Why Pretty Mobile Home Parts Often Have Ugly Returns?
Some mobile home park buyers have this erroneous idea that the goal is to buy a great looking asset. They even rate the parks they look at based on physical appearance. The star system is a good example. Most people think a five-star park is always superior to a one star park. However, the only real star system they should consider is which park is a superstar on cash flow. Because at the end of the day, all that really matters when you own a mobile home park is making money. Parks that make money are great, no matter how ugly they are, and parks that lose money are dogs, despite how cute their entry may be. And, as a general rule, the prettier the park, the uglier the cash flow. So why do pretty parks often not make money? • They cost too much to buy. Pretty parks sell at the lowest cap rates. Normally one digit, and a low one digit at that. 5% , 6% and 7% cap rates are great for sellers, but can be complete failures for buyers. It is quite difficult to make any money buying parks at
