In the last decade, some of the country’s biggest private equity firms have been acquiring mobile home parks at a blistering pace because of their one-of-a-kind performance qualities. The secret is getting out.
Mobile home parks offer distinct advantages that are attracting people from all walks of life seeking an alternative to traditional investments. And for busy professionals who want all of the perks without doing any of the work, a mobile home park fund can be the ideal passive investment opportunity.
Wall Street Volatility Means Your Money Can Disappear Quickly
The longest sustained bull market in history made investors happy from 2009-2019, but we all know it can’t last forever. 2020 showed us the kind of volatility that investors face with traditional investments. It’s not a matter of if there will be more market corrections, but a matter of when.
In some cases, dips turn into plunges. The market crash of 2008 instantly wiped out an average of 50% of the value of retirement accounts and investment funds in the blink of an eye. And that wasn’t a once-in-a-lifetime event. If anything, we’re now seeing that major economic events may happen more frequently, and the value of traditional investments can vanish with terrifying speed.
Market cycles are inevitable, and the volatility we’ve seen recently is a sign of what’s to come. The problem is that most traditional investments are tied to market cycles, and investors have little control over their movement. When the market corrects, so does the value of most investments.
Where Can Investors Turn
Many investors diversify their portfolios in an attempt to insulate themselves from market fluctuations. However, because the performance of most traditional investments is correlated with the market, diversification doesn’t always help. That strategy may simply accumulate a varied portfolio of poorly performing investments.
To truly insulate investments from the market, investors turn to alternative assets like commodities, private companies, and real estate. While this strategy will certainly sidestep Wall Street volatility, not all alternatives are created equal. Some alternatives are considered a hedge against inflation, while others are looked to for cash flow.
Real estate is often referred to as the ultimate hedge because of its qualities as an inflation hedge and its ability to produce cash flow. As the saying goes, more wealth has been created by real estate than any other investment type. But keep in mind, most real estate can be impacted by corrections like we saw in the Great Recession of 2008.
An Alternative with Many Advantages
The secret that the country’s biggest private equity firms know about is the one niche within real estate that consistently outperforms others, in good times and in bad: mobile home parks.
The unique characteristics of mobile home parks cause them to be uncorrelated with the markets, the economy, and the performance of other real estate, resulting in their powerful ability to weather a recession. Because of these qualities, they can deliver predictable cash flow during difficult times and shield investment dollars from losses.
Why Mobile Home Parks are the Best Investment for Busy Professionals
As an investment, mobile home parks (MHPs) check all the boxes for people seeking a passive, lower-risk investment that can provide predictable cash flow and peace of mind.
- High demand: Mobile home parks are the most affordable housing. The demand for affordable housing continues to increase, and it will escalate even more during the next recession.
- Low supply: Few new mobile home parks are being built, so supply is dwindling. And as demand goes up during economic downturns, supply gets even lower.
- High cash flow: Mobile home parks tend to produce consistent cash flow through every market cycle, unlike other forms of real estate that ebb and flow.
- Low volatility: Mobile home parks are lower-risk, recession-resistant investments. They have the ability to produce predictable cash flow, even when markets crash, because they are consistently in high demand. And their performance is not correlated with the stock market, the economy, or other real estate classes.
The Easiest Way to Invest in Mobile Home Parks
There are two ways to invest in mobile home parks: buy a park yourself, or partner with a mobile home park syndicator. Buying underperforming parks and turning a profit requires a combination of knowledge, time, capital, connections, and access to deals. Busy professionals may have some of these, but rarely all of them.
There is an easier option that allows people to invest in MHPs without doing all the heavy lifting themselves: partnering with an experienced mobile home park syndicator.
A mobile home park syndicator (also commonly referred to as a “sponsor”) is a company that offers a passive investment in mobile home parks. The company is responsible for finding deals, performing all the tasks required before and after closing, overseeing day-to-day management and property improvements, and managing the overall performance of the investment. The investor’s only responsibility is contributing capital.
Working with an experienced syndicator allows an investor to benefit from all the advantages of mobile home parks without the time commitment and risks of owning one themselves.
Top 10 Benefits of Passive Mobile Home Park Funds
Investing with an experienced syndicator grants investors many benefits they may not receive if they acquire a park on their own, including:
- Access to deals: Syndicators can find deals that the general public never even knows about.
- Lower required investment: Rather than having to fund the purchase of a whole park yourself, working with a syndicator means you can buy shares of MHPs in much the same way you do with stocks.
- Low time commitment: You’ve got too much to do already and not enough time to manage all the responsibilities that come with owning a mobile home park. A syndicator does all the day-to-day work for you.
- Lower risk: Investors can leverage the syndicator’s experience to avoid costly mistakes. In most cases, investors will make a better return being passive than they would have if they acquired a park on their own.
- Better returns: Syndicators tend to buy larger parks. Larger parks create economies of scale that result in higher returns and more stable cash flow.
- Profit sharing: At the end of the investment period, when the parks are sold, investors get to share in the profits.
- Direct access: Unlike traditional investments, syndication offers direct communication with the people responsible for the performance of your investment, the mobile home parks themselves.
- Tax benefits: Investors can receive the same tax advantages that come with ownership of real estate, such as depreciation.
- Retirement-account friendly: Mobile home park fund investments are a great fit for retirement accounts because they are resistant to recessions and have stable cash flow. These qualities help meet required minimum distribution requirements (if applicable) and create the opportunity for compounding returns by reinvesting cash flow distributions in the parks.
- Diversification: Similar to the way a mutual fund behaves, a mobile home park fund diversifies the investment across a group of parks instead of investing in a single park. This results in reduced risk and blended performance across all the parks in the fund.
A Powerful Opportunity for Busy Professionals
Most investors find that a passive investment with a sophisticated syndicator is the simplest way to invest in mobile home parks and usually results in a better return. It gives them all the advantages of park ownership without the need for expertise or a big-time commitment. The benefits of passive mobile home park investment are perfect for professionals who have more pressing things to do with their time than actively managing a property.
This is a conversation about investments, but when we zoom out, this is really about time and money. For busy professionals, a passive investment in mobile home parks can give them more of both.
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.