As a mobile home park investment company, 52TEN constantly monitors market conditions so we can make smart decisions and adjust if necessary.
For investors who do the same, the current investment environment is challenging, to say the least. Everywhere they look, there’s uncertainty:
1. Inflation is at a historic high.
The cost of goods and services continue to go up, impacting the cost of living as well as the cost of doing business.
2. The stock market is down.
From the fall of 2021 to the fall of 2022, even the best investments in the stock market lost 15-20% of their value, while the worst ones plummeted 75-80% in a single year.
3. Interest rates have risen abruptly.
In an effort to combat inflation, the Federal Reserve began raising interest rates in early 2022. As rates continue to increase, the economic impact becomes a greater worry for policy makers, business owners, and investors.
4. Safe havens aren’t so safe.
Investments that are traditionally thought of as a hedge against inflation have been inconsistent. The gold market has fared the best but has still lost value, and Bitcoin, which was touted to be the “new digital gold,” plummeted in 2022 to a fraction of the value it was just a year prior.
5. Instability is everywhere.
The world is still not fully recovered from the pandemic, the political environment is in turmoil, and the war between Russia and Ukraine could escalate into an energy crisis. All of this has resulted in unnerving volatility, especially for traditional investments.
Given all those challenges, where can investors turn to find comfort and performance despite the economic headwinds? Look for investments with these important qualities:
1. Insulated from volatility to avoid loss of capital
If you’re invested in the stock market and the market goes down, you lose money. The same is true of gold or crypto. If you have your money in any investment that’s tied to the markets in general, your portfolio likely goes backwards during economic downturns. The ideal investment is one that’s insulated from that volatility in a way that minimizes the risk to your principal.
2. Consistent cash flow for stable income
Especially in times of inflation, it’s important to find investments that can be a source of cash flow. Specifically, look for investments that can provide stable distributions along with the opportunity to increase performance through a recession.
Historically, mobile home park investments (MHPs) have proven to be highly resilient in uncertain economic conditions. Particularly among real estate investments, MHPs stand out as a safe haven for a number of reasons:
MHPs are good at preserving capital.
Compared to other real estate classes, the likelihood of losing principal in an MHP investment is extremely low.
MHPs are recession resistant.
Historically, MHPs have produced consistent income even during prolonged economic downturns.
The MHP market is hot.
Demand for low-cost housing is at an unprecedented high, and the supply of affordable housing options is extremely low. Mobile homes are among the most affordable housing solutions, putting them in an ideal position compared to other real estate.
MHPs are a consistent source of cash flow.
Residents of MHPs tend to stay for long periods of time, which makes the parks a reliable source of income for investors.
MHPs have relatively low operating costs.
Due to the fact that the tenants own the homes in a MHP, there is less maintenance, resulting in lower operating costs compared to other real estate.
MHPs offer forced appreciation.
Because there is such high demand for affordable housing in these uncertain times, a good MHP operator is able to increase the value and performance of the investment, even during a recession.
With global unrest, high inflation, and rising interest rates, no one can accurately predict where the future is headed. However, it’s clear that investors either have to get comfortable with high levels of volatility or pivot to something more appropriate for times of uncertainty. One of the best investments to consider in these uncertain times is a recession-resilient strategy like mobile home park investments. They can be not only a safe haven for your wealth, but also offer the potential for growth in the most unstable economic environments.
This content is the perspective of the author and is not intended to be relied upon as a forecast, recommendation or investment advice, and is not an offer or solicitation to buy any securities or to adopt any investment strategy. The information and opinions contained in this content are derived from experience, historic data, and other sources deemed to be reliable, are as of the date of this content, and may change as subsequent conditions vary.