Mobile Home Parks: An Untapped Real Estate Gold MineBy Amy Bell

Is now the time to invest in real estate? In today'stumultuous real estate market, most armchair expertswould answer with a resounding, "No!" However,if you delve a little deeper, you'll discover a morerealistic answer to this question is... it depends. Itdepends on what type of real estate you have in mind.

If you're thinking of investing in single-family oreven multi-family homes right now, you may wantto think again. However, there is one commonlyoverlooked real estate niche that remains profitableeven in these tough times: retirement communities ofmanufactured homes (a.k.a. adult mobile home parks).

Research shows that fully-occupied, adult mobilehome parks rarely lose money even in the worst of realestate markets. As a matter of fact, these lucrative realestate investments are virtually immune to economicfluctuations. Read on to learn how adult mobile homeparks measure up to other real estate investments.

Residential homesOn the residential side, the single-family housing

~market is extremely weak. In some over-built areasof the country, home prices have plummeted to halfof their previous levels. Unfortunately, no one knowswhen we'll hit rock bottom. Maybe we're alreadythere, maybe we're not. No one can say for sure.Plus, with a multitude of investors already flooding thesingle-family home area, the market is fully saturated,making these investments much less profitable.

Single-family homes also suffer from extremelylow cap rates. (A cap rate is the actual return onthe equity of an investment.) These days, investorswho purchase and rent out a single-family home areearning as little as 3 to 4%, and often much less.

On the other hand, mobile home park investorsusually rake in twice as much. Well-maintained mobilehome parks typically have a cap rate of 7%. That meansmobile home park investments earn nearly 100% morea year than single-family home investments.

Multi-family homesMa ny econom ists pred icted that the wea keconomy

would boost the apartment business. However, these~experts failed to consider the number of young adults

who would lose their jobs, leave their apartments andmove back in with Mom and Dad.

In the fourth quarter of 2009, apartmentvacancies skyrocketed to a 30-year high as countlessyoung, laid-off workers moved back home or doubledup with friends. To top it off, rents fell three percentin 2009. So the multi-family market is not nearly asstrong as anticipated.

Commercial real estateOn the commercial side, vacancies are soaring

to historically high levels. According to Moody'sInvestors Service data, real estate prices on U.S.commercial properties dropped 4% in June 2010,causing Commercial Property Price Indices (CPPI) tolunge 41.4% below its peak (recorded in October2007). Due to the weak economy, throngs of retailstores and other small businesses have been forcedto close their doors. To top it off, small shoppingcenter establishments are suffering from what someexperts call "The Walmart Effect./I These smallbusiness owners simply cannot compete on pricewith the Goliath Walmart. Real estate prices on retailproperties fell by a whopping 10.9% in the secondquarter of 2010, according to Moody's.

Thanks to the downfall of innumerable businesses,office buildings are also suffering. Additionally, asan increasing number of employees are working fromhome, demand for office space is steadily decreasing.Today, more than 34 million Americans work fromhome occasionally, and this number is expected torise to 63 million by 2016, according to ForresterResearch.

The industrial space real estate sector is alsofloundering due to the feeble economy, not to mentionthe thousands of industrial jobs moving overseas,particularly to China. In the second quarter of 2010,industrial real estate prices decreased 2.9%.

Mobile home parks: A profitable nicheUnfortunately, in today's economy, most forms

of income-producing properties are not generatingthe income they have in the past. As a result, theseproperties are worth less today than they may havebeen two to five years ago.

However, there is one real estate investment nichethat has historically remained strong in both goodmarkets and bad: adult communities of manufacturedhomes.

I

Consider this: what factors make real estate a"good" investment?

1. Financial Strength: Investors need financiallystrong tenants who pay the rent or lease on time.

2. Diversification: Investors benefit from a largenumber of tenants paying the rent, rather than just afew. There is strength in numbers.

3. Stability: Your real estate investment is only asstable as your tenants.

4. Desire to Stay: If your tenants want to stay put,your investment will tend to be much more profitable.

When you scrutinize every type of real estateinvestment from single-family homes, duplexes,apartments and manufactured home communitiesto shopping centers, office buildings, warehousesand industrial properties, only one type of incomeproducing property stands out and meets all of these"good" investment factors. Only one has historicallyweathered the ups and downs of the economy. Thatone real estate investment is-adult manufacturedhome communities.

The fun (and aHordable) mobile home lifestyleMobile home parks that specifically target

residents aged 55 and older have proven to beextremely lucrative real estate investments. But whydo retired residents want to live in manufacturedhome communities?

The vast majority of adult mobile home parkresidents say the number one reason is the lifestyle.Some larger parks offer a number of exciting senioractivities every day of the week. From Bingo, cardgames and arts and crafts to coffee gatherings, potluck dinners and Happy Hour, these activities allowcommunity residents to mingle and socialize. Plus, justabout everyone in an adult mobile home park knowseveryone else-and they all look out for each other.

Of course, the extremely inexpensive rent is yetanother compelling reason, with lot rents rangingfrom $250 to $600+ per month. Here's an example:in one Florida-based adult mobile home park, aresident can pay $5,000 to buy a used single-widemanufactured (mobile) home. Then, the homeownerpays just $322 per month, which covers the homesite, water, sewer, trash, and lawn mowing.

This park is conveniently located so residents canwalk to the grocery store, the pharmacy, doctors'offices, churches, the hospital and even the mall.So, for just $5,000 in cash plus $322 per month, aretiree is fully covered, except for food and medicine.A retiree's Social Security payments would more thancover these affordable living expenses. Therefore,retirees in mobile home parks typically don't have toworry about outliving their money.

A lucrative investmentIt's obvious that many retirees enjoy living in adult

manufactured home communities. But what aboutmobile home park investors? Let's see how odulmanufactured home communities measure up to thos,_four "good" investment factors:

1. Financial Strength: Adult mobile home parksare populated by retirees. These tenants have money,and they pay their bills on time.

2. Diversification: The typical Florida mobilehome park includes 200 home sites. Each home siterepresents 0.5% of the rental income the propertyearns. Now, that is diversification.

3. Stability: Retirees generally leave a park for onlyone of two reasons: Either they pass away or moveto an assisted living facility. It's not like the commonrenters, who move every few years. Once a retireesettles in a park, they are normally there to stay untilthe end-or at least close to the end.

4. Desire to Stay: These retired residents do notwant to move. They want to stay in the park andenjoy the lifestyle as long as they are physically andmentally capable of remaining there. The state of theeconomy has no impact on their decision.

The bottom lineSo, is now the time to invest in real estate? When

it comes to mobile home parks, any time is a goodtime to invest-but especially now, when other realestate investments are struggling.

Although this niche is commonly overlooked,investors stand to earn significant amounts of moneyon mobile home parks. Take billionaire Sam Zell, forexample. Zell is the largest mobile home park ownerand one of the leading real estate investors in the U.S.

In other words, if you want to tap into a real estategold mine, you may want to check out that mobilehome park down the street.

Amy Bell is a professional freelance writer and owner ofWritePunch Inc. With more than a decade of experience,

she writes for a variety of publications and companiesthroughout the nation, including Investopedia, The Real

Source, Agent's Sales Journal, The Weather Channel,Turner Entertainment

and Perspectivesmagazine. She is a

University of Georgiagraduate with a B \

in Journalism. Visl1Amy's website at

www.writepunch.comfor more information.