Mobile Home Parks: Gold Mines or Money Pits?

By WEALTH Magazine Staff | Print This Article

If you ask multi-niche investor Frank Rolfe what he thinks of investing in mobile home parks, his answer is simple:

“They’re a gold mine,” he says. “We are willing to bet money that they are the best real estate niche in existence in America right now.”

Rolfe says he has personally owned and operated more than $100 million in parks over the last decade.

Rolfe of finds mobile home parks to be a phenomenal investment—if you get educated and do your due-diligence research.

What Makes Mobile Homes Moneymakers

Why are parks so great for investors? Rolfe says the main reason is that customers can’t move their homes. If an apartment renter wants to move, he can just pick another apartment. If a homeowner decides to move, he can sell his home and buy another. But if a mobile home owner wants to move, he either has to sell the mobile home or move it—and moving it is usually too cost-prohibitive. Either way, the park owner keeps collecting rent on the home site.

The second factor that makes mobile home parks a great investment is that not many, if any, new mobile home parks are being built. Yet the demand for affordable housing is increasing, and mobile homes remain popular because they offer the perk of a single-family dwelling rather than apartment living with neighbors over, under and adjacent to you. The third reason why these investments can be so attractive, Rolfe says, is that many of them are owned by people who are nearing retirement age or no longer want to keep the park in the family.

“There are about 50,000 parks in the U.S. and forty thousand of them are basically owned by moms and pops, many of whom don’t know what they are doing,” Rolfe says. “If you look at their financial statements—if they even have financial statements—they are often messed up. You can find many parks where the expenses are overinflated and the rent has not been raised in decades and is way behind the local market.

When you find a park where you can walk in and either easily cut costs or raise the rent, then you are looking at a great investment.”

Rolfe says the pièce de résistance for mobile home parks is that the land in many of the “mom and pop” parks is already paid off, and the sellers will hold the loan with only 10 or 20 percent down.

“When you already have the financing done by the seller, it allows you to avoid the whole banking nightmare,” Rolfe says. “Plus, sellers don’t require recourse, which means you have very little risk. If you hate it or if disaster strikes, you can just give the park back and walk away.

“If you buy a house today, you sign a mortgage with the bank. That means if you walk away or go into foreclosure, the bank will hold an option. If they sell the house for less than you owe, you still have to pay the rest. On a recourse note, they are coming after you.

“With mobile home parks, if Mr. and Mrs. Smith sell me their park, they don’t demand recourse because they are not very sophisticated. I can walk at any time, and they get the park back. You forfeit the down payment and that makes them happy as can be, because they can sell it again.”

Where to Dig for Gold

If you want to try your hand at investing in a mobile home park, Rolfe has some insider tips you should know in order to get started.

Look for parks in areas that are growing, not shrinking in population. Do your homework on any park you are considering. Ask to see the books, but if the books are not accurate or up-to-date, or if they don’t exist at all, recreate them. Find out what utilities cost, and check around to see what the average rental prices are in the community compared to what is being charged at the park you want. And stay away from top-of-the-line parks, the high-end ones with clubhouses, swimming pools and state-of-the-art amenities. The best investments are actually the older parks that offer very little. Why? Because the key to mobile home park profitability is affordability.

“There is a segment of the industry that is luxury parks, and these guys are often sitting at 50 percent occupancy. They’re doing awful,” Rolfe says. “In the 1980s when they were built, it cost 10 or 15 thousand for the mobile home and the land rent was $150 a month. So for $300 a month, you got a beautiful place to live and everyone was happy.

“Then in the 1990s, the REITs [real estate investment trusts] went crazy and bought up all those parks. They raised the rents. Plus, they wanted to keep the parks looking nice, so they demanded that the mobile homes be a certain age or newer. Homes had to be replaced, and the cost was a lot more. Suddenly, instead of three hundred a month for the house and land, owners were paying a thousand dollars a month.

“Who wants to pay a thousand dollars a month to live in a trailer park when they could have a nice house for the same amount? People just walked away.”

The money is made in the older, even the more rundown parks, Rolfe says.

“The industry has gone bipolar,” he says, “with the luxury parks doing terribly. The ones where the homes are old are flourishing.”

Landlord or Slumlord?

Many investors might cringe at the thought of making a profit from lower-middle-class mobile home renters, but Rolfe stands by his belief that these parks are solid investments that provide an important service to people with low, limited incomes.

“You are only collecting rent on the land under the homes. You are the landowner,” Rolfe says. If you set a few rules about the park’s appearance, keep the grounds neatly mown and landscaped, make sure the utility pipes and lines are in good working condition, and keep the roads in good shape, you are doing your job as a park landlord. The condition of the homes is up to the homeowners.

“The real slumlords are the apartment-building owners in the projects and inner cities. That’s where all the real trouble is,” Rolfe says. “Ask any police officers in your city where the most trouble is, and they’ll tell you it’s in the apartments, not the mobile home parks. That’s one of the things that increases demand in the mobile home parks, because people know how bad the apartments are and want to get out of there.”

Looking out for the Downsides

The one big no-no in mobile home park investing is buying parks that sit squarely in hurricane zones, Rolfe advises.

“Hurricanes are a real problem in parks,” he admits. “If you have an apartment complex, you hold insurance to rebuild. But as a park owner, the homes are not your responsibility. Many will not have insurance, and many will be underinsured. So if you buy a park and it gets hit by a hurricane, it’s going to be a real mess. You cannot afford to be a park owner in Galveston, Texas. Even if a hurricane only comes through every ten years, if your whole community is wiped out, that is a lot to lose.”

Another downside can occur if you micromanage your investment.

“Here’s the key to happiness in the park business: Do not get involved in the homes,” Rolfe strongly advises. “The big mistake park owners make is that they buy a park then discover that the lady in Lot 19 wants to sell her house for only a thousand dollars. Suddenly, the owner thinks he can buy that and get the rent on the land and the home. But the homes will kill you, because then you become involved in the lives of your tenants. You are one of them. They will call you all hours of the day and night, and you will be expected to mediate disputes. The homes are just not worth it.”

Rolfe says good park investors have to see themselves as similar to a city.

“If the city suspects someone is making meth (an illegal drug) in a home, do they confront the homeowner or go around asking the neighbors if they know anything? No,” Rolfe says. “The city informs the police and lets the police handle it.

“If the roads are good and the utilities are flowing, you’re doing your job. You don’t want to know the names of your tenants or about their families. You don’t really want them to know yours. You just provide the grass and the pipes, and that’s it.”

How Money Is Made

In the days before the Internet, mobile home park investing required hunting down a local broker in an area you were interested in and having him show the available parks, or cold-calling or visiting park owners to see if they wanted to sell. While these methods are still available, most investors now turn to the Web.

“The industry has changed hugely since the Internet was developed,” Rolfe says. “Now, even moms and pops have computers, so they Google ‘Sell my park’ and end up on our website. We carry over a thousand parks on, so you can build a vast universe of projects really fast, which you can then cold call or send a postcard. There is no shortage of product.”

There are three main reasons a park is up for sale, Rolfe says.

“There is one subset of sellers who are just opportunists. We call it ‘fishing for idiots.’ They will list a park for three times what it is worth, and some idiot will buy a bad park. Then there is another subset of sellers who are in distress and have to get rid of their parks. Some of these sellers are banks. But the bulk are the mom-and-pops. Because they are older or got divorced or have some kind of problem, they have to get rid of their family jewel.

“A lot of them built the park themselves and live in the community. They are not trying to get rid of it because it isn’t good. They just can’t carry it anymore.”

A good deal is a park that has a going-in cap rate of not less than 10 percent, Rolfe advises, and investors should plan to be able to take that from 10 to 20 percent in three to five years.

“You have to be honest with yourself during due diligence and work hard to ascertain all the real revenue and all the real expenses. And do it at the current occupancy figure. If there are 40 empty lots, do not put a penny of value on those empty lots. Just work with what you’ve got.”

The way to make money is to raise the rent and cut the costs, Rolfe says.

“Let me give you two personal examples. I bought a park in Grapevine, Texas, from a man who lived in a little house with a lot next door that he had turned into a little park of about 30 lots. Now he was old, and his wife hated the park and he wanted to sell. When I asked what rent his tenants were paying, it was $100 a month. One hundred dollars—when the going rent was at least $300 in the area! So I bought it and sent a letter to all the tenants telling them that they had been getting away with paying next to nothing for years, and in 60 days I was raising the rent to $275. They could leave if they wanted to, and I gave them a list of all the other parks in the area and their rents, all of which were higher. Sixty days later, I almost tripled the rent, and everyone stayed. I didn’t change anything else, except that I put up a nicer-looking sign.

“In another example, I bought a big park in Oklahoma from a businessman in California who was too busy to stay on top of it. He was losing money and basically didn’t want to mess with it. He didn’t know what was wrong with it. I went down there and found out that the guy had been suckered years before into offering free cable to all the tenants. And he had not even negotiated a commercial deal with the cable company. So at the beginning, he was paying like $20 a month per lot, but now cable was like $50 a month, and the guy was so inattentive that there were like 50 empty lots, and he was still paying for the cable on all the empty lots! He was paying thousands of dollars per month for nothing. I went to the cable company, found out the contract had long ago expired, and told them to turn the cable off. If the tenants wanted cable, they could order cable.

“The bottom line is this: A good deal will have real easy rent increase options and cost-cutting options.”

Like any good real estate investment, you must also look at location. In fact, location is especially important in mobile home park investing, because that is really all you are buying.

“If I buy a park in Durango, Colo., I am really just buying a piece of land in Durango,” Rolfe says. “I have to make sure Durango is going up and not down. You might be able to get a cheap park in Detroit, but good luck filling it up.”

And while most first-time investors buy parks within a couple of hours’ drive of their home so they can check up on them on a regular basis, Rolfe says the best-run parks are usually those whose owners live far away.

“Most people are just not comfortable enough to buy something too incredibly far from where they live,” he says. “They do better because the owners are not getting involved in personal disputes, and because tenants have no one to constantly complain to. Once you get over your mental reservation, most people go to their parks only two to four times a year.”

Visit for more information.

Print Friendly

Tags: , , ,

  • Ms. J

    I just purchased a mom/pop community and Im still nervous about this new adventure… however after reading your article I feel a lot
    better. It was funny too and made me laugh. Thanks

  • kjuhler

    “Raise the rent” Dear Sharks I bought a home in a mobile home park, I can’t move it. The rent is being raised 5% per year. It started under $700 and now is $850. If I calculate the mortgage on a new house, for the same payment, I am rapidly being DRIVEN back to home ownership and out of the park. Why? My equity position is diminished by the space rent proportionate to what a mortgage can buy. This amount, conceptually, should be subtracted from the value of my home. Very soon, now, all thinking tenants start a race to the bottom, trying to sell/dump their units. Rents start to dry up, you don’t want to lower your rent with fewer tenants. You, the owner, are now rapidly gaining the combined hatred of multiple families. Do you believe in Karma?