How about _____ ? (insert other real estate invest asset here)

In our search for the ideal Real Estate asset, my partners and I have considered, among others…

Multi Family (from duplexes, to apartment buildings)
Single homes (buy and hold, or flip)
High density (where you buy an asset, and then you actively fill it up with as many people as possible, like in the case of a nursing home)
Others…

We found that all of them have their pro’s and their cons. There are a lot of people out there making a lot of money on any given asset, so I do encourage you look into them if they appeal to you. There are specific reasons why we think mobile homes perform better, here’s a quick overview of two important aspects: Liability and Crash-proofness.

Liability.

Whenever you own something, you have to wonder… what could go wrong? What will I have to pay tomorrow if it breaks (or if they sue me?
For example, if you won a house and the roof starts leaking, there goes your profits for a good chunk of foreseeable future. Or if you are running a nursing home, and somebody sues you because they think there has been malpractice… what are the legal costs you are looking at?

Mobile Home Park advantage: what you really own is the ground the park is on. In some cases (but not always) you own some infrastructure (water and sewage). At times you own some mobile homes, but there’s a way to deal with that (we have a secret ingredient here… that I am not ready to share just yet).

The bottom line here is that there’s far FAR less things that could go wrong in a mobile home park than in any other type of assets (if you exclude buying land).

Crash Proof

What happens when the next market crash comes around?

What happens to assets when the market crashes?

Think of home flipping. It can be very profitable while the market is on an upswing, and if that’s your bread and butter, please continue doing it. For us though, we were worried about what would happen when the next market crash happens, and most of our capital is locked up in a number of homes that suddenly become upside down on their value… would we have to wait another 4–6 years before being able to make any profit on them? It wasn’t a scenario we were looking forward to.

The MHP advantage: what happens to the value of a mobile home park when a market crash happens? It goes UP. Yes, up. It might seem counterintuitive, but it’s true. The simple reason is that when the market crashes people are forced to downgrade, and that results in more demand for mobile homes.

Think about 2008: what happened to all home owners that were using their house as a credit card? They had to let go of their house and go live… where? Some of them in apartments. Others in mobile homes, but most of them in apartments. That means that there is more demand for apartments, therefore apartment prices go up. A lot of people that could barely afford an apartment, suddenly couldn’t anymore, and what did they look at, if not Mobile Homes?

So you have more demands for Mobile Homes from people that can no longer afford their home, and more demand from people that can no longer afford their rent… all of that equals more demand for mobile homes, which means that prices of mobile home rentals go up, which mean that the value of the parks themselves go up.