The value of any investment comes from its ability to generate cash flow. This influx of cash can be immediate, such as a stock’s dividend or a property’s rental income. Cash flow can also come in the future, when you sell an asset for more than what it cost. With real estate, the same principles typically apply. As an investor, you’re in it to achieve an acceptable return.
On the other hand, you’re investing in something tangible. You’re likely going to hang onto your investments for a while, making improvements along the way. Properties can also become projects and a source of pride as you make them better places to live for the residents. Mobile home parks present opportunities to take a property from good to great. Let’s explore three ways you can transform these investments for the better.
1. Upgrade the Infrastructure
Real estate is often judged by its bones. You’ve likely heard the saying and may have even used it yourself. The house doesn’t fall when the bones are good. This saying primarily refers to the foundation and other major structural components of a conventional property, such as a condo high-rise. But you can still apply the concept to mobile home parks.
If you think of the park’s infrastructure as its “bones,” then you’re on to something. Maintaining this infrastructure properly is essential. Yet, upgrading it can make a huge difference in terms of adding value to your investment. Typically, a park’s infrastructure includes roads, common areas, and utility hookups. The infrastructure will also include sidewalks and lighting.
When it comes to mobile home parks, Lifestyle Investing expert Justin Donald talks about key investment strategies. Value-add investing is at the top of the list. Donald explains, “If you are interested in mobile home parks, it’s a good idea to purchase properties that are not yet attractive to institutional investors. You can elevate a lower-tier park into an asset that REITs will pay a premium for by upgrading infrastructure.”
Think of it this way. When you buy a home, you assess the necessary improvements and factor them into your offer. It’s what other investors are going to do once you decide to sell your park. When attractive upgrades are already there, it’s an easier sell. Additionally, you’re enhancing the park’s ability to attract new residents and retain those already there. The fewer vacancies, the more short-term profitability, which is also attractive to investors.
2. Boost the Amenities
Another way to transform a mobile home park is to add community amenities. What you add will be determined by the size and location of the park. Different states may have varying legal definitions of what constitutes a mobile home park. For instance, Colorado defines a park as an area with five or more mobile homes where an owner or manager collects rent from residents under rental agreements.
If you have a smaller community and limited land to develop, you may want to focus on installing an outdoor playground. Consider adding a shared recreational facility where residents can work out and play indoor tennis. With larger properties, those amenities could expand to include a swimming pool, an on-site dog park, and coin-operated laundry.
You could also beef up the park’s security. Installing surveillance cameras and gated entrances provides mobile home dwellers with the same features typically found in upper-tier neighborhoods or buildings. You could also hire security staff to monitor the grounds. The staff could be stationed 24/7 or during the evenings when residents may want extra surveillance.
If having a security patrol on-site is too much, remote monitoring is an option. Residents can still be assured that the community’s safety is a priority, and help is nearby when needed. They’ll also have peace of mind if they leave to go on vacation. Adding amenities like these can increase the park’s value, as more residents will be attracted to live there. Additionally, amenities can enhance the park’s resale value.
3. Implement Tenant-Friendly Policies
A community can be immensely attractive with a stunning golf course and waterfront views. All the desired amenities can be there at the right price. But have you ever passed on moving into a place because it would be too much of a hassle? Policies that make it difficult to live in a community can turn away residents faster than an undesirable location.
Low occupancy rates signal problems for investors. Without sufficient rental income, it’ll be challenging to maintain the park’s operations. A high vacancy rate could also concern prospective residents and result in below-average rental rates.
Tenant-friendly policies can keep vacancy rates low while optimizing the property management aspect of the investment. Examples include automating rent payments, streamlining community communication, and offering incentives to residents. Unlike apartments, mobile homeowners usually want to stay put. It costs thousands of dollars to move their house from one park to another. Rewarding long-term lease signers with a slightly lower loyalty rate can be mutually beneficial.
You may want to consider collectively billing utilities and including those costs in the monthly rent. This way, tenants only have to pay one bill each month instead of several. Hosting regular onsite events, such as tenant meet-and-greets and socials, can reduce isolation and build residents core group. Move-in specials, flexible lease options, and periodic rate reviews are additional ways to make a community more tenant-friendly.
Mobile Home Park Improvements
Increasing the value of a mobile home park can make it more attractive to residents and other investors. When a community is well-maintained and has the upgrades tenants desire, it becomes a place where people want to be. They’re proud to say they live there. As an investor, you can say you had a hand in creating the space from the ground up.
A piece of real estate is often a long-term investment. You want to leave it better than you found it, should you ever decide to bow out. And if you maintain ownership of the property for longer than expected, it can become part of your showcase portfolio. If you acquire other properties, your reputation for creating communities with high standards will follow. Most importantly, you’ll be improving the lifestyle value of those who choose to live there.
Featured Image Credit: Curtis Adams; Pexels; Thanks!
