Yesterday’s NY Times Magazine had a really interesting piece on investors who buy and fix up mobile home parks.
In a somewhat surprising twist, the reporter seemed genuinely to respect the investors who are, after all, providing pretty decent accommodation to people at absolutely the lowest possible rung of the housing ladder.
For investors, I think two points stood out:
1. If you’re looking for above-market returns, it’s worth looking into unpopular businesses. Tons of people are happy to tell their friends about the apartment buildings they own in Beverly Hills. Not too many people want to tell their friends about the trailer parks they own in Yerington, NV. Where there’s less competition to own a given cashflow, the price will be lower and, thus, the yield higher. (Did I spend time looking at trailer park listings after reading the article? What do you think?)
2. The undesirability of trailer parks in California and New York, because it’s too difficult to get rid of tenants who don’t pay rent. Regular readers will remember that I have spent some time writing about the implications for the rental housing business of the increasing “tenant-friendliness” of specifically California’s legal system, but I think it’s worth repeating.
The investor profiled in the Times piece is one of the good guys. He’s not running luxury complexes, but he is keeping his parks up and maintaining order. In order to make money by running decent parks, he needs to be able to get rid of people who don’t pay. If you make this difficult, then he (and other responsible owners) will not run parks in your state.
Do you know who will run them? Slumlords who cut costs to the bone to maximize current cashflow while letting the parks go to hell. Do you know who suffers when this happens? The vast majority of tenants, who are decent people just trying to get by.