobile Home Parks are owned by Mom & Pop operators, some of which use no formal accounting system and have not raised rents in year. Patriot has been actively building relationships with sellers for 10 years+. This gives us access to high yield, high return off-market assets.
A family-oriented communal environment results in up to 50% less turnover when compared to apartments. Mobile Home Park residents benefit from communal amenity space, which includes: Yards/Parks, Private Parking, Non-Common Walls. As a result, tenants are more likely to call the MHP "home" for a longer average rental period.
Investors own the land and property infrastructure (street, utility connections and common areas), and typically lease the land to homeowners (for $300 to $500+ per month). As a result there are usually no capital expenditure costs for the upkeep of the individual homes.
The average tenant is usually in the early retirement age (50-75). This age group is expected to grow more than 3% per year over the next 10 years. On the average, residents spend less than $1,000 per month on total housing costs. This is still 30-50% less than the alternative - single-family housing or apartments.