How to Know If It’s Time to Sell Your Mobile Home Community: Tips from an Industry Authority
There’s a lot of talk going on right now about cycles, the economy, interest rates, and the dreaded but inevitable slowdown. With all the noise, it can often be confusing to sort through what’s hype, hyperbole, or genuinely hot. Like all other investors and business owners, there comes a time when you begin to wonder if you should be taking some kind of action, such as selling. Or should you just wait and hold?
Mobile home park owners are in a historically unique position. the question on whether to act or not has never been more consequential. Here’s how to know whether now is the right time to sell Your MObile HOme Community.
Business, Personal, or Both
Business owners sell for one of three reasons: business, personal, or both. For the purposes of this article, we’ll set the personal aside. This leaves us with the business reasons for considering whether it is time to sell or hold. There are many topline factors involved. But the decision typically comes down to the bottom line: Will you make money by selling now?
For most of you, the answer to that question will be an easy “yes”. You bought a while ago, have held your park for some time, and prices have dramatically increased over the last few years.
So the question becomes: Will you make more if you sell your mobile home community now, or do you hold to see if you can gain more by waiting? The answer to that always is in the market. And the market is telling us several things.
According to the National Low Income Housing Coalition, the U.S. has a shortage of more than 7.2 million rental homes that are available to extremely low-income renter households. Only 35 affordable and available rental homes exist for every 100 extremely low-income renter households. In addition, as baby boomers are retiring in record numbers, home prices have hit historic highs, and fewer affordable housing units are being supplied to the market. The need for affordable housing has hit an all-time high.
While the demand for manufactured home properties as investments has boomed, the supply has not. The inventory of available manufactured home communities has remained low because the barriers to entry are high and the path to approval and profitability for new developments can be long and costly. This gap between the supply and demand of mobile home communities has driven prices higher than ever.
The increase in demand and price has attracted the attention of investors. Mobile home parks have become the shiny objects of the commercial real estate investment set. As a result, individual, corporate, and institutional investors have moved in. Dave Anderson, executive director of the National Manufactured Home Owners Association, noted in a recent news article that there was a “‘huge jump’ of about 26 percent in the number of sites now controlled by the 50 largest operators in the three years to 2018.”
However, where there is demand, new supply will be created. This means, for example, that while just one mobile home community was built in Florida in the past 15 years, new communities will begin popping up because the large corporations can afford to pay what were, for family operators, prohibitive entry costs. More supply will drive park prices down, and the shiny object will begin to lose its sparkle.
The market is being sifted by corporate and institutional investors, and the mobile home sector, in my opinion, is primed for disruption. The question is how long do we have left in this cycle before a) there is a slowdown, b) the inevitable disruption occurs, and/or c) prices stop rising.
Buy Low and Sell High
With that being said, all investors know that one of the golden rules of investing is to buy low and sell high. With parks across the country selling at record prices, the market is telling us that now is a good time to sell. Today’s prices offer an excellent opportunity to sell high and cash out.
So, how do you know if the price is high enough? Ask a qualified and licensed broker for a “Broker Opinion of Value”.
How to Select the Right Broker
- Specializes in the mobile home sector
- Focuses on representing sellers, not buyers
- Has a proven track record of success
- Has a solid reputation in the market
- Advises, versus sells, you
The Broker Opinion of Value, often referred to as a BOV, will provide market data, sales comparables, and other information to provide a data-backed and substantiated opinion of the potential price your property could sell for. Once you have that number in hand, you’ll know if it’s the right time to take action and sell.