Low-hassle affordable housing + land banking + triple-net leases = what? There’s only one answer to this real estate investing equation, and that’s mobile home parks.
In the second episode in our Profitable Niches series, we venture into the land of mobile home park investing.
We chat with super syndicator Andrew Lanoie about why he ventured into this niche and what benefits investors can find in the mobile home space.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your mobile host, Robert Helms
- His unmovable co-host, Russell Gray
- Experienced syndicator, Andrew Lanoie
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An expert investor in a unique space
Do we know what’s going on in the mobile home space? We’ve got some general knowledge … enough to form some hypotheses.
But to test our hypotheses, we turned to Andrew Lanoie, principal partner at Park Place Communities. He’s been in the mobile home space for the last five years.
Why mobile homes? Two reasons:
- Increasing demand for affordable housing in the marketplace.
- Adequate supply of mobile home properties for sale, often by owners suffering from lazy landlord syndrome … which means many properties also have a value-add opportunity.
These two reasons are the main factors Andrew has made a place for himself in the mobile home space.
He started out in single-family homes but realized things weren’t penciling out after several years in the space. Andrew then tried multi-family properties … same problem.
Prices were escalating while returns were decreasing. So, Andrew started looking at different asset classes, eventually arriving on mobile home parks.
Today, he looks for distressed assets where he can buy low and add value.
Are mobile homes actually “mobile”? Not really. Ninety percent of mobile homes stay in place for the entire life of the home. Most residents sell their homes and buy new ones instead of paying pricy moving fees.
Why are mobile homes in demand? This class of affordable housing offers a lot of square footage for each resident’s dollar.
Think about it … the standard double-wide mobile home is equivalent to a 3-bedroom, 2-bath apartment. For $500-600 a month, that’s a lot of bang for a renter’s buck.
Plus, residents don’t have to share walls.
Pros of mobile home investing, and where to step cautiously
There are many benefits for investors, too. For example, Andrew says one big difference between a multi-family property and a mobile home community is the expense ratio.
“The expense ratio is reduced in mobile home communities because you only have to deal with below-the-ground issues.” That’s because generally, residents own the mobile home they live in, while investors only own the ground beneath their feet.
Owners’ biggest costs will be infrastructure costs, like sewers, water systems, roads, and electrical setups. Another cost is the cost of vacancies, although buyers can bring that down by renovating and reselling non-performing homes.
One area for upside is rent increases, although investors should be very careful in this space. In the affordable housing sphere, “You cannot just gauge rents up,” says Andrew.
However, investors can make slow and steady rent increases … as long as they are making other improvements to increase the value of the property to residents.
How does tenant-landlord law work? In most cases, residents are paying a pad rent plus an additional lease amount if they don’t own the mobile home outright. If a mobile home owner can’t pay their pad rent, operators can essentially put a lien on the mobile home.
“It’s usually a 90-day process to get someone out,” notes Andrew. In many cases, operators can make a deal with residents before it gets to that point. But if necessary, it is relatively easy to expel a non-paying and uncommunicative tenant.
While there are many benefits to buying a mobile home community, Andrew recommends caution as an overarching strategy when purchasing. Deferred maintenance and other issues crop up often in older properties, so buyers should do thorough due diligence before buying.
Another thing to consider is the path of progress. Some mobile home properties increase in value as cities grow around them. “I wouldn’t plan on that as an exit strategy, though,” warns Andrew.
One tough aspect of mobile home investing is that commercial lenders are almost always unwilling to offer loans for this investment class when occupancy rates are low. Investors interested in distressed assets will have to find alternate financing sources.
One option? Syndication. This is the model Andrew uses to buy and operate mobile home investments. Keep reading to learn about his strategy!
A peek at Andrew Lanoie’s prolific syndication portfolio
With his team at Park Place Communities (PPC), Andrew has almost 1100 operating units in 15 communities spread throughout 8 different states.
“We get the most traction in the Midwest and Southeast,” says Andrew.
Many of his investments aren’t in major metros … but towns can’t be one-trick ponies, either. He’s looking for markets with multiple employers and diverse, stable populations.
An essential part of running this kind of operation is building a stellar team. Andrew has people on the ground in every state to search for and buy new properties.
Because this asset class is often difficult to operate and there isn’t a property management company that could fill all PPC’s needs in every state, Andrew and his team have built out their own management team.
They’ve also formed a construction company to renovate homes at new sites. For Andrew, renovations are the “low-hanging fruit” when adding value.
PPC also works with manufacturers when a lot needs new mobile homes … the cost of which investors can potentially recoup when they sell to residents. These homes do not need to be paid for with cash, but can be mortgaged, freeing up money for the investor.
Once the construction crew is done and units are in place, the marketing department takes over to find residents. Once residents are found, they’re sent to PPC’s lender, who looks for a history of on-time rent payments and an ability to pay the rent going forward.
One other essential relationship is with brokers. Andrew and his team have built great relationships with brokers, which allow them to access off-market deals and pocket listings.
Andrew’s operation has a TON of moving pieces … which allows the PPC team to leverage efficiencies for maximum return.
For the average mom-and-pop real estate investor, running an operation like Andrew’s is out of the question. That’s why PPC syndicates deals … so investors can access a high-cap-rate investment passively.
Another pro to this investment class? It grows slowly and steadily … even during downturns.
We asked Andrew what potential investors need to know. His number-one piece of advice is to do your due diligence before jumping into a deal.
Interested in learning more about investing in the mobile home space? Listen in to the show to get access to Andrew’s curated report on mobile home park investing. He’s compiled a detailed overview of why he and his team are bullish on affordable housing and mobile home communities … and why you should be too.
We encourage you to do your own research and learn more … and keep listening to the Profitable Niches series to step off the beaten path and learn more about other lucrative, but as-yet unexploited asset classes.
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