Mobile Home Parks… Are they a good investment?

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By Cynthia Aasen

Trailer parks are far from the trailer-trash image comically portrayed in the Trailer Park Boys of TV and movie fame.

Manufactured or modular home parks provide affordable housing for seniors, young families and additional quick possession housing in high growth markets. The modern modular home is impressive, comfortable and conforms to the highest level of construction codes and standards. These modular homes will go through careful constructing to ensure that they meet the correct building codes, it doesn’t just stop there though as there will be checks done and things like concrete coring administered for structural testing and access for various wiring and foundation needs, all of this together can help these modular homes be the best accommodation for those that need it.

As an investment, modular home parks are a highly sought-after commodity. The reasons are numerous, but the biggest is the steady cash flow they produce. Because of this, lending institutions have changed their tune over the years and now find them a safe and desirable investment to finance. Appraisals and a Phase One Environmental Study are usually required, however, as parks are classed as a commercial investment property.

This investment income is from the rental of a pad space. Some parks have park-owned rental units which is like owning an apartment block or single-family residential units, with vacancies, tenancy changes, tenants skipping out, repairs, appliances and maintenance on the units. Owner-occupiers of mobiles usually take pride in their homes and are the preferred tenants. So they will call out something like a Dryer vent cleaning service by Pure Air or local electricians to deal with any issues that may crop up whilst the tenant is living there to ensure that the unit is properly cared for and functioning.

In recent years modular home parks have been marketed as bare land strata developments or as condominium plans with lots sold to owners or investors who then construct and place a modular home for sale, for rent, or home ownership.

In addition to understanding the rules of the applicable Residential Tenancy Act, Condominium or Strata Act, there are other steps you can take to reduce the risks when purchasing bare land strata/condominium plan.

The key area of concern is what if the developer fails to complete the development? I highly recommend the following to mitigate your exposure:

  1. Do your due diligence on the developer. Has this developer done similar projects?
  2. Conduct a land title search on the parcel of land proposed for the development to determine if and/or how much financing is secured by land.
  3. Request a copy of the budget to fully service and develop the lots.
  4. Do the math. Mortgage financing plus development cost budget = the number of pre-sales required to break even. Request verification of pre-sales.
  5. If it s a Phased Development check the dates for the final phase to be completed and whether any infrastructure is contingent upon the final phase being completed.
  6. Check the zoning.
  7. Determine the salability and/or the rental rate. Is this a viable strategy in this market?
  8. Read the Disclosure Statement or the Condominium Package.
  9. Obtain a copy of the bonding requirement and process to access the funding in the event the work isn t completed. Usually the local or provincial municipality registers caveat against an occupancy permit requiring the work to be completed by a certain date.
  10. Ensure your offer is subject to obtaining financing and understand how and when funding will occur.

Top 7 Reasons People Choose Modular Construction

Modular Home are Better Quality Construction:

Because modular homes are built in factories, manufacturers are able to utilize tools unavailable to the site builder.

Modular construction timeframe is predictable

Building in a factory saves time as construction proceeds without interruption from beginning to end.

The Energy Efficiency of Modular Housing:

Quality engineering and the latest construction techniques significantly increase the energy-efficiency of your new modular home.

Shipping, Stability & Superior Strength of Modular Homes:

To deal with the rigors of shipping, each modular home is constructed with roughly twenty to thirty percent more material than a traditional stick-built.

Modular Homes are Environmentally Friendly:

According to the National Association of Home Builders (NAHB) Research Center, the “typical” waste for a new 2,000 square foot site built home is eight thousand (8,000) pounds or fifty (50) cubic yards. In 2000, the cost to dispose of this averaged $511 per home. Consequently, while waste from a site built home typically goes in a landfill, waste from a modular home is recycled. However, for waste like electrical appliances, there is eco-friendly Rubbish Works appliance removal services, and others like it, that can be used for a variety of home waste needs.

Modular Housing Cost Considerations:

Cost overruns are virtually unheard of in the modular industry.

Skilled Subcontractors:

Because modular homes are built in factories, the subcontractors are already there.

Real estate investment expert has this to say about modular construction: …as the industry continues to evolve and perfect the science, the complexity, quality and visual appeal of modular has progressed substantially to the point that in some cases you would never know that the home is modular unless you knew in advance.

(Modular Construction) is not the same quality as stick built. This is true in many cases the quality isn t the same, but in a very positive way.

Over the past 20 years Cynthia Aasen has been an active real estate investor and heavily involved in the progress of her client s and her own properties. She cares about her clients and is committed to helping them understand how to best position themselves for success as well as protect themselves from any risks associated with purchasing real estate. Directly involved in over 850 transactions valued in excess of $165,000,000 she understands all aspects of the transaction.

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