So my significant other and I own a few single family homes and rent them all out. All were purchased significantly below market valve and we have tons of equity now since prices have been rising. We still have money to invest, but she’s so against the “negative” aspects of parks that it’s hard to convince her of all the benefits. My goal in buying park(s) is too keep them long term for cash flow purposes, not buy and sell. I want to replace my stressful, but good paying job with other income streams and a park seems to be a great fit for my goals. Single family homes just won’t do it for me, unless I had 20+, not to mention the management nightmare.
Her biggest beef is the liquidity of a park - the time it takes to sell a park compared to a single family home. She’s convinced that if we ever buy a park, that we’ll never be able to sell it; or that it will take years to sell. I’ve tried hard to explain that we buy it at a certain cap rate; improve that cap rate; then we should be able to sell it without too many issues. Just need to quiet her fears regarding the “exit” strategy. Any suggestions?
Another topic she raised (which I don’t have a great answer for) is what happens when a tornado demos the park? Remember hearing Dave went through this with a park in OK. I’d assume insurance might cover the loss of business for a while, but for how long, and would tenant owned homes with insurance payouts just take the money and run?
Thanks for the advice.
We have been doing educational “Introduction to Mobile Home Park Investing” bus tours in several cities – 4 hour rides and walks through actual mobile home parks while showing the reality of the industry and dispelling the myths. You might consider having her go on one of those. The cost is only $99 ($149 for two), and it is a good ice breaker.
In answer to your questions, mobile home parks (properly purchased) are certainly no harder to sell than single family homes – in fact, I would think the supply/demand would be more favorable in mobile home parks (with few on the market) than single-family (which has thousands).
Tornadoes are a concern anywhere in the U.S. As a result, we have plenty of insurance on the parks, including loss of income. But that still won’t 100% protect you from a tornado as far as insurance goes. The reality, however, is that the very nature of the tornado creates greater demand for immediate housing, and mobile home parks actually tend to benefit from a tornado. Case in point is Dave’s park in Oklahoma that went into the tornado with old homes and a mortgage, and came out filled with new homes and virtually no mortgage. The Red Cross gave the tenants checks to go buy new homes, and other families took the rest of the lots. The insurance effective paid off most of the mortgage. The park is 1,000 times nicer today than before the storm. The reason this is possible is that the U.S. government is great at handling those type of crisis. They are manageable in size, and there are many organizations to spread the effort (Red Cross, FEMA, State, Army, etc.). In Joplin – the second largest tornado in this century as far as damage goes – they have already replaced 80% of the damaged real estate within two years. Compare that to Hurricane Katrina’s current stats.
Frank, Thanks for the response. When is the next bus tour in the Midwest - it looks like I missed the Chicago one?
Yes, Chicago was yesterday. I"m not sure when the next one is, but we’ll email blast it out soon.