Investing in a mobile home park

Investing In A Mobile Home Park: The Complete Business Plan

Even though we love our rental businesses, managing properties is not a cakewalk. But how about a rental business that is truly passive, and requires minimal to no efforts? A recession-proof, high-demand, and constricted supply business. Would you be interested in learning about  Investing in a mobile home park is one such rental business and is sure a perfect business opportunity for real estate investors.  


Investing in a Mobile Home Park allows you to make money from the dirt. You just need to learn to find the right dirt and inject value into it. There is no need to deal with tenants and toilets anymore. This business has the potential of returning more than 10% safe returns annually. Just align a few ducks in the row and get your mobile home park up and running. 

What is a Mobile Home Park?


A Mobile Home Park, in general, is a community of manufactured homes placed on a plot of land often referred to as pads.


According to a more official definition by the code of ordinances. The mobile home park is a properly planned plot of land subdivided for the use as sleeping/living quarters, or parking spaces. The spaces must be maintained for rent or without rent. And there must be space for three or more mobile homes in order to be considered a mobile home park.

Classification of Mobile Home Parks

Mobile Home Parks To Invest

The Classification of Mobile Homes are done based on a star rating system. A star rating provides a reference on what quality of living and infrastructure can be expected. Based on the ratings, a mobile home park is classified as a

  • 1 Star Mobile Home Park
  • 2 Star Mobile Home Park
  • 3 Star Mobile Home Park
  • 4 Star Mobile Home Park
  • 5 Star Mobile Home Park

The 1 Star Park being a decent community park to live in and 5 star being the finest to live in. 

Which Mobile Home Park To Invest In?

In order to be successful with mobile park investing, you must understand a few things. Go wrong and you will be ripped off. 


  • You are targeting a specific niche of real estate that is affordable housing. 
  • Financing a Mobile Home Park is a bit of a task and lenders are specific about eligible parks. 


It is unlikely that you will get financing for a 1 star or a 2 Star mobile home park. So, it becomes important, you know the ratings before investing in one of the mobile home parks.


So which mobile home park to invest in???


Suppose you have invested in a 5 Star Mobile Home Park. Do you think you will be able to cater to a large audience? The community who will live in your 5 star Park will mostly belong to the affluent ones. Their mobile homes are either a second home or a vacation home. Will such affluent individuals be your consistent tenants? Don`t you feel they will have more than enough resources to move every now and then. 


You need consistent renters. Those who stay for long and don’t move every now and then. Once the mobile home is parked, the person or the family must stay there for many years to come. But how can you ensure this? 

“Successful Investing in Mobile Home Park is about catering to a group of people who are looking for affordable housing.”

As per the Wage Analysis report, half of the US workforce earned less than $35,000 a year which comes to roughly $2900 monthly. The average median rent in the US is about $1097 according to a data prepared in 2019. Going forward with these numbers and the 30% rule, a person with a $2900 monthly income can afford a maximum of $870 for housing costs plus utilities.  


This represents a perfect opportunity for investors who can provide affordable housing. And in order to be affordable and yet profitable, you must target a 3 star or max a 4 star Mobile Home Park. Because anything below this will attract low quality renters and financing will also be an issue.  

Business Plan For Investing in a Mobile Home Park 


Mobile Home Park Investment

1.  Stick To Existing Mobile Home Parks


The first and foremost thing about the mobile home park business is to evaluate the existing mobile home parks and see whether you can pump value to raise revenue. You should stay away from starting a park from scratch. Setting up a new park from scratch is not a viable option due to


  • Restrictive Zoning and Prohibition of New Mobile Home Communities in many cities. This means you need a lot more to build a new mobile home. The mobile homes are required to meet certain standard zoning and development standards.
  • Furthermore, along with land, you are required to set up electricity, water, and sewerage. Setting up these utilities in far-away locations can cost anywhere from $500,000-$750,000. 


2.  Cap Rates For Mobile Home Parks


A Mobile Home Park Business can easily yield a 10% cap rate. So, if we stick to a minimum cap rate. You should find a mobile home park that at least provides a 10% cap rate and has a further potential of generating a higher rate.


To understand the Cap Rate for a mobile home park. You must have these numbers on hand for a quick back-of-the-envelope calculation.

  • No. of Individual Pads on the Park
  • Lot Rent
  • Park-Owned Mobile Homes
  • Tenant Owned Mobile Homes
  • Upfront Repairs
  • Vacancy Rates


Cap Rates= (Net Operating Income/ Purchase Price of Property) x 100

Gross Income= {(No. of Individual Pads x 12 x Lot Rent) + (12 x Rent of Park Owned Homes x No. of Park Owned Homes)} 

Net Operating Income= Gross Income – {(Gross Income x Vacancy Rate) + (Maintenance Costs)} 

Purchase Price= Cost Paid to Acquire Property (Excluding Financing Costs) + Upfront Repairs Costs


Let’s quickly evaluate the cap rate of a Mobile Home Park by putting some numbers

  • Cost of Property: $350,000
  • Upfront Repairs: $50,000
  • No. of Lots: 15 
  • Park Owned Home: 3
  • Lot Rent: $300
  • Park owned Home Rent: $350
  • Vacancy Rate: 20%
  • Annual Maintenance Costs: 30% of Gross Income (Mobile Home Parks Operating Expenses in General)

Gross Income= {(15x12x$300)+(12x$350×3)} = $66,600

Net Operating Income= $66,600- {($66,600 x 0.20) + (0.30 x $66,600)} = $33,300

Purchase Price= $350,000 + $50,000 = $400,000

Cap Rate= ($33,300/ $400,000) x 100= 8.325

This is a low cap rate for a mobile home park deal. To get to a 10% cap rate, you have to consider negotiating the purchase price to $283,000.


Read: How To Do Complete Cash Flow Analysis on Rental Deals?


3.  Evaluating The Mobile Home Park Deals


When you are hunting for MHP deals, it is important to evaluate the right price. Paying more for a deal can eat up your profits and can even set you up for a negative cash flow


Going through the MHP deals, you most often see three types of mobile home parks. 

  • A Mobile Home Park that has a mix of both tenant-owned homes (TOH) and park-owned homes (POH)  placed on the lots. 
  • Mobile Home Park with only lots. No tenant-owned homes, no park-owned homes. 
  • The Mobile Home Parks which has lots with only tenant-owned homes. No Park owned Home. 


The first piece of advice when evaluating a mobile home park deal is to avoid those parks that have park-owned homes. The park-owned homes may seem to be an asset to an average investor Joe. Rather these are liabilities. 


Most of the parks that have park-owned homes are old mobile homes from the 70s or 80s and those were certainly not built to last. Betting on these falling apart structures may take up your fortune to get them to rent-ready condition. Hunt for deals where there are no park-owned homes.


Not able to find any mobile home park without park-owned homes? 


Not to worry. You can still invest in that MHP with park-owned homes. The key here is not to overpay for a mobile home park. Simply, do not take into account the value of POH and neither any income from these homes when evaluating a deal. And if you have to account for its value for some reason, only bet half of the value that you can get by selling the mobile home in the market.

“A Wise MHP investor will never own the mobile home, but only the land. The idea is to make money from dirt.”

4.  Location

Like any other real estate, buying a mobile home park at the right location is very important. The major criteria in choosing the location is that your mobile home park should appeal to the right audience. 


Well, who`s the right audience?

  • Baby Boomers 
  • Millennials between the age group of 25 and 32
  • Retirees who are looking to Downsize


A location where the median income is less than $50,000 will be a perfect state for you to invest in your motor home park. Refer to this table depicting the median US Household incomes by the state. More than $50,000 median income households can afford to rent a regular home.


Another aspect while evaluating the mobile home park deal is to check the zoning requirements. As per the zoning requirements, your mobile home park should meet design standards and be compatible with the surrounding land use, the compliance goes that no more than 4 mobile homes per acre in a mobile park where public water and a septic tank are used. And no more than 10 mobile homes per acre where public water and sewer are used. However, you must check the regulations first with the local authority of that state. 


Further, it is important to ensure you are getting enough lot rent for the price that you paid for that one lot. Some locations are expensive compared to others due to high land prices. Before investing, refer to the Lot Rent throughout the US and compare the deal accordingly. 


Also, stay within county limits where there are all sorts of daily essential stores near your mobile home park. Avoid buying an MHP at far away remote locations and locations that are in the hurricane, flood, or, in environmental hazard zones.


Read: Worried to go for Out of State Properties?

5.  Checking the Infrastructure


One of the most expensive mistakes a mobile home investor can make is not checking the infrastructure of the park properly. You don’t own the mobile homes but still are responsible for maintaining the infrastructure of the park. Roads, water, and sewerage are among the few responsibilities of a MHP owner. 


Expect to lose about tens and thousands of dollars if you get to repair any of these. So, you should perform all the due diligence within time to avoid such pricey unexpected costs. Furthermore, always stay away from those MHP that have private utilities and extra amenities. Maintaining private utilities like wastewater systems or drinking water plants is not at all an affordable job and will significantly increase your Cap Ex. 


6.  Financing a Mobile Home Park


Financing a Mobile Home Park often seems to be the hardest part for investors. On the contrary, it is not. It’s just different. Lenders do recognize this asset class and the potential of MHPs to generate positive cash flow. Many lenders specialize in financing this asset class. 


You have financing options available for 

  • Purchasing Existing Mobile Home Park 
  • Renovating the Mobile Home Park
  • Buying Land and developing it into a Mobile Home Park


However, we are sticking towards only purchasing an existing MHP. The benefit, your lender can run through the existing financials increasing your chance to secure financing faster. 


When buying an existing MHP, you must take all the previous financial reports and tax returns of the previous owner. This way you can both analyse the profitability and secure financing.   


The Types of Mortgages Available for Mobile Home Parks

  • Freddie Mae and Fannie Mac Loans
  • Conduit Financing or Commercial Mortgage Backed Security Loans (CMBS)
  • USDA Loan (SBA 504)
  • Seller Financing
  • Private Money Lenders
  • Hard Money Lenders


Shop around and see which lender offers you the best rate and terms. Lenders have specific requirements for originating loans for mobile home parks. Every lender has a different requirement.


Apart from basic loan requirements, the lenders most often go about

  • Type of Park
  • Type and Age of Mobile Homes (Single Wide or Double Wide)
  • No. of Minimum Pads
  • Infrastructure of Park (Paved Roads)
  • Minimum to no park-owned homes
  • Existing Occupancy Rate in the Park
  • Location of the Park (Metro, Non-metro, Rural)
  • Private or Public Utilities 
  • Previous Financials

Lenders specializing in mobile home park financing offer loans up to 80% LTV, fixed interest rates from 5-30 years, and credit scores as low as 670.  

Should You Invest in a Mobile Home Park?

Why not invest in a mobile home park when you can get a stable cash flow, potential of higher returns and that too with minimum botheration? Do you know any other real estate asset class which is this stable and likely to be always in demand? 


Interested to know more advantages of investing in a mobile home park? 


  • Recession Proof Investment

During economic meltdowns or recessions, many tenants have to leave their pricey apartments and search for more affordable accommodations. Do you think there are any more cheaper renting options for a tenant than living in a mobile home other than moving to a friend’s place or having sleepless nights in a car or a tent?

In all, you are tapping into an asset class which already has a demand (affordable category of housing) and will stay in demand even if the recession hits.  


  • Entry Barrier

It is always better to own a business that has an entry barrier. Otherwise every man on the street will be in this business. The entry barrier, though, is not due to the capital needed for the business but because of the artificially controlled supply. The government zoning plans restrict the construction of new mobile home parks if not completely banned. The sole reason why more old parks have been redeveloped than more new parks.

More and more new players are entering into this asset class and the big players already own a big chunk of this pie. But don`t worry as there are still a considerable amount of mobile home park deals available in the market today.  Seek for the mom and pop sellers who are motivated to part ways from their mobile parks


  • Accelerated Depreciation

Tax Breaks is one of the most unfair advantages that comes with real estate investing.  And when you can reduce your taxable income by depreciating the value of your asset, it is icing on cake. 

With mobile home parks, the IRS allows accelerated or bonus depreciation which isn`t available with other forms of rental property investments. A mobile home park owner can deduct a huge portion of their investment within the first year.

Investing in a Mobile Home Park Vs Other REIs?

The mobile home parks have certain distinct advantages compared to other forms of Rental Investments like apartments, SFRs or MFRs. 


  • Low Tenant Turnover

Frequent tenant turnovers bite deep into your profits. We all want stable tenants. And this is where investing in a mobile home park provides an edge. You don’t own a home in your park, just the land. The home is owned by the tenant. 

In order to move out, the tenant has to take the mobile home along and this comes at a considerable cost. Moving a mobile home can cost anywhere between $5000-$8000. It is not at all a viable option for tenants to move out every now and then. Expect your tenants to stay for many years to come at your park. 

  • Maintenance and Repairs

The most cumbersome aspect of the rental business is to maintain the property and do the repairs. On average, a rental owner shells about 50% of their gross income in maintenance and repairs. Not just spending money, a rental owner is also legally liable to get the repairs and act on maintenance requests in time. 

God save a rental owner who doesn’t have a property management company to take care of things. And if you see, when you own a mobile home park, you save a good chunk of money and your time. As a park owner you are only responsible for park infrastructure and not the homes. A Mobile Park owner on average spends only about 30% of their gross income on maintenance and repairs. 

  • Higher Return Potential

When you own a mobile home park, your acquisition cost significantly reduces. You acquire more units and still pay less because you are just going to own the land.  On the contrary,  buying a single family rental or a multi family property, you pay significantly more but still acquire less units. When you have more units, you have a potential of getting higher returns. 

Imagine what kind of effect can forced appreciation provide you if you can increase rent by just 5% on all your units?  Calculate yourself how much return will increase on SFR or when you own a mobile home park. 

Read: How to increase the returns from your Rental Units?

Is there any Risk Investing in Mobile Home Parks?

There is always a risk involved with an investment. The only thing is identifying the risk and whether it can be managed or not? Investing in Mobile Home Parks is no different. But more than risk, consider these as downsides. 


  • It Takes Time To Get Complete Returns

When you start a mobile home park, it can take up to 5 years to reap the full returns. When you buy an existing park, it is hard to find a fully occupied park. Getting these empty lots occupied can take time for a variety of reasons.

  • a) Bigger institutions and investors are already having their hands on a good chunk of mobile home parks that are at good locations. Your chance of buying at a prime location is thin. And when you buy a little off from the main locations, it can take more time to fill vacancies. Your marketing should be very effective in this case. 
  • b) A person who is considering to live in an affordable mobile home community is likely to be making a bare minimum on the salary front. His ability to afford a decent mobile home will be limited. Now, he can either rent a park owned home or finance the mobile home. Financing a mobile home is not that easy. This can set you back some more time to get your vacant lots filled. And for good, you are only renting to those who own their mobile homes. 

Do check out the 21st Mortgage Cash Program. It will certainly be in your interest. With this program, a park owner can quickly get a tenant to finance their mobile home. 


  • Community Rules

Mobile Home Parks are a shared community. There are certain rules and regulations of living in a community. And being the owner, it becomes your responsibility that every person inside the community adheres to the community rules. 

To get your tenants to comply with rules will take your efforts, time and money. And if you choose to ignore this, your business can suffer.


  • Crimes and Quality of Tenants

When you provide the cheapest form of housing on the market. You tend to attract renters from all kinds of groups. Occurring to cases of crime, drug dealing, police sirens in your mobile home community can be a common sight. Mobile Home Communities got a bad reputation just for the sole reason. Though there have been studies that have proved this only as a stereotype or generalization of MHPs. 

But still, you need to be very careful whom you rent to. Your business can be at risk if you don’t do a thorough background check before letting to renters in your community. 


  • Occurring to Liabilities

Working with lots of tenants, you are more prone to liabilities. And when you are a mobile home park owner, there can be a lot of things that can go wrong. You must carry adequate liability protection otherwise you and your business will be at risk. 


Read: Do You Need A LLC For Your Mobile Home Park Business?

The Bottom Line

Mobile Home Parks are a good investment haven considering the economic downturns and its ability to provide a stable cash flow. Consider MHPs as a way to diversify the risk. But always remember to analyse all the pros and cons before jumping into anything. And if you are a first time or a small investor with limited rental experience, you should proceed with caution with Mobile Home Park Investment Strategy. 


Have anything to share related to Mobile Home Parks or are you considering to invest in MHPs anytime soon? Do write us your comments in the box below.

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