How Much Does a Mobile Home Park Make?

Mobile home parks, also known as manufactured home communities, offer unique advantages over other real estate investments. For one, they typically require lower capital investment compared to traditional real estate like apartment complexes or single-family homes. Additionally, mobile home parks have a higher return on investment (ROI), making them a lucrative venture for those looking to generate steady passive income.

The Income Potential of Mobile Home Parks

So, how much does a mobile home park make? On average, mobile home parks can generate an annual income ranging from $100,000 to over $1,000,000 depending on several factors. These factors include the number of lots, occupancy rates, lot rents, and operational efficiencies. Let’s break this down:

1. Lot Rent Revenue

The primary income stream for a mobile home park is the rent collected from tenants who lease lots for their manufactured homes. The average lot rent in the United States ranges between $200 to $800 per month, depending on the location and amenities offered by the park. For a park with 100 occupied lots at $400 per month, the gross income would be:

Monthly Income = 100 lots × $400 = $40,000

Annual Income = $40,000 × 12 = $480,000

This figure can significantly increase in markets where lot rents are higher or if the park is larger.

2. Additional Income Streams

Beyond lot rents, mobile home parks can generate income from various ancillary sources. These may include:

• Utilities: Some parks charge separately for utilities like water, sewage, and electricity, either as a direct pass-through cost or with a slight markup.
• Laundry Facilities: On-site laundry services can be a significant income booster, especially in larger parks.
• RV Spaces: Renting out spaces to recreational vehicles (RVs) can also add to the income, especially in areas popular with tourists.
• Storage Units: Offering storage units for rent within the park can be another lucrative option.

Combined, these additional income streams can add anywhere from 10% to 30% more revenue to the park’s total income.

Cost Considerations

While the revenue potential is attractive, understanding the costs involved in running a mobile home park is crucial. Operating expenses typically range from 30% to 50% of gross income. These expenses include property taxes, insurance, maintenance, utilities, and management fees.

1. Operating Expenses

Common operating expenses include:

• Property Taxes: This varies by location but is a significant line item in the park’s budget.
• Insurance: Mobile home parks require comprehensive insurance to cover liabilities and potential damages.
• Maintenance: Regular maintenance of roads, utilities, and common areas is essential for tenant satisfaction and long-term park value.
• Utilities: If the park owner is responsible for utilities, this can be a substantial cost.
• Management Fees: If the park is managed by a third-party company, expect to pay management fees, usually a percentage of the gross income.

2. Capital Expenditures

In addition to operating expenses, park owners must also account for capital expenditures (CapEx). These are larger, infrequent expenses such as road repairs, infrastructure upgrades, or adding new amenities to the park.

Profit Margins and ROI

After accounting for all expenses, the profit margin for a well-managed mobile home park typically ranges from 40% to 60%. This means that for every $1 in revenue, $0.40 to $0.60 is profit. The ROI for mobile home parks can vary widely, but many investors see returns of 10% to 20% annually, which is higher than many other forms of real estate investments.

Case Studies: Successful Mobile Home Parks

Case Study 1: Park A

• Location: Rural Midwest
• Number of Lots: 120
• Occupancy Rate: 95%
• Lot Rent: $350/month
• Annual Gross Income: $478,800
• Annual Expenses: $191,520 (40% of income)
• Net Operating Income (NOI): $287,280
• Profit Margin: 60%

Case Study 2: Park B

• Location: Coastal Florida
• Number of Lots: 200
• Occupancy Rate: 90%
• Lot Rent: $600/month
• Annual Gross Income: $1,296,000
• Annual Expenses: $518,400 (40% of income)
• Net Operating Income (NOI): $777,600
• Profit Margin: 60%

Risks and Challenges

While mobile home parks can be highly profitable, they are not without risks:

1. Tenant Turnover: While turnover is generally lower than in apartment rentals, when it does occur, it can be more costly as moving a manufactured home is expensive and time-consuming.
2. Regulatory Risks: Zoning laws, rent control measures, and environmental regulations can impact the profitability and operation of a park.
3. Market Saturation: In some regions, an oversupply of mobile home parks can drive down rents and occupancy rates.
4. Management Challenges: Effective management is crucial, particularly in maintaining occupancy rates and ensuring tenant satisfaction.

Conclusion

Investing in mobile home parks can be a lucrative venture with the potential for high returns, especially when compared to traditional real estate investments. However, success requires careful due diligence, effective management, and an understanding of the unique risks and challenges associated with this asset class. For those willing to navigate these complexities, mobile home parks offer a compelling opportunity to generate substantial and steady income.