Trailer parks are a fragmented, mom and pop family-owned business in America. About 22 million people live in mobile home parks and generally fall into households earning less than $50,000 a year or approximately ¾ of the residents meaning this is an important source of housing for rural or low-income residents. A majority own their trailers, which depreciate just like cars but rent the land underneath them most of the time. However, these tenants save tremendous money by paying incredibly low taxes along with saving from not having a 30-year banknote with interest to pay. These tenants tend to stay for years upon years due to the significant cost to move the trailer to another park which typical cost can be $5,000-10,0000. So, most can’t afford to move them even if it was physically possible. This has resulted in the most stable income streams of any form of real estate, which has also resulted in the lowest bank default rate.
The largest private equity funds such as The Carlyle Group, Apollo, as well as other major institutional investors like Blackstone have heavily invested in mobile home parks over the past 5 years in the terms of Billions in acquisitions. Mobile home parks are the last remaining area of affordable housing in the US along with a majority of the properties being mom and pop owners, making this a prime asset class for consolidation.
Warren Buffet loves a moat in business. Buffet owns Clayton homes the biggest manufacturer of new homes along with Century 21 financing, the largest financing for mobile homes. With mobile home parks, you haven’t been able to build a new mobile home park in most American cities since the 1970s and that is pretty much set in stone at this point. The reason is simple and will never change as mobile home parks lose cities money due to incredibly low total tax income to the city. Meaning you can’t develop new parks and have huge demand, you have the best moat against new competition.
The manufactured home sector is the only major real estate asset class that has not experienced a year-over-year decline in net operating income in any year since 2000. Including offering the most favorable return profile among all property sectors including apartments, office buildings, retail, hotels, industrial, and self-storage during this period. Mom & pop owners neglected to ever raise rents with the price of inflation as the typical current national rent is $270-425 per month and comparable apartments are 2-3 more expensive today. New owners are correcting that problem and with new higher rents translates to instant equity appreciation to the owners while still provided great value to the residents.
What is the future investment outlook and sentiment in this space? Demand will continue to go up with 10,000 baby boomers retiring every day, along with the fact the American middle class is vanishing with 46.5% of American’s working-class earning currently less than $32,000 a year. Mobile home parks are the only solution for a safe and comfortable home. In return, investors have steady cash flow and stable investment that will only increase in value and demand for decades to come by savvy and institutional investors.