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The Urgent Need for Pre-Retirement Passive Income

Americans are facing an urgent, but often overlooked need for passive income. Some have put this thought off until retirement. The big problem is that most never know when, and how soon they are really going to need it.

The Desperate Need for Passive Income

Via the Harvard Business Review professor Robert C. Merton has echoed the warning of a pending global retirement crisis. Specifically Merton says that income is the biggest challenge facing Americans in retirement. A big nest egg might sound great, but it will rapidly disappear, unless it is throwing off cash flow returns. Unfortunately experts like Merton point out that the entire investment and retirement saving system completely fails to help individuals and families target income goals for later in life. They focus on the wrong goals; defined contributions, not defined benefits.

Retirement Saving Statistics

  • Only the top 10% of Americans have $250,000 or more saved for retirement
  • The average 401k balance is around $90,000
  • Around half of Americans have no savings at all

Even for the wealthy with $1M saved, withdrawing $100k per year would completely deplete their funds within 10 years. Yet, more and more Americans need to be prepared for a 30 plus year retirement.

Kiplinger and Bankrate.com IRA Minimum Required Distribution calculators show that the average 70.5 year old, with a $90,000 balance may have to begin withdrawing just over $3,000 per month. That’s just $250 per month. Meanwhile the balance is decreasing.

You Never Know When You’ll Need It

Despite the fact that many Americans say they will just work until 70 or older in order to pay their way, the data shows most are retiring far earlier than planned. And they are not doing it because they believe they are financially prepared. This can be due to layoffs, health problems, or simply age. He Transamerica Center for Retirement Studies’ Survey of American Retirees says the median retirement age is actually 62. These factors that force individuals into early retirement can also bring big expenses themselves; depleting any savings a lot faster than expected. Some statistics show the average retirement account balance plunging around 50% within a few years of retirement age.

3 Current Challenges to Earning Passive Investment Income

  1. Rising living expenses which prevent savings
  2. A new era of zero or negative investment returns on stocks and bonds
  3. A recession forecast for 2016

Finding Income Solutions Pre-Retirement

The bottom line is that individuals need to setup and secure passive income streams in advance of retirement. Having a reliable stream of passive income coming in now means that you’ll be ready for retirement at any time. Every year that you don’t retire you can use that surplus income to expand investments and grow income streams, or spend it.

CDs and investing in mortgage debt are examples of income producing investments. Yet, one which may be far more advantageous in the years ahead is mobile home park investing. It doesn’t require great credit, substantial startup capital, or full time hands on management. Yet these investments can throw off cash every month, while providing extra tax breaks.

Take a look at this asset class and find out if it is a good match for you…

Mobile Home Park Investing: Local vs. Out of Area Investing

What’s the difference in investing in mobile home parks locally versus out of area, and even out of state?

Access to more data, technology, and contacts than ever before now enables real estate investors to effectively invest in and hold properties virtually anywhere in the world. So with such great freedom, and no barriers what are the pros and cons of sticking close to home versus further afield? What’s better, and why?

The Challenges of Investing Close to Home

Some investors will find they have great mobile home park investment options close to them. These definitely should not be ignored. Aside from the close proximity and potential knowledge of the area, there can be other benefits of investing in your home town too. This may include positively influencing the property values of any other real estate you own (if you do an amazing job at property management). Then there can be other than monetary benefits such as improving the local community and economy and helping others.

However, there can be pitfalls of staying local too. This includes:

Limited Options

You may be in the best mobile home park market in the universe. If so don’t overlook those deals close to you. But since the whole world is your oyster, don’t suffer inferior returns, or forego the need for diversification. Demand the best investments, with the best returns, in a strong portfolio.

The DIY Management Trap

Perhaps the worst part of staying local is the potential to fall into DIY style self-management. This notoriously traps many, even among those who didn’t plan to get involved. There is just too much temptation to stop by, answer the phone, and try to fix it yourself. That can create all types of bad habits, confusion, and issues.

Privacy & Security

Some investors like the ego boost of being known as the big land owner in town. For others the spotlight is a nightmare. Most investors fail to put enough cushion between them and others. That means they can easily be looked up and hunted down by irate tenants, and the attorneys of malicious fraudsters and opportunists.

Unsustainable Investment Model

Those that fall into the DIY property management trap face even bigger issues later on. Eventually most investors will move. They may move for better weather in retirement, to be near family, or to downsize and be close to good healthcare. Then who is going to manage the investment. If you haven’t built in enough margin to cover hiring a professional third party management firm that could mean a negative cash flow situation which begins to eat into previous gains.

The Benefits of Investing without Borders

Investing with a full map doesn’t mean ruling out mobile home parks that may be right down the street. It simply means keeping every option open so that you can invest in the very best deals, anywhere.

Some of the perks of this approach include…

Finding the Right Match in Price Points

For some the biggest need is to find mobile home parks in the right price range. For some this is smaller, more affordable parks to get started, or to diversify when using a 1031 exchange from a sale. For others it may actually be finding more expensive parks to move up to.

Finding the Best Matching Properties

Following on from the above; it isn’t necessarily about finding ‘better’ properties, or the ‘perfect’ property. It is about finding the best match for you. With more options mobile home park investors can find the right matches for their individual goals and timeline. For example; perhaps you are looking for undervalued opportunities that you can add value to. Others might be searching for parks needing little work, and which already have strong cash flow.

Investor Friendly Locations

There can be a dramatic difference in risk, liability, and net returns, between locations. Some states, counties, and cities are far friendlier to landlords, business owners, and investors than others. Find those places to invest.

Diversification

Diversification is a must for every individual who is serious about their finances and financial future. Period. You can’t truly diversify effectively in only one city of region. Keep your options open and invest broadly.

Best Destinations Right Now

It’s no secret that all real estate is local. Every micro market is turning on its own cycle. With more options mobile home park investors are able to seize on the ripest markets at the best moments, for maximum results.

Mobile Home Parks Versus Other Assets

How do mobile home parks stack up against other sectors for investors?

While mobile homes are often looked down on by some newer real estate investors, this asset class continues to make up a sizable portion of the portfolios of the world’s wealthiest billionaire investors. What draws these sophisticated investors to this sector? What metrics are they looking at that may be overlooked by others?

Cost Per Door

One of the most substantial differences between mobile home parks and other property types is cost per door.

Consider this…

The median cost per door:

  • Single family home $268,900
  • Apartments $30,000
  • Mobile homes $10,000

What it means for Investors

Starting out with $268,900 that means investors can choose between:

  • 1 single family home
  • 9 apartments
  • 26 mobile home units/ lots, with $8,900 left over

Take into account the average rent per type of unit:

Average gross annual income for your $268,900 by property type:

  • Single family home $14,181.48
  • Apartments $103,680
  • Mobile home parks $156,000

Which would you rather have?

The Net can be Substantially Different too

What is more difficult and costly to manage; a portfolio of spread out single family homes, or multiple mobile home lots on one parcel? That can make a substantial difference in net profit at the end of each year, and over time.

It’s also worth pointing out that if your 1 single family home tenant stops paying, and it takes 3 months to kick them out, and 3 months to replace them; you’ve lost half of your income for the year. If you lose one mobile home park tenant under the same scenario you only lose 1/50th of your annual gross income.

The Perks of Mobile Home Parks

There are many other perks of mobile home parks too, including:

  • Growth potential
  • High demand for affordable housing
  • Low intensity maintenance
  • Availability of seller financing
  • Additional tax benefits

Summary

There are many advantages of investing in mobile home parks. Among the most notable is cost per door, and the resulting benefits of consistency in cash flow, and overall annual and lifetime returns. These are the facts that the most intelligent and wealth investors in the world understand, and why they are so bullish about mobile home parks as an asset class.

Retirement: Beating the New Era of Zero Investment Returns

Can Americans beat the new economy, to retire with confidence and in comfort?

There is little uncertainty about what’s ahead in the minds of many leading financial experts. They are pretty adamant that at best we are facing a stalled economy, if not a recession even greater than 2008. What threats does this really bring to Americans who are trying to save, and get ahead financially?

The New Era

Even if things don’t crash; fund giant Bill Gross warns we are entering an era of minimal to zero returns, and that can be far worse for retirement savings than most understand.

Sub 5% returns in the stock market and bonds mean that savers and investors will effectively be in a zero net gain environment, and a negative rate situation when inflation is factored in. That means cash and saving may not grow, and could be depleted year after year, before retirement instead.

That’s if markets don’t plummet from the stampede effect. 2016 began with what CNBC calls the “worst performance ever.” The coverage also warns that dominant financial institutions and governments rarely warn the public of impending crashes.

Key Points

That would be counterproductive to their goals. CNBC reminds us that the peak to trough of the last 6 recessions has been 37 percent. That would take the S&P 500 down to 1,300; if this next recession were to be just of the average variety,” And forecaststhis one will be worse.”

Financial advisor and author Harry S. Dent who has successfully called previous crashes predicts this next one will be far uglier than what we’ve seen in the past, including the Dow Jones getting crushed to just 6k.

Sam Zell is adamant that the US is heading into a recession in 2016, that’s if it isn’t already in one. He’s walking the walk too, and has recently shed billions in investments which he believes have topped out for this cycle.

Negative interest rates are already being effectively felt by many savers across the world, and Bloomberg warns that this could simultaneously tighten lending and working capital for businesses and home buyers at the same time.

Factors That Could Alter the Course of the Economy

What factors could alter the current course of economic and investment performance for better or worse?

  • 2016 presidential election
  • Fed rate changes
  • Positive or negative reports on job, growth
  • Stock market volatility
  • New regulations

Most Important Considerations for Retirement Planning

  • How to grow savings and investments in a zero rate environment
  • How to save enough when other sources of income may be hampered
  • How to ensure sufficient passive income for time out of work, and in retirement

Key Takeaways from the Economic Forecast

Less than 10% of Americans have enough saved for retirement. Saving and growing that nest egg through traditional stock and bond portfolios seems unlikely to be a viable strategy ahead. These assets may still have a place in a well-balanced portfolios, but all of them, including cash in the bank could be net losers for a number of years.

In order to beat these dynamics Americans must act fast to beat the crowd to the few asset classes which still offer value, attractive yields, and most importantly; reliable cash flow.

Mobile Home Park Investing

Investing in mobile home park investing may be the answer for many. It is the one asset class which Sam Zell has continued to increase his footprint in, even while selling off apartments, office buildings, and other business investments.

The advantages of this sector for retirement planning include:

  • Traditionally grows in line with inflation
  • Can produce consistent income uncorrelated to asset value
  • True passive income and monthly cash flow
  • Potential to perform well in both bull and bear markets
  • Full suite of tax advantages

Perhaps even more notably in the current and forecast environment; seller financing and alternative financing is quite common in this space. That could prove to be an invaluable advantage during periods when conventional lending is tight. It means the ability to leverage and achieve asset and income growth, while others struggle to stay afloat.

Summary

The economic and investment performance forecast for Americans isn’t very sunny according to the majority of experts. Even stalemate returns can be a serious threat to retirement planning. However, there is at least one asset class which could prove a powerful ally. Don’t overlook the advantages of mobile home park investing.

 

Top 4 Reasons Why Investors Love Mobile Home Parks

Why are investors so interested in mobile home parks today?

Those that understand the math and advantages of mobile home parks as an asset class can’t help but be drawn to investing in them. Investors that are looking for more from their portfolios may be surprised that they haven’t been tuned into these investments before.

What you need to know…

Returns

Superior ROI

Between attractive rental spreads, value add opportunities, enhanced tax benefits, and evolving fundamentals, mobile home parks some of the best, and most predictable returns out there. For the 12 months ending in March 2015 the gross returns of three major mobile home park operators hit 44% according to the Wall Street Journal.

Potential Add Value

Forbes’ recent report on investing in real estate for income and retirement highlights the advantage of control over asset value that real estate offers. Try as hard as you like and you aren’t going to increase the value of CDs or stocks you own.

Imagine buying Disney stock and trying to add value to that. Even if you buy an annual pass to every park, get an ESPN subscription, and buy all the merchandise as gifts for your family for the next year, and even spend you weekends volunteering to don a character costume; you aren’t going to nudge your stock’s value up one cent.

In contrast; real estate owners have numerous ways to force up the value of their own properties. This works in all phases of the property cycle. This can include raising the rent, making over the property, adding additional services, and even simply holding and seasoning property performance until it is considered ‘stabilized’.

Lower Maintenance Costs & Ease of Ownership

One of the most common excuses investors lean on to justify not having direct real estate investments in their portfolios is maintenance and property management. We’ve all heard the tales of the high maintenance tenants that want help unclogging the toilet, changing a lightbulb, or unlocking the door when they forget their key; at 2am. Mobile home park investing eliminates that dynamic.

In a mobile home park residents generally own their units. You collect lot rent. So if they lock themselves out, break something, or want new appliances; that’s all up to them, and out of their pocket. You are as the park owner have to keep up the landscaping, and any community features you choose to include. But that’s a night and day difference from managing single family homes or low income apartment buildings.

Lower Cost per Unit & Creating Economies of Scale

One of the main attractions to multifamily investment properties by sophisticated investors and funds in the past has been the ‘low cost per door’. This simply doesn’t get any lower when you are buying mobile home lots in bulk.

The second advantage here is the economy of scale. This includes property management, but this also specifically relates to ROI on improvements. Improvements made can elevate the total property value, and income potential across all units in a park. Compare this with spread out single family homes and the ROI is clear. You could hire a professional manager, install new laundry services, and a swimming pool to serve a whole mobile home park for not much more than for one single family home. Yet, you are simultaneously increase the rental potential on what may be a dozen or a hundred or more units.

Demand

Affordable Housing Needs

20% of US households earn less than $20,000 a year. Yet, even many of those that earn much more are struggling to afford anything more than a mobile home. While many are unhappy about the proposition of a $15 an hour minimum wage, the truth is that a $30 an hour minimum wage isn’t nearly enough to afford a reasonable starter home in many parts of America.

Need Growing on a Daily Basis

The need for affordable housing is growing on a daily basis. Even millennials and generation X aside; Pew Research reveals that 10,000 Baby Boomers are retiring daily. Vanguard reports the median 401k savings at age 65 as of 2015 is just over $70,000. Even for those that have owned homes for 30 years and paid them off (which remains rare) that isn’t enough money to go very far when you factor in property insurance, taxes, and maintenance. Never mind food and healthcare. As we enter an era of higher inflation this savings – expenses gap will only grow.

Priced Out of Other Housing

Since 2009, over 50% of new mobile home park residents have been former single family home residents. With house prices rising fast, and interest rates set to go on a hike spree for the years to come more and more individuals and families are going to find they are priced out of other housing options as each quarter goes by.

Limited Supply

Real estate is often heralded as a great investment due to limited land and housing stock. Well, there are even fewer mobile home parks. You can actually build more land with man-made islands, and in most areas you can construct or redevelop luxury condos and single family homes. What you can’t do is build new mobile home parks. Local government and developers don’t want to approve them. In fact, many owners of standalone mobile homes find they can’t replace them once their useful life runs out. Building codes prohibit it. That leaves existing mobile home parks. As these parks have been changing hands from those that have held them for decades to new long term buy and hold owners supply is decreasing. There is more demand than there is availability. That means rising value.

Diversification

Returns Not Tied to Wall St.

Wall Street and mobile home park returns are not tied together. This provides better diversification to counterbalance any downfall in stock market performance. In fact; downturns on Wall Street often spur greater demand for mobile home housing and investments. This is crucial for those desiring predicable income streams, and cash they can count on to support their lifestyle before and after retirement.

Can Buy without Banks

Seller financing is common in mobile home park investing. This has multiple benefits. One; it means investors do not need to tie up their personal credit reports with loans. It also means being able to purchase and increase acquisition activity even when banks are contracting and tightening underwriting. That works on the exit side as well.

True Tangible Diversification

Stock, bond, fund, and even REIT investors can find true, non-paper diversification in mobile home park real estate. A well rounded portfolio is great; but non-paper assets are critical. Mobile home parks even offer a secondary layer of diversification by having multiple units and tenants. This ensures consistency in cash flow and yield month after month.

Direct Ownership

The land mobile home parks control isn’t going to be lost. It is a much lower risk than office buildings, multifamily apartments, and even single family homes which owe most of their value and performance to the structures above ground. Additionally, this provides greater control. This is even better than a condo or co-op where you really have no control over the value of the complex, or a single family community. It’s better than a fund, stock, or REIT in which you don’t actually have any tangible collateral. A company can shed its real estate, a fund manager can change up the stock mix, or something else which leaves the investor nothing. The opposite is true with mobile home parks.

Now is the Time to Invest in Mobile Home Parks

Invest Like Buffett

Everyone wants to know how to invest like billionaire Warren Buffett. You can invest in Berkshire Hathaway stock, but it is very convoluted, does not offer diversification from other stocks and funds in your portfolio, and Buffett himself has warned its size threatens low yields ahead. What Buffett does continue to call his best lifetime investments (aside from getting married) is his direct real estate investments. Buffett’s organization is now owner of Clayton Homes, the largest mobile home manufacturer and financier of mobile homes; worth an estimated $2B. Direct mobile home park investing cuts out all the middlemen to enable investors to enjoy more security, higher yields, and net returns.

Unique Window of Opportunity for Acquiring Mobile Home Parks

We’re currently experiencing a unique window of opportunity for mobile home park acquisitions. Due to their strong cash flow and easy management owners rarely want to let their mobile home park investments go. However, after being held for decades, some aging original owners are looking to unload underperforming mobile home parks and retire. They often offer seller financing on these properties to retain passive income streams to retire on, though are willing to pass on the opportunity to improve and manage them to a fresh buyer. Once these opportunities are absorbed we may not see many available again for another few decades.

Other Real Estate is Overpriced

Other real estate asset classes are currently rapidly becoming overpriced. Some are buying into the panic of buying homes as house flippers and developers force up prices fast. Savvier investors are taking a bigger picture, more business like view. They see homes being flipped for $50,000 in profit in days without much being done to add value. They know it is only a matter of time before someone gets stuck holding the hot potato that no one else wants, and the debt that comes with it. Zillow is already predicting a softening and single digit declines in many US cities in 2016. History suggests that when the market goes down, it will invariably fall harder and longer than anticipated. This will only add more demand for mobile homes, and mobile home parks as investors sit out and wait for the bottom of the single family home and commercial property market. Remember single family prices dove by as much as 70% or more in the last downturn. Yet, even though bank lending can become scarce, stock portfolios can be impacted, jobs can be hurt; this also only supports the demand for mobile homes.

Technology is Creating More Efficiency

Technology is changing the dynamics of mobile home park investing too. It not only now allows investors to find, buy and manage MHPs from anywhere in the world, it also means increased net profitability through superior management. This checks the vital boxes investors seek in lifestyle and investment convenience.

Current acquisition opportunities won’t be this appetizing or available forever. But those that are acting now can find it a major financial game changer.

 

Stock Investing Versus Mobile Home Park Investing

How does investing in stocks stack up to mobile home investing?

If you’ve ever found yourself defending your stock market investments because you “don’t like to deal with tenants,” or “don’t want to spend my weekends getting my hands dirty fixing up old houses,” – you need to read this…

 “I like to invest in stocks because I don’t want to deal with tenants”

 There are plenty of excuses to invest in stocks. Perhaps your grandparents did okay in the stock market. Maybe that is what most of your colleagues and ex-school buddies are doing. Maybe there are even some wealthy people that you aspire to be like who have invested some money in stocks. Maybe you have even picked some individual stocks that have performed pretty well for the last couple of months. But with more leading Silicon Valley and Wall St. minds and wallets exiting old school stocks, and checking into mobile home park investing, it’s certainly a wakeup call to look into new investment options.

Whether it is fear of a rumored stock market bubble swelling, or merely the wisdom of looking to diversify an investment portfolio, real estate undeniably stands out as the most attractive option to explore. However, there can be many misconceptions among first time property investors. These sadly often become excuses not to participate.

This includes worries about having to fix up properties like a DIY show on TV, having to deal with nightmare tenants, and not being made to look foolish by investing in something they really don’t get. The next few sections of this report tackle these concerns, and bring clarity to the synergies and contrasts between investing in stocks and real estate like mobile home parks.

Invest within Your Circle of Competence

The principle of investing within our “circle of competence” is often repeated by Warren Buffett. Buffett of course may be known for his stock plays, but is actually one of the biggest ambassadors in investing in real estate, and specifically in mobile homes. In fact, those that know Warren’s moves well know that he continuously names his real estate investments as his best. With no mention of stocks in his top 1-3 list.

Some of those reading this may know stocks extremely well. Yet, how well do they really intimately know every business, industry, and the factors impacting them? Contrast this with real estate. Each and every person reading this, and everyone they know has dealt with real estate and housing. They’ve dealt with it their entire lives. Those that have struggled without housing are just as familiar with its importance. Ever since birth we’ve needed shelter, seen most of our parents spend the bulk of their lives worried about paying for it. Real estate is something we deal with every day. Is there anything we know better?

Security of Capital

Before any promises of returns on an investment comes the security of capital, and return of investment. The stock market is notorious for its volatility, and this can even carry over to publicly traded real estate stocks and REITs. Every industry, asset class, and type of investment has its cycles. However, direct real estate investment offers far less volatility. And it is always there. There can be zero downside protection in the stock market. You can be completely wiped out.

Truly Passive Income

With mobile home parks investing can be completely hands-free. With a professional system and management in place there is no need for rolling up your sleeves and picking up a hammer, answering tenant phone calls, or collecting rents in person. This means truly passive investing, and truly passive income. If you invest in stocks via an advisor and then into managed funds you may be enjoying passive income, but often with double the costs taken out. If you are day trading there isn’t much time for restful sleep.

The Power of Having Others Invested in Your Success

Most investment opportunities really count on you investing in, and fueling the success of others. Mobile home park investing is almost unique in that it provides you with a team of others invested in your success. As a mobile home park investor most often you really mostly own the land. Residents often own their mobile home units, and are leasing the land from you. This does two things. First, it makes the investment even more secure. The land isn’t going to be flattened by a hurricane or tornado or fire, and it’s pretty hard for someone to run away with. Second, it places numerous others in charge of preserving and nurturing your investment. For mobile home park residents this is their slice if the American Dream. They are homeowners, ‘stakeholders’, and they are families putting down affordable roots. To others, these properties may seem more than a little shy of the Ritz, a Manhattan condo, custom Bay area home, or mansion on Miami Beach. Yet, to residents they are equally as valuable.

Timing

Timing is everything when it comes to making an investment. It’s pretty obvious where the stock market is, and what lays ahead for stocks in general. Then look at the future for mobile home parks. In one way or another American housing is only going to get more expensive. Mobile homes are effectively one of the last bastions of affordable housing, and affordable homeownership. If demand is any barometer of the future performance of an asset class, then it is pretty obvious where mobile home parks are headed.

Summary

So how do stocks compare to mobile home investing? When investors really dig in, they will discover that real estate, and in particular mobile home parks really don’t have to be that complicated or difficult to own and profit from. In fact, mobile homes stick out as superior investments. You know housing. You know that affordable housing is a big issue today. And that isn’t going to change. Done well mobile home park investing offers a lot of security, passive income, can leverage a highly motivated workforce of others invested in your success. And the timing couldn’t be better.

Mobile Home Parks As An Under-The-Radar Investment

When you think of investing, what’s the first thing that comes to mind?

Probably Wall Street stocks and funds. That’s the case for most people because stock investing firms market pretty aggressively. On television, radio, print, and online, consumers are bombarded with attractive offers to invest through this company or that one.

Or, perhaps the first type of investment that comes to mind is the single family home (SFH) investment. Investors all over America have discovered the power of real estate investing as a superior alternative to Wall Street investing.

But many investors are becoming frustrated at both types of investments: Stocks and other paper investments are no longer attractive because of their unpredictability; single family homes aren’t as attractive as they once were because house prices are rising and investors are learning that it can take a lot of work to be a landlord of a tenant in a rental property.

Fortunately, you have options – and more options than you probably realized! Real estate investing continues to be a superior and attractive alternative to the paper investments of Wall Street, but there are far more investments out there than the single family residence investment that springs to mind.

The Problem With Stocks And Single Family Homes

Stocks are an obvious market, with thousands upon thousands of financial planners and investment bankers making deals daily to put money where it will perform the best. The average investment banker can produce a cash-on cash return around seven percent annually (but it can and does fluctuate vastly from year to year). A stellar investment banker can produce higher, but at a greater risk to your money.

The stock market is fickle. In order for your portfolio to operate at its top capacity, you need to pay close attention to its performance. Selling and buying need to happen at a moment’s notice, and all for a modest return of seven percent annually? There has to be a better option.

For single family homes, the upside is a steady stream of cash flow monthly. However, if your tenant vacates the home, you are left in a negative cash flow for a period. Renovation and maintenance costs are never certain when purchasing a rental property and can deplete funds and negate positive cash flow even when occupied. These rentals can and do regularly produce ten percent cash-on-cash returns annually thus are a popular choice.

The Surprise Investment That Flies Under-The-Radar

Mobile Home Parks (MHPs) aren’t usually at the forefront of an investor’s mind, but they should be. Here’s why:

Better cash flow: As a real estate investment, they are all too often overlooked as a steady stream of cash flow that is really a single asset with multiple streams of cash flow, very much like a multi-family residence. But unlike a multi-family residence, you can often add more units or even additional income streams!

Lower purchase price: Many mobile home parks are still managed by their original owners who are looking to retire. This means they’re not fully utilized and not always effectively managed, giving you a rapid upside when you invest. And because they’re often overlooked, you are less likely to enter into a bidding war with other investors (which happens in single family homes a lot these days).

Lower costs: Some investors may assume that MHPs are a lot like multi-family residences but that’s not true. Along with the ability to increase cash flow (mentioned above), the costs are lower because MHP owners simply own the ground and they rent out individual lots to homeowners. Therefore, homeowners are responsible for the care and maintenance of the structure while the MHP owner is not.

Growing trends: Investors who love to invest with the trends should know that MHPs are trend-supported investments: As the number of minimum wage jobs in America increase each year, new homeowners still want to own their own home but can’t afford larger suburban structures, so mobile home parks are ideal for them. And there’s another growing trend at play: baby boomers who are retiring and re-evaluating how much they can afford in their retirement are now looking to the comfort and community of a mobile home park to enjoy in their golden years.

Supply versus demand: The supply/demand fundamentals are strong as well: While the demand is growing (see Growing Trends, above), the supply of mobile home parks remains stagnant – in short, it’s difficult to build a new mobile home park so they’re not keeping up with the need. As well, expanding cities are buying up mobile home park land, further reducing the availability of this affordable housing space.

Little-known: Mobile home parks fly under the radar because there aren’t very many of them, and, investors often mistake mobile home parks for trailer parks or for RV parks (both of which are VERY different). Mobile home parks are made up of manufactured homes that are primarily permanent structures that are owned by low income earners.

Summary

When you think of investing, chances are you think of stocks or single family residences. But both of these top-of-mind investments have their challenges – from inconsistency to time-constraints.

Savvy investors are looking elsewhere to find investments that are affordable, in-demand, with plenty of upside. Consider a mobile home park as an investment property. Let everyone else fight over the single family rental properties. Leave the stock market up to the gamblers. Mobile home parks are an investment to put on your radar.

Mobile Home Park Investing: The Economies Of Scale

One of the big perks of mobile home park investing is the economy of scale. So how does this show up, what tangible advantages does this offer investors in this sector?

The Economy of Scale

Sophisticated investors and heavy weight funds have long be known for investing in larger properties with multiple tenants. Whether this is office buildings, multifamily apartment buildings, or mobile home parks, this is often seen as being due to needing to put a lot of money to work. But it is more than that. These investors understand, and seek out the economy of scale. Properties with multiple units offer this advantage. This is in stark contrast to buying single family homes.

Vacancy & Cash Flow

A single family residence can be a good investment. However, trying to manage a portfolio of single family rental homes can be a completely different story. What happens when you have a single unit income property that goes vacant? It starts costing you money every month!

Contrast this with holding a mobile home park with 10 or more lots and tenants. Even if 30% of those tenants leave or stop performing investors ought to still be generating a positive monthly income. The chances of 10 units in a mobile home park all going empty at the same time is far lower than a single family home going vacant at any time. This not only ensures positive returns, but consistency in cash flow month after month.

ROI on Property Improvements

The return on improvements for multitenant properties is far greater. An improvement to community property can raise the value and rent on all units. For example; putting in a swimming pool can raise the value of 25 or more units in a mobile home park. Contrast that with spending almost as much to put in a pool for a single family home, or having to fork out for 25 pools for a whole portfolio of single family properties!

Efficiency in Property Management

The most obvious and significant benefit of scale that mobile home parks offer is when it comes to property management. Having multiple units on the same lot means dramatically slicing down the time and costs of property management. This applies to the number of team members and vendors you need to recruit and manage, and their workloads. This also rolls over to researching acquisitions, marketing for tenants, and screening tenants. With a mobile home park just one $15 sign can be used to market for multiple tenants repeatedly whenever there is an upcoming vacancy. To compare; multiply the marketing and due diligence costs by each single family home that you own.

Financing

There are great advantages in the economies of scale when it comes to financing too. Having 10 or more units on one property means that many fewer loans you’ll need. Some borrowing costs are related to price and value, others are not. Needing just 1 loan versus 10 can definitely reduce acquisition and operating costs. That increases your income and bottom line. Just as importantly is reduction in workload and risk. Managing ten sets of loan documents, property taxes, invoices, and insurances for just 10 units is much more risky and time intensive than 1. Mobile home parks mean less likelihood of making a mistake or being scammed.

Acquisition and Resale Efficiency & Costs

Being able to acquire 10, 20, or 100 units at a time dramatically increases efficiency when it comes to sourcing and acquiring investment properties. That also applies on the flip side when liquidating assets and restructuring portfolios. Do not underestimate the importance of this. In a recent radio address, speaking on his new book ‘Money’, Tony Robbins highlights the fact that fees make a massive difference in profits and wealth building. Even a 1% difference in costs can add up to being hundreds of thousands of dollars up or down over the years. Seize the benefits of the economy of scale, and put them to work for you.

The New Housing Bubble and Your Retirement Plan

Are we in a new real estate bubble? What are billionaire moguls selling and holding now? How will it impact your retirement plan?

New questions and concerns are being raised about the US real estate market. Is another bubble or correction possibly on the horizon? How are leading investors reacting? What strain might this put on current retirement savings and expectations? What smart moves should individuals be making now in order to protect themselves?

What Kind of Bubbly is the Real Estate Market in for in 2016?

The National Association of Realtors had forecast a year worth breaking out the glasses and bubbly for. An even better year than 2015, and a return to ‘normal’. New data suggests the hangover from that party may come sooner rather than later.

Although the facts are disputed by PropertyShark; the Financial Times proclaims that New York City’s property market began crumbling last year. FT states that NYC luxury real estate sales fell 27% year over year in 2015. A new report from FMA Data states that the “Orlando Affordability Index topped 177% in January 2016, meaning housing costs are almost double what the median income earner can afford.” This report, and statistics from The Real Deal also show that Miami Beach home inventory has swollen to 24.6 months. 6 months of inventory reflects a balanced market. New records have been set in NYC, with a Manhattan penthouse selling to a hedge fund major for almost $100M. He says it is a speculative investment he hopes to flip in the future.

Of course not all markets have reached these new highs. RealtyTrac reports that New York City as a whole is facing a 300%+ spike in foreclosure auctions, and bank repossessions in early 2016. Over 50k Detroit homes were slated for foreclosure auction for past due properties this year.

Stock market declines and uncertainty in the economy is driving even more capital to real estate. So while some markets still appear to offer great value, analysts can fairly argue that some niches of the market have already peaked.

What Sam Zell is Selling, and Holding

All real estate is local, and different types of real estate assets move on different cycles. So what are the savviest investors buying, holding, and selling?

According to The Wall Street Journal billionaire real estate investor Sam Zell made a deal to sell off 23,000 apartments for $5.4B in the third quarter of 2015. The Denver Business Journal notes that Zell arrange to sell off $1.4B of metro Denver apartments in early 2016; more than 25% of the sales volume of the whole market in 2015.

Note that Zell is also credited with one of the largest single sell off deals ever, right before the last bubble burst. He unloaded a $39B portfolio of office properties to Blackstone, just before most of them ended up tanking in value.

Interestingly the one most consistent area of growth for Sam Zell, and one he has held onto for years, through multiple cycles is manufactured housing parks. He owns hundreds of them.

What a New Housing Slowdown Would Mean for Americans

Firstly; those approaching retirement should consider that a new decline or at least a stall in higher end housing prices and sales in top metros could negatively impact plans for retirement. During slower period home equity lines of credit can be frozen and reeled in by lenders. It may be tougher to sell. Hopes for tapping equity with a reverse mortgage as a form of pension may be cramped.

Recently we’ve seen many investors and home buyers buying at prices which only make sense as Airbnb short term rentals at incredibly high prices. Some of that activity may dry up in a leaner economic period. It is also worth noting that some cities are banning short term rentals or are using permits to minimize them to 30% of less of local housing stock. The move recently hit one Minnesota neighborhood hard where 78% of the properties were rentals.

Then there is the impact on REITs and real estate stocks. The Street recently reported that Real Estate would be given its own sector in the S&P 500 later in 2016. Some analysts speculate this was aimed at propping up the index during a forecast recessionary period. However, higher interest rates, and a slowdown in condos, apartment buildings, office, and single family rental homes could drag down the performance and trading prices of these publicly traded, and highly volatile investments.

The Need for Affordable Housing

The pressure from all the above is only going to increase the demand for affordable housing. Mortgage lending is still tight, and rents have been spiraling upwards to a point where Zillow reports the average income required to rent an apartment in many cities is several times minimum wage.

One of Sam Zell’s keys to success is “supply and demand.” Those that control the supply of affordable housing are going to find substantial demand for their product. Taking a page out of Zell’s playbook, manufactured or ‘mobile’ home parks could be one of the most prized assets, and most desirable property types ahead.

In comparison to other housing types there are not many manufactured home parks. Yet, the need for living in them can only grow. Owning one of these properties could be key to empowering individuals to continue to generate income in lean times, preserve and grow their wealth, and possibly even secure affordable or essentially free housing for themselves, and their loved ones.

Summary

A new housing bubble and correction may happen this year, or several years from now. When it happens it will hurt the retirement plans of millions of Americans. It will likely hurt their stock portfolios, and many of their real estate investments, while cramping the ability to leverage existing home equity. The opposite may be true for mobile home park owners. These investments ought to flourish ahead. Right now interest rates are low, seller financing may be available on these properties, and many are ripe for increasing rents and profitability. This could provide exactly what many need to maintain their lifestyles, and stay on track to a comfortable retirement.

The Broken 401k & Finding a Real Retirement Strategy

401(k) plans aren’t working for Americans. What’s wrong? What is a truly viable retirement plan for individuals?

New data suggests that the 401k retirement plan just isn’t working. It is even worse for those without an organized retirement plan of their own. So what has gone wrong? Just how bad is the situation? What might the best retirement strategy be now?

The Data Is In

The figures from Business Insider, the Economic Policy Institute, Federal Reserve Survey of Consumer Finances, US Census, and The Fiscal Times reveal a fractured system, with great disparity between how individuals are doing at preparing for retirement.

Key Facts from the Business Insider Report:

  • Average families with a 401k or IRA had $95,776 in their accounts
  • The average 401k and IRA balance has risen by around $4,500 since 2001
  • Unfortunately of Americans as a whole almost 50% have zero saved
  • The median family has $5,000 saved
  • The average for those approaching retirement between the ages of 56 and 61 have an average retirement account savings balance of $17,000
  • The top 10% of savers have at least $274,000
  • 82% of Americans without high school diplomas do not have a retirement account

The Big Switch

Business Insider notes that the “switch to 401(k) plans began at the same time that Social Security benefit cuts kicked in,” adding that “401ks are much more lucrative for Wall Street fund managers than pensions.”

It is also important to remember that Social Security was never meant to provide pensions in the way many need them today. They were designed as short term supplemental assistance for a limited amount of time. Now more than 50% to 90% of Americans’ only hope for income in retirement appears to be Social Security. And given the instability and shortfalls of the system it is just hope.

The most significant factor in all of this is the shift from defined benefit plans to defined contribution plans. That really applies to traditional 401ks and Social Security. With defined contribution individuals have to put money in, but really have no guarantee of a set amount of money coming out. Yet, reliable income remains the most pressing need for those approaching retirement. The size of a nest egg or balance sheet is virtually irrelevant, when what you need is spendable cash every month.

Traditional 401ks and social security can’t really guarantee defined benefits. That is their biggest flaw, in addition to the fact that people aren’t putting aside enough savings. The solution then is for individuals and families to both find a way to invest more, and increase the predictability and reliability of income thrown off by their investments.

Finding a Real Retirement Strategy

How should individuals be planning and preparing for retirement?

Look for:

  • Solid assets with low volatility
  • Inflation proof assets
  • Sound diversification for safety
  • Tax protected investments

Some of the tools for accomplishing these things may include; paying off your own home so that it can be leveraged with a reverse mortgage in retirement, as well as rolling over to, or establishing a self-directed 401k or IRA. These accounts can be used to invest in a wide variety of assets, including income producing mobile home parks.

The Role of Mobile Home Parks in Your Retirement Portfolio

Mobile home parks are one of several types of income producing real estate assets which can be powerful retirement tools.

The advantages:

  • Monthly and weekly passive income
  • Tax benefits
  • Ability to invest in them via self-directed retirement accounts
  • Move with inflation
  • Easy to diversify
  • Ability to build wealth and cash flow simultaneously
  • Low volatility
  • Growing demand with limited supply
  • Ease to understand
  • Personal control over asset value and performance

For many a couple of mobile home park investments may be all they need to secure their own retirement and financial future. They may provide free housing, monthly spendable cash, and build equity which can be passed on to future generations and other heirs. Even a modest park with 20 units, throwing off a meager $100 in positive cash flow per unit, each month is $24,000 in passive income per year. That far eclipses Social Security benefits. Multiply those results and a $100k a year passive income level isn’t too hard to achieve in this sector.

Summary

The data shows that the vast majority of Americans are desperately underprepared for retirement. The financial system seems to continue to trend away from providing a meaningful and reliable solution. Those that want to be confident in their future finances and income can take things into their own hands. A part of that plan could be mobile home park investments for cash flow and long term wealth building.