How to Decide on Whether to Invest in Tiny Home Parks vs. Mobile Home Parks

You’ve been thinking of investing in real estate. But you’ve decided to avoid the traditional apartment complex, condo, or single-family home and diversify your portfolio further. Your instincts tell you to consider less conventional choices like tiny homes and mobile home parks. You want to focus on one type of unconventional property and not spread your resources too thin.

While affordable housing concerns make either choice an attractive investment, there are differences between these two considerations. The distinctions could make one choice more reasonable and desirable than the other. It all depends on the resources you’ll need for the project and your investment goals. Here’s how to decide whether investing in tiny home parks versus mobile home parks is right for you.  

Tiny Homes May Offer More Variety

For average wage earners, traditional homes have become unaffordable in 99% of the country. It’s a shocking statistic, although perhaps not surprising. Simultaneously, it’s important to note the metric for “affordable,” according to the report that produced the statistic. According to the report, “affordability” is defined as 28% of a household’s income. Mortgage, property tax, and insurance payments are figured into that cost.

While some people will choose to stretch their budgets to make their dream home a reality, others just can’t. They’re seeking more attainable housing options like mobile and tiny homes. Although mobile home models can offer some variety, tiny homes tend to come out ahead in this category. There’s everything from unique 200-square-foot designs to larger 600-square-foot floor plans that resemble compact versions of single-family houses.  

Tiny homes offer wider aesthetic and functional choices from the exterior to the interior. You can even choose whether you want a tiny home to be on wheels like an RV or stationary. As an investor, you could establish a tiny home park where you start small. You could buy a few tiny homes and rent them out to vacationers or those who need short-term housing.

You could also purchase only the land and rent it to tiny homeowners needing a place to park their dwellings. But with the variety comes added risk. If you choose to rent out tiny homes you own, there are risks associated with finding and keeping good tenants. And owners of stationary tiny homes may find it less feasible to pick up and move. However, owners of tiny homes on wheels won’t face the same hurdles.

Mobile Home Parks Can Involve Less Maintenance

Investing in a mobile home park where the tenants own their homes often means less maintenance for you. As the investor, you’re responsible for keeping up the land where the homes sit. The areas of the park you’ll typically have to maintain are common or shared spots, such as onsite playgrounds and roadways.  

With tenant-owned mobile homes, the tenants must take care of the big stuff. Think of HVAC units that go down and outside siding needing repairs. When you’re relatively new to real estate investing, opportunities with fewer risks and less upkeep are easier ways to practice.

Lifestyle Investing expert Justin Donald says, “You may start out playing chopsticks on the piano. Still, with a ton of practice and listening to your mentor or teacher, you will soon have the sweet melody of success.” In general, you’re more likely to find an increased number of established mobile home park investments than tiny home parks. These are communities with a history of numbers you can look at.

Yes, there might be over 10,000 tiny homes in the U.S. But it doesn’t mean they all exist in established communities. Although tiny homes continue to grow in popularity, some states are more friendly to tiny home parks than others. Yet, you’d be hard-pressed to find a state where mobile home parks haven’t existed for decades. For beginners and the risk-averse, mobile home park investments can be more accessible or practical.

Tiny Home Parks May Require Starting From Scratch

When you invest in a tiny home park, you may need to build everything from the ground up. Unlike buying an established mobile home park, you may purchase open land without infrastructure. Local zoning laws might be friendly to tiny home communities, but most people aren’t going to want to live off the grid.  

You will have a niche of tiny home dwellers who desire an off-grid experience. But the majority will want electricity and running water. If you’re embarking on a tiny home park investment, you might need to establish and build the necessary infrastructure. Footing the bill for this can increase your initial costs and risks. It also may take you longer to recoup your investment and reach your desired rate of return.

An alternative to tiny homes is to invest in an existing mobile home or RV park and convert it into a tiny home community later. However, you could uproot residents with a longstanding history of paying rent on time. In addition, you’ll need to thoroughly research zoning laws and potentially go through the process of zoning changes. The latter may be more applicable if you plan on accommodating stationary tiny homes versus ones on wheels.

An advantage of converting an existing RV park is the utility infrastructure already exists. On the other hand, you’ll need to decide which segment of the tiny home market you want to target. Say you focus on those seeking stationary homes. You’ll want to find a builder and factor in construction costs plus the time it will take to build and sell those homes. You may need to enlist the help of other experts to get your investment up and running.     

Mobile Home Parks Might Have More Consistency

In most areas, zoning laws limit the number of mobile home parks. Furthermore, existing tenants are more reluctant to move their homes. For one, their options in the area can be restricted. There might not be available space at another nearby park. It’s also typically cost-prohibitive for tenants to move their homes.

When you invest in a mobile home park, you generally inherit its established tenant base, too. This base means you could see consistent, positive cash flows immediately. You won’t necessarily have to build the park or find a solid tenant base from scratch. Think of it as buying into a franchise.

Yes, you’re ultimately responsible for a successful operation. Yet you’re able to ride the coattails of a known brand. The reputation of the park and its existing customer base can make the road to success less tricky. While this can work in reverse, you won’t be investing in something relatively unknown.

If the park has a less-than-stellar reputation and tenants have concerns, you can turn it around. Again, it goes back to tenants’ overall reluctance to move their homes. They may be more willing to negotiate and work with you to improve an older or run-down park.

Investing in Tiny Home Parks vs. Mobile Home Parks

Despite real estate’s reputation for good returns, investing in it has pros and cons. When considering whether to take the unconventional plunge, risks can increase. Yet, with higher risks, you can earn greater returns.

While tiny home and mobile home parks come with both, it depends on how much work you can put in. Tiny home parks may offer more options and the chance to start from scratch. And mobile home parks can mean fewer upfront costs and immediate, consistent cash flows. As with any investment, evaluate the risks and rewards against your tolerance levels and goals.

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