Americans with bad credit, criminal histories live in trailer homes
Some of Wall Street and Silicon Valley’s best minds are packing it all in for greener pastures. And they’ve found those pastures in…trailer parks.
“Trailer parks have unusual economics,” says Anthony Effinger, the author of an article on the topic for Bloomberg Markets. “It’s a supply and demand curve that’s super attractive to investors.”
There certainly is demand for trailer homes— they’re often the cheapest form of housing which means a lot in an economy with ever-growing wage disparity-- roughly 6% of American’s lived in trailer homes as of 2012. The supply of designated trailer parks is also quite low because, “nobody wants a trailer park in their town or county,” says Effinger.
Dan Weissman, who previously worked at Goldman Sachs and a private hedge fund, now owns five mobile home parks. “The greatest part of the business is that we go to sleep at night not ever worrying about demand for our product. It’s the best decision I’ve ever made,” he tells Bloomberg Markets.
“What’s at work here,” says Effinger, “is the shrinking middle class.” People with bad credit and criminal histories are often unable to rent or buy homes, and are forced into trailer parks—where owners are usually willing to overlook credit and criminal activity (the average trailer home in America rents at $390 a month).
It’s not all a walk in the park. Investors go into these parks and often have to fix decrepit homes, deal with criminals, and in some cases even meth labs.
Weissman and his partner, David Shlachter (who has a master’s degree in development economics from Harvard), bought a park with 159 mobile homes in 2013 for $485,000 and made $250,000 in improvements. They expect to earn $150,000 in rent for 2014 and the park is only at 40% capacity right now.
“There are so many people crowding into technology,” says Effinger. “They’re all super bright, everybody’s making a new app for the iPhone and in New York there are super-talented MBAs scrambling for a limited number of financial jobs…what these guys wanted was something where they didn’t have to bump up against those folks.”
They’re willing to enter a hairy industry to avoid that competition.
So should you look to invest in mobile homes? “I suspect you’d need a lot of patience and a lot of time to deal with some of this stuff,” says Effinger Yahoo Homes.