8% DEFAULTS VS LESS THAN 1%

Understanding Investment Sustainability: Why I Prefer Mobile Home Parks Over Most Real Estate Assets

As investors, we spend a lot of time talking about returns.

  • Cash flow.
  • Cap rates.
  • Equity growth.
  • IRR.


But one of the most overlooked questions in investing is:

How sustainable is the investment itself?

In other words, what factors could permanently impact the asset’s ability to generate income in the future?

 

This question has become increasingly important as rising interest rates, inflation, and economic uncertainty continue to expose weaknesses in many real estate sectors.

 

Recently, investor and mobile home park expert Frank Rolfe highlighted a statistic that caught my attention:

At the time of his discussion, approximately 8% of apartment complexes were reportedly in loan default, while less than 1% of mobile home parks were experiencing similar distress.

 

Whether those exact numbers fluctuate over time isn’t the primary takeaway.

 

The real lesson is understanding why some asset classes tend to be more resilient than others.

Great Investments Require More Than Demand

Many investors focus exclusively on demand.

  • People need housing.
  • People need storage.
  • People need office space.
  • People need retail.


While demand certainly matters, demand alone doesn’t guarantee a successful investment.

 

 

You must also understand supply.

 

 

A strong investment typically exists where:

  • Demand is stable or growing
  • Supply is limited
  • Replacement is difficult
  • Competition is constrained

 

When supply can rapidly increase, profits often decline.

 

 

When supply remains constrained, existing assets tend to maintain stronger occupancy, pricing power, and long-term value.

 

The Apartment Challenge

Apartments serve an important role in housing.

 

 

People will always need places to live.

 

 

However, apartments face one challenge that many investors underestimate:

New competition can be built relatively easily.

 

 

When rents rise, developers respond.

 

 

When financing becomes available, new projects get approved.

 

 

When markets improve, construction increases.

 

 

The result is a recurring cycle:

  • Strong rents attract development
  • New supply enters the market
  • Occupancy softens
  • Rent growth slows
  • Margins compress

 

Then the cycle repeats.

 

 

For apartment owners, one of the biggest risks isn’t necessarily economic downturns.

 

 

It’s oversupply.

 

 

A property can be performing well today and suddenly face hundreds of competing units opening nearby tomorrow.

Why Mobile Home Parks Are Different

Mobile home parks operate under a very different dynamic.

 

 

In most markets, building a new mobile home park is extremely difficult.

 

 

Many cities and counties simply will not approve them.

 

 

In fact, new mobile home parks are being created at a very slow pace while many older parks continue to be redeveloped or closed.

 

 

This creates something investors love:

Scarcity.

 

 

When an asset class is difficult to replicate, existing owners benefit.

 

 

Unlike apartments, most mobile home park owners don’t spend their time worrying about a brand-new competing park opening across the street.

 

 

The barriers to entry are simply too high.

 

The Business Model Matters

Beyond supply constraints, mobile home parks often benefit from a unique operating structure.

 

 

In many communities, residents own their homes while the park owner owns the land underneath them.

 

 

This creates several advantages:

  • Lower maintenance responsibilities
  • Reduced repair costs
  • Lower capital expenditures
  • Stronger resident retention
  • More predictable operating expenses

 

When residents own their homes, moving becomes expensive and inconvenient.

 

 

As a result, turnover tends to be lower than many traditional rental properties.

 

 

Lower turnover often translates into stronger and more predictable cash flow.

What Private Lenders Should Understand

At Houston Capital Group, we spend a significant amount of time evaluating risk.

 

When lending on real estate projects, we’re not simply looking at potential returns.

 

We’re asking questions like:

  • Is there long-term demand?
  • How easily can competitors enter the market?
  • What happens during a recession?
  • How durable is the business model?
  • What could permanently impair this asset?

 

These are the same questions private lenders should ask before funding any investment opportunity.

 

The goal isn’t simply to earn interest.

 

The goal is to preserve capital while generating consistent returns.

Why I Continue to Like Mobile Home Parks

After nearly two decades in real estate, I’ve invested in:

  • Single-family rentals
  • Fix and flips
  • Owner-finance properties
  • Land development
  • Commercial projects
  • Syndications
  • Notes
  • Mobile home parks
  • RV parks


Every asset class has strengths and weaknesses.


But if I’m looking for long-term sustainability, affordable housing remains one of the sectors I find most attractive.


The United States continues to face a shortage of affordable housing.


At the same time, regulatory and zoning restrictions make it extremely difficult to create new mobile home park inventory.


That combination of strong demand and constrained supply creates a compelling long-term investment thesis.


Will every mobile home park be a great investment?


Of course not.


Good operators still matter.


Due diligence still matters.


Market selection still matters.


But when evaluating opportunities, I prefer assets that have built-in protection against oversupply and offer essential housing at a price point that remains affordable for everyday Americans.


Because in investing, the best opportunities aren’t always the flashiest.


They’re often the most durable.


And durability is what creates wealth over the long run.