…because "Mom & Pop" are opting for the gold watch (retiring).
The mobile home park industry was started 60+ years ago by the greatest generation. They won wars, made babies and built a lot of mobile home parks. Now Mom & Pop are retiring. They’ve been managing these parks for decades; now they’re over it and are finally ready to sell their little gold mines.
We love buying parks from mom & pop. They typically have no debt on the property, so they 1) haven't been as motivated to maximize park profits (by filling vacant pads, controlling costs and charging market rents) and 2) are typically more flexible on pricing and terms.
However, this Mom & Pop buying window won’t last forever. Other mom & pop owners are not going to replace the current mobile home park owners. Not a lot of today’s MHP investors are looking to move into a mobile home park and keep rents 30% under market because they’re friends with the neighbors.
The friendly tableside chat / seller-bonding with Pop to discuss due diligence findings and the unfortunate, but necessary, price reduction can’t last forever. The “Aw shucks son, I understand….how about I carry a note?” will eventually turn into contentious conference calls with the professional MHP investor's law firm: Dewey, Cheetham & Howe.
This same dynamic has occurred in other niche real estate investments. Industrious individuals develop great properties / business models, hold them until retirement and then sell to small investment firms that are early to identify the strength of the business model before the secret gets out. Then comes the institutional players and an affordable mobile home park IPO will eventually follow. We’ve seen this movie before (self storage industry).
Not surprisingly, It’s harder to buy a tremendous deal from a professional owner / operator. They want market prices (who likes to pay retail?) and they typically can’t offer seller financing.
We certainly hope the opportunity to buy parks at today’s attractive pricing levels continues indefinitely. However, we suspect the deal flow will eventually slow down as parks are inherited by younger owners or sold to “pros”, who’ll either sell for nosebleed pricing or hold for the long term because the cash flow yields are too attractive to give up.
While we might be in the later stages of this MHP buying opportunity, there are still far more great parks to buy than there is capital for us to invest. So, if you’d like to join us in sending Mom & Pop off to Florida in style while increasing the inventory of affordable housing and still earning a stellar return, kindly review our fund documents by clicking the link below.