Mobile Home Park or Multi-Family Properties?

Question

Hello all!

New to BP as well as real estate investing. I am very interested in Mobile Home Parks as well as Multi-Family properties and right now we are somewhat tied between the two. This would be the first investment for both my partner and I. I currently live in Southern California but am looking into properties OOS. Do either of these sound like a realistic first investment?

Thanks in advance!

Alina Trigub · Answer

@Devon Olsen

You received an excellent feedback from @Taylor L. You have to pick one asset class and concentrate on learning all about it. I know it's hard to do, so read "One thing" by Gary Keller and search for some concentration exercises on youtube.

In terms of investing in general, given that you're in California, this would be out of state. So you need to decide whether you'll have the bandwidth to run this business as that's what it is. Here's an article to help guide you further: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

Taylor L. · Answer

MHPs and Multifamily are both great asset classes. In my opinion, that's not your main issue right now. It is possible to do either of these as a first deal, but...

You need to focus on one asset class and one market.

I see you had a post in September looking at Self Storage. That is a great asset class as well, but the problem isn't the asset class, it's the level of dedication to one of them. You must pick one and chase that relentlessly.

I am subject to shiny object syndrome myself, so I'm always fighting against it myself. I didn't start seeing success in multifamily until I focused on it.

Hai Loc · Answer

Stick with one asset class and just go with it. When you think you conquered that asset class you then can move onto the next. Owning 2 different assets classes and learning about them at the same time can be hectic especially when you first start.

Devon Olsen · Answer

@Alina Trigub thank you for your response! I'm going to be looking at the article and picking up that book!

Devon Olsen · Answer

@Jack Martin thank you for your response! I am looking for the long term investment, and cash flow. I'm not too obsessed with appreciation as of now. With your advise and what I am looking to accomplish it sounds like MHPs might be the more realistic option for now.

Devon Olsen · Answer

@Hai Loc Thank you for your response! That is what I am going to do, now it's time to figure out which one to stick with.

Taylor L. · Answer

Totally. Either one will have stumbling blocks along the way. You're going to look at a bunch of crappy deals, a handful of decent ones, make a bunch of offers that get rejected.. but that's the process!

Devon Olsen · Answer

@Taylor L.

Thank you for your response. That absolutely makes sense, it does seem like we move between the two and just need to stick to one class.

Jack Martin · Answer

@Devon Olsen the answer to your question depends on what you are seeking to achieve.  Are you seeking to acquire stabilized assets or value add assets?  Are you investing for the short term or the long term?  Are you investing for appreciation or cash flow?  Do you plan to own these assets through the next downturn or hope to exit before the market corrects?

Apartments are likely to be better suited for shorter term value add flips, while MHPs are likely to be better suited to hold long term for cash flow.  Apartments are more mainstream and tend to have a wider variety of solutions for property management than MHPs.  MHPs tend to require more specialized knowledge and can be slower to execute a value add strategy due to filling up vacant spaces with homes and all the requirements associated with home sales.

While apartments and MHPs may seem to be similar on the surface, there is a major difference with their tenants that separates them.  Apartment tenants are renters and tend to see an apartment as a temporary solution, while MHP tenants own the MH and tend to have more of a homeowner mentality.  This single characteristic drastically effects the frequency of turnover and favors MHP as a more stable cash flow asset, which becomes particularly attractive during a recession.

Having syndicated value add projects in both asset classes, I can say that MHP's are more difficult than apartments, but I still prefer them over apartments because of the stability they can provide.

Keep in mind, I have a longer term perspective with a focus on cash flow and am sensitive to where we are at the cycle.  When a market correction arrives, my partners and I want to be invested in assets that not only will weather the recession, but will continue to perform during those tough years.

Mobile Home Park or Multi-Family Properties?

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