{"id":123082,"date":"2020-05-01T10:00:46","date_gmt":"2020-05-01T16:00:46","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=123082"},"modified":"2023-04-03T20:47:34","modified_gmt":"2023-04-04T02:47:34","slug":"lessons-investing-mobile-homes","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/lessons-investing-mobile-homes","title":{"rendered":"4 Key Lessons Learned From Investing in Mobile Homes"},"content":{"rendered":"<p><iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC2224600377&#038;light=false\" width=\"100%\"><\/iframe><\/p>\n<p>Do you dare invest in mobile home parks?<\/p>\n<p>If not&#8230; why not?<\/p>\n<p>Mobile home parks, aka manufactured housing communities, are among the most stable and profitable asset classes in America. And unlike <a href=\"https:\/\/www.biggerpockets.com\/blog\/2013-04-09-how-to-buy-a-small-multifamily-property\" target=\"_blank\" rel=\"noopener noreferrer\">multifamily<\/a>, where I had planned to invest for the rest of my life, manufactured housing is still \u201ca little bit undiscovered.\u201d<\/p>\n<p>I\u2019m entering my third decade of real estate investing later this year, and I have had four brushes with manufactured housing. One produced zero results, and the second was a disaster. The third produced minimal results, and I thought that would be my last go-round in this sector.<\/p>\n<p>But our firm has invested millions into mobile home parks in the past few years, and we couldn\u2019t be happier. We have discovered a hidden jewel in the commercial real estate realm, and we, along with our friends and investors, are reaping massive rewards in the form of income, appreciation, and <a href=\"\/renewsblog\/real-estate-taxes-deductions\" target=\"_blank\" rel=\"noopener noreferrer\">tax benefits<\/a>.<\/p>\n<p>But there are many ways to mess this up. Though <a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-best-investment-overheated-asset-classes\" target=\"_blank\" rel=\"noopener noreferrer\">I\u2019ve written elsewhere<\/a> about why I love this sector, today I want to talk about how this could go wrong.<\/p>\n<p>I\u2019m going to give you a brief tour of my four brushes with manufactured housing investing with the hope that you can avoid my mistakes and enjoy the awesome benefits of this powerful asset class. Then, I\u2019ll tell you why I love mobile home parks.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-94542\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/mobile-home-surprises.jpg\" alt=\"mobile-home-surprises\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/mobile-home-surprises.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/mobile-home-surprises-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>Experience 1: Pure Ignorance<\/h2>\n<p>My mama always told me to stay away from trailer parks. Did yours?<\/p>\n<p>She told me nothing good happens there. I think I even heard her use the word \u201ctrailer trash.\u201d (I\u2019m not proud of that.)<\/p>\n<p>My dear mother and father passed away several years ago. And after a lifetime of working hard at a well-paying job, Dad left us about enough money to cover their funerals\u2014along with some hefty credit card bills.<\/p>\n<p>I\u2019m grateful for the life they gave me. But my parents weren\u2019t great investors. In fact, they knew nothing about investing. And this was a handicap to me\u2014especially when I made my first few million dollars at age 33.<\/p>\n<p>I knew nothing about investing. And as a result, I confused investing with speculating. I launched into several years of binge-speculating (though I told people I was \u201can investor\u201d). And it cost me dearly.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-123084\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Investing-vs-Speculating.png\" alt=\"\" width=\"702\" height=\"177\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Investing-vs-Speculating.png 974w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Investing-vs-Speculating-300x75.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Investing-vs-Speculating-768x193.png 768w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p>I actually had a chance to invest in a mobile home park back in those days. I swiftly turned my nose up at that opportunity. And I can imagine that you might have the same reaction.<\/p>\n<p>Though I don\u2019t know if I would have had the humility to listen in my mid-thirties, I wish I would have had access to the wisdom of Robert Helms from The Real Estate Guys. Robert said, &#8220;Live where you want&#8230; and invest where it makes sense.\u201d<\/p>\n<p>Please don\u2019t ignore this powerful asset class. Warren Buffett and Sam Zell, two of the top investors of all time, can\u2019t be wrong.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-123086\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Sam-Zell.png\" alt=\"\" width=\"702\" height=\"151\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Sam-Zell.png 974w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Sam-Zell-300x65.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/Sam-Zell-768x166.png 768w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p>A <a href=\"https:\/\/www.wsj.com\/articles\/this-stock-has-returned-4-100-since-the-housing-crash-11582632000?emailToken=08610ee8f4ae5a3dc1778a2419a1522fCim75G3Cu2BlilyNBM8xMExSmwpgcl0PWBZPFEuxkba3soE8xseXfwYE9QdBDO\/39UH56sWZvaDifMIJ6\/L\/ENOObCQgfh552IIfqZFffVdSxTKDBtyAzYMi9CPIpS5J&amp;reflink=article_imessage_share\" target=\"_blank\" rel=\"noopener noreferrer\"><em>Wall Street Journal<\/em> article<\/a> published just a few weeks ago details how Sam Zell\u2019s stock grew at over 1,200% since the recession, and another mobile home park company, Sun Communities, actually grew at 4,100%. (I like the subtitle. See below.)<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-123087\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/WSJ-MHP-Headline.png\" alt=\"\" width=\"702\" height=\"178\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/WSJ-MHP-Headline.png 974w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/WSJ-MHP-Headline-300x76.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2020\/03\/WSJ-MHP-Headline-768x195.png 768w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>Experience 2: Investing in Individual Mobile Homes<\/h2>\n<p>I can\u2019t tell you how badly this went for me. When I look back on my years of real estate investing and think of my worst mistakes, three mobile home investments top the list. These were some of the impetus for co-launching our <em>How to Lose Money<\/em> podcast over three years ago.<\/p>\n<p>Though there are exceptions, trailer tenants are some of the more difficult tenants out there. Every single mobile home park investor I know avoids owning individual mobile homes. There is no end to the stories I could tell you from my experiences. And I hear the same thing from top industry pros.<\/p>\n<p>Owning and renting out mobile homes makes a ton of sense on paper, but that\u2019s where it stops. Don\u2019t be fooled into believing otherwise.<\/p>\n<p>Almost all successful mobile home park investors own and operate the dirt and infrastructure of the park. And that\u2019s the way they want to keep it. When they \u201cinherit\u201d an abandoned trailer or acquire a park-owned home with a park acquisition, most want to sell it to the tenants as quickly as possible.<\/p>\n<p>And thanks to our friend Warren Buffett and Berkshire Hathaway\u2019s 21st\u00a0Mortgage Corporation, it\u2019s easier than ever to get financing for tenants who want to make these rented homes into owned homes. The boundless enthusiasm of the nation\u2019s top real estate investor, Sam Zell, has made financing more widely available, as well.<\/p>\n<p>Mobile homes are also the only asset (to my knowledge) that can be financed for purchase through Section 8. Did you know that?<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/mobile-home-licenses\" target=\"_blank\" rel=\"noopener noreferrer\">The Investor\u2019s Guide to Mobile Home Licenses<\/a><\/em><\/p>\n<h2>Experience 3: Building Modular Homes<\/h2>\n<p>Manufactured housing falls into at least three categories:<\/p>\n<ol>\n<li>Mobile homes<\/li>\n<li>Recreational vehicles (RVs)<\/li>\n<li>Modular homes<\/li>\n<\/ol>\n<p>I am actually a fan of the last category. Modular homes are homes that are built to stick-built (site-constructed) standards, but they are pre-assembled in factories and set up onsite. There are many advantages to this type of construction.<\/p>\n<p>This was especially advantageous to a real estate investor (me) who did not have a construction background. It limited my risk, time, and hassle in constructing new homes. And I built about seven of these in the early part of the century (I still love saying that). I made money on each one (contrasting with losing tens of thousands on one of the two ground-up construction homes I built).<\/p>\n<p>I hear your question coming: \u201cWait. So why was this a mistake?\u201d<\/p>\n<p>Sometimes investments don\u2019t have to lose money to be a mistake. If I told you I was \u201cinvesting\u201d in my savings account at under 1% interest, would you call that a mistake right now? I hope so.<\/p>\n<p>The modular home saga included a lot of drama and hassle, and it was never as profitable as predicted on paper. And most importantly, compared to where I am now, I wasn\u2019t building real wealth. I was just trading hours and effort for dollars. And I wasn\u2019t obtaining the powerful tax-saving strategies available to commercial real estate investors.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-73955 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/07\/Mobile-Home-702x336.jpg\" alt=\"Mobile Home Modular Home Manufactured Home\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h2>Experience 4: Passively Investing<\/h2>\n<p>My firm, joined by a growing tribe of friends and investors, vets best-in-class operators in the mobile home (and self-storage) space and invests heavily with them. And we couldn\u2019t be happier. We are enjoying the fruits of a wonderful asset class without the hassle and risk of operating the assets ourselves. This is my favorite investing strategy.<\/p>\n<h2>Why Mobile Home Parks?<\/h2>\n<p>I\u2019ve already written about this, and I\u2019ll do so again soon. Here is a list of why we love this asset class:<\/p>\n<ul>\n<li>Recession-resistant (steady through the last downturn)<\/li>\n<li>Shrinking supply, increasing demand<\/li>\n<li>Tenants that rarely leave<\/li>\n<li>Low and predictable maintenance and capital expenses<\/li>\n<li>Limited need for contractors<\/li>\n<li>Tenants are joint stakeholders with park owners<\/li>\n<li>Stigma of mobile home park investing leads to lower competition<\/li>\n<li>Great financing options<\/li>\n<li>Surprising tax benefits<\/li>\n<li>Mom-and-pop owners aging out and selling underperforming properties<\/li>\n<li>Hungry institutional investors who want to write large checks (the benefit of assembling a stabilized portfolio)<\/li>\n<\/ul>\n<p>Are you ready to invest in mobile home parks?<\/p>\n<p>Our own <a href=\"https:\/\/www.biggerpockets.com\/users\/brandonatbp\" target=\"_blank\" rel=\"noopener noreferrer\">Brandon Turner<\/a> has joined Sam Zell and Warren Buffett to build his future around this powerful asset class. If you want to learn more, look out for the new book I\u2019m writing on self-storage investing to be published by BiggerPockets.<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/tips-for-new-mobile-home-investors\" target=\"_blank\" rel=\"noopener noreferrer\">10 Tips for New Mobile Home Investors From Active Mobile Home Investors<\/a><\/em><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-91217 size-full\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>Have you let the trailer park stigma keep you out of this recession-resistant asset class or are you all-in on mobile home parks?\u00a0<\/em><\/p>\n<p><strong>Let us know your opinion in the comments.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mobile home parks, aka manufactured housing communities, are among the most stable and profitable asset classes in America. I\u2019m going to give you a brief tour of my four brushes with manufactured housing investing with the hope that you can avoid my mistakes and enjoy the awesome benefits of this powerful asset class.<\/p>\n","protected":false},"author":214608,"featured_media":114698,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4242,7119],"tags":[],"class_list":["post-123082","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile-homes","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/123082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/214608"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=123082"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/123082\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114698"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=123082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=123082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=123082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}