From Caleb – Why Mobile Home Park Living is in High Demand
I spend at least an hour every week researching the rental markets where our parks are located. One of my favorite markets is in Dubuque, Iowa where our Lore Mound Mobile Home Park is located. Right now, the average 2 bedroom 2 bath apartment rent in the city is $1,300 a month. While this may seem low for someone like me living on the West Coast, this is strong for a Midwest market. If you are a family looking to live in the Dubuque area, you can rent a 3 bedroom 2 bath house for around $1,700 a month or you can buy a home for around $250,000. If you choose to buy, you need $50,000 to put 20% down. Your options are limited if you are a blue-collar worker in Dubuque.
The lot rent at our community is $425 a month and includes water, sewer, and trash. We currently are bringing in a brand new, 3 bedroom, 2 bath, 1,165 square foot mobile home into this community. The price of this home is listed for $72,999. By using 21st Mortgage’s mobile home payment calculator, we can calculate for a tenant with 5% down and a 650 credit score would be paying a $648.74 mortgage. This means lot rent, mortgage, water, sewer, and trash, the tenant will be paying $1,073.74 a month.
This includes a yard for their kids, more parking than an apartment complex could offer, a neighborhood feel, a detached house, pride of ownership, and access to all the park amenities. This is over $600 cheaper per month compared to renting a three bedroom house (and this does not include the savings from them not paying water, sewer, or trash). Additionally, in 23 years when the mortgage is paid off, they will own the home outright and only be paying lot rent.
Take a look at some photos below of the exact model we mentioned we are bringing in:
Compare this to the cheapest 3 bedroom home in the city. It is listed for $1,440 a month:
Put yourself in the head of a family trying to get by in today’s tough economy. Which one would you rather choose? Both of these options are both “rentals” so even by paying the higher monthly price, you never build up wealth in your home. Except with a mobile home, you can build equity over time as you pay down your loan.
We could theoretically raise our lot rents by $300 per month and we would still be cheaper than the cheapest other option. This is why there is such high demand for mobile home parks. The low-price we offer can not be beat by any other housing industry.
Let’s look at another scenario that is much different than the Dubuque example.
We own another park in Bloomfield, Iowa. Bloomfield is a much smaller town that Dubuque (about 3,000 people compared to 60,000). However, it is in the MSA of Ottumwa IA which has around 40,000. When we were under contract for this property, we were trying to get to know the market as well as possible. We noticed that the home prices in Bloomfield were $100,000 higher than Ottumwa. This did not make sense to us because generally the larger towns have higher home prices than the smaller towns.
We finally got an answer on why this is the case from our on-site manager. The answer: families.
Bloomfield, although only a population of 3,000, has a high school and elementary/middle school. The schools are MUCH better than the schools in Ottumwa. So, Bloomfield is full of families that commute to Ottumwa for work, but live in Bloomfield for their kids. In addition, the county hospital is located in Bloomfield. Crime is much less than Ottumwa, and it is overall very family centered.
When looking on Zillow for rentals in the city, there was not one 3 bedroom home or apartment for rent! When a home would come up for rent, it would be taken off the market in only a few days. It was surprising to learn that a lot of these rural Iowa tows have too little housing.
We ended up buying the Bloomfield mobile home park with a goal to bring in 3 bedroom units where families can live. The lots on this property are very small, so we are bringing in 16×66 3 bedroom 2 bath models. These can be sold to the tenants for $64,999.
With 5% down and a 650 credit score, the mortgage comes out to $586.37 per month. Lot rent at this community is only $249 a month which is very cheap. That means their total payment comes out to $835.37 per month.
Right now, the only rental on the market is a 1 bedroom 1 bath apartment for $700 per month. So, it is almost impossible for a family to move to Bloomfield unless they get lucky with a rental that comes on the market, or they put down $40,000-$50,000 on a $200,000-$250,000 home. When 3 bedroom rentals do come on the market, they are almost always apartments and they cost anywhere from $850-$1,000.
The bottom line is mobile home parks can offer a price that is unmatched by single family, apartments, townhomes, or any other type of living. We are in a housing crisis in the United States and mobile homes are one of the last affordable types of housing left. All without government subsidies. It is a win-win for the owners and the tenants.
As time goes on, inflation keeps increasing, and housing becomes less affordable, mobile home parks will continue to offer the true solution to affordable housing.
