Everybody in real estate is fighting over the same apartment buildings at five caps. Meanwhile, my guest on this episode built a portfolio reportedly worth over a billion dollars in the one asset class everybody gets weird about: trailer parks.
Frank Rolfe has owned around 500 mobile home parks. And the thing that makes mobile home park investing work is a single structural detail that has nothing to do with the buildings. You own the dirt. The tenants own the homes. It costs about $10,000 to move one, so almost nobody ever does.
That one detail is why investors love this asset. It's also exactly why critics call it predatory, and why Frank ended up getting played on John Oliver. We got into both sides.
In This Article
What a Well-Run Park Actually Looks Like
You Own the Dirt, They Own the Home
Nobody Is Building These Anymore
Mobile Home Parks, By the Numbers
14 Years
Average tenancy, versus 1-2 years in apartments
30-40%
Expense ratio, versus 45-50% for apartments
~10 a Year
New parks built nationwide, while ~100 get redeveloped
What a Well-Run Mobile Home Park Actually Looks Like
When most people hear trailer park, they picture 8 Mile. Frank's framing is better: a mobile home park is a high density subdivision. That's literally what it always was.
The word park goes back to the 1920s and 30s, when it just meant a field where you could park your trailer overnight for a fee. Back then RV parks and mobile home parks were the same animal. They split in the 50s and 60s, with RV parks becoming a travel luxury and mobile home parks becoming permanent housing.
A modern well-run park looks like a regular subdivision with two visible differences. The lots are tiny, maybe 50 by 100 in a newer park and more like 30 or 40 feet wide in a traditional one. And the homes sit about three feet off the ground, which is why you see skirting and a deck. Beyond that, plenty of them have clubhouses and pools.
Frank also makes a quality-of-life case against apartments at the same price point, and it's hard to argue with. No neighbors knocking on your walls and ceilings. You get a yard. You park at your own front door instead of a communal lot. You get a trash polycart instead of hauling bags to a dumpster. And because people stay, you get an actual sense of community.
That last one shows up in the numbers. The average mobile home park tenant stays 14 years. The average apartment tenancy is one to two. If you want the wider view of how this asset sits next to office, retail, and industrial, start with my breakdown of the types of commercial real estate.
You Own the Dirt, They Own the Home
This is the whole business model, and it's why the expense math looks so different from apartments.
Frank still owns some apartment buildings that came attached to parks he bought, so he can compare directly. In an apartment, if a toilet won't flush, that's on him. Door won't close, on him. Broken window, broken door knob, on him. Plus roofs and foundations. It's a phone that never stops ringing.
In the land business, he doesn't touch any of it. He rents land. His comparison: it's like owning a parking lot downtown where you're not responsible for the cars. The difference is you have to provide utilities and a manager, and your customers live there.
That's the split that produces the expense ratio. If tenants pay their own water and sewer, a park runs about 30%. If the park pays, about 40%. The real range is 25% to 50%, with the low end when the city owns the streets and the high end in Cook County-style property tax markets or parks carrying real vacancy.
Compare that to the 45% to 50% expense ratios my friends in the apartment world live with. That gap is not a rounding error, and it's the reason a lot of multifamily investors are segueing into this asset class.
Most professional buyers now pass water and sewer back to tenants as the first move after closing. Consumption typically drops about 30% when people pay for what they use.
Nobody Is Building These Anymore, And That’s the Moat
Here's the part that should interest you most as an investor.
There are about 44,000 mobile home parks in the United States, and the number goes down every year. Roughly 100 get redeveloped into something else annually. Frank doesn't believe more than about 10 new ones get built nationwide in a year.
The reason is zoning. No city allows them. No small town allows them. Frank lives in a town of 5,000 that doesn't allow them. So the only place you can build one is far out in the county where there's no supervision, and that's exactly where there are no customers, no hospital, no shopping, no schools. The two parks he watched get built north of Fort Worth in the 90s both went bankrupt, and those were experienced builders.
It isn't primarily a cost problem. Lots run about $25,000 each to develop, and a new home on top of that is another $80,000 or so, putting you around $100,000 a lot. The problem is demand. Most Americans are horrified by the idea of living in a mobile home, so it takes a lot of population density to find the people who will. Build way out in the country and you've stacked a small market on top of a small market. And anyone who genuinely wants rural living can just buy a home and stick it on their own acre.
So supply is frozen while the parks that exist keep filling up. That's a Warren Buffett moat, and it was handed to the industry by zoning departments rather than built by anybody in it.
One more piece of the picture: this is the cheapest form of detached housing in America. Demand goes up when the economy gets worse. Frank watched it in the dot-com bust and again in the Great Recession, when mobile home sales volume actually rose. The industry's bad years are the boom years. In 2004 and 2005 he had people in eviction moving across the street into brand new subdivisions on zero-down, no-documentation loans. They all came back.
The Spread That Actually Sets the Price
Nobody prices these on replacement cost, because they were all built in the 50s and 60s. Frank calls it the most income-based real estate on earth. Everything trades on existing NOI.
The rule of thumb is refreshingly simple. You want to buy at a cap rate above the interest rate on your loan, and the size of that spread sets your return.
Cap Rate Spread Over Your Debt
1 Point
Gets you roughly a 10% cash-on-cash return
2 Points
Roughly 15%
3 Points
Roughly 20%, which is what most buyers target
Most buyers in the industry want that three-point spread and a 20% cash-on-cash return. They get there either by buying at a wide spread outright or by buying at a thin one and then pushing rents, filling vacant lots, and cutting unnecessary cost. If you want to see how those returns actually stack up over a hold, here's my walkthrough on how to calculate commercial real estate investment returns.
Which means interest rates are the backbone of every valuation in this business. At the 2021 bottom, with Fannie and Freddie paper near 3%, parks traded at four and five caps. Today with rates around 6%, you're buying at seven and eight caps and pushing from there.
If you ever see a park trade at a four cap in this rate environment, it's almost always a seller carry deal where the seller is holding paper at 3% for a couple of years. Worth understanding if you're exploring creative financing structures.
Two other things buyers are showing up for. This asset class has the lowest default rate in real estate, which makes lending easy. And it throws off about four times more depreciation per dollar invested than any other real estate sector, which makes a cost segregation study unusually valuable here.
On where to hunt: Nashville is picked over because everyone wants Nashville. Frank would go to the exurbs, or to the small commuter towns up to an hour out where people like the schools and the downtown. More broadly, the Southeast is where the opportunity is, because the market data got good long before investors started paying attention. A four to five hour radius of Nashville covers some of the hottest ground in the country right now.
How Frank Screens a Deal
He uses a five-point checklist that spells IDEAL, and it's a genuinely good filter.
Infrastructure. City water and city sewer, ideally. No master metered power or gas. Paved roads are nice but fixable. What isn't fixable is converting private water or sewer to public, or splitting a master meter into individual utility connections.
Density. Lots big enough that you can actually bring new homes in on them.
Economics. The spread over your interest rate, as above.
Age of homes. He wants predominantly 1990s, pitched roof, and paid for. Tenants without a mortgage churn far less.
Location. Either an urban location that's genuinely safe, or a suburban, exurban, or commuter-town location with good schools and real demand.
The Instant Drop List
Some things kill a deal on the spot. Call the city about the permit and hear there isn't one, or that it's permitted for 20 lots and running 80. If it's illegal, walk. A floodplain where the base flood elevation is high enough that water reaches the homes rather than passing under them. Anything in the floodway, where you've got actual ripping current instead of standing water. A test ad that pulls poorly. Density the fire marshal considers unsafe.
Others surface later in due diligence. Frank has had deals die on an easement running diagonally through a park that nobody mentioned, which made the whole thing impossible to operate. Environmental issues too.
Never Trust the Seller’s Numbers
Mom-and-pop parks are notoriously bad on financials, sometimes because the owner didn't know better and sometimes because the actuals don't match the tax returns. Frank was blunt about it: if you trust the numbers a seller gives you, you will go bankrupt. In his entire career he has never once verified a mom-and-pop's numbers and found they'd estimated too high.
Revenue you can mostly audit yourself. Walk the park, touch each home, look for a spinning power meter and signs of life. On a hundred-space park you might get burned on one or two units that turned out to be abandoned. Survivable.
Cost is where you get killed, so he verifies nothing through the seller. He calls the water department, the sewer department, and the power company directly and asks for the last several years of bills. For things you can't verify that way, like repairs and maintenance, use plug numbers or get three bids.
Watch for the tricks. Sellers leave off mowing because they mow it themselves. They capitalize repairs into capex so the expense line looks thin. And the big one: property taxes. If the assessor has it at $200,000 and you're paying a million, you underwrite the tax on a million, because that bill is coming the year after you close. In Missouri that's a 1% problem. In Texas it's 3%. In Chicago it's 10%. Nashville just took a 37% increase. This is exactly the kind of line item my guide to underwriting commercial real estate exists to catch.
The Waffle House Quote, And the Case Against
I wasn't going to skip this. Everything above works because residents can't easily leave. That's the moat, and it's also the exact thing critics point at.
Frank once said owning a park is like owning a Waffle House where the customers are chained to the booths. John Oliver played it for millions of people. I asked if he regrets it.
Not at all, and his explanation is worth hearing. A Bloomberg reporter asked why his default rate was so low. He said restaurants have the highest default rate in business, so compare the two. You open a Waffle House and you don't know if anyone walks in that day. Open the doors at a mobile home park and all your customers are already there. It was a line about default risk, not about people being trapped.
His actual position: the homes are chained to the booths, not the people. Customers move constantly. Some stay two years and default, some stay fifty, and the 14-year average sits in between. If you lose your job or your spouse leaves, you sell the home where it sits. Why would you spend $10,000 moving a $5,000 home?
And the homes genuinely can't move, for two reasons. Federal law grandfathered pre-1976 flat-roofed homes where they sat and prohibited moving them. And anything from the late 70s or 80s won't survive the transport. Frank has had his own homes break apart on the highway. He's seen a double wide take out all lanes of Interstate 55, and the liability for that lands entirely on the mover.
And the Rent Increases
He's also been quoted in the Guardian on 10% annual rent hikes. His answer is that percentages hide how small the dollars are. Average lot rent in the US is about $300 a month, so 10% is $30. The average apartment is around $2,000, where 10% is $200. He thinks the coverage leans on percentages precisely because the dollar amounts don't sound like much.
His harder argument is the one worth sitting with. Parks sit on two to seven acres with good frontage and full utilities, which happens to be the perfect redevelopment pad site. If rents stay where mom-and-pop left them, owners take the redevelopment money instead, and the housing disappears. He bought a park in Austin where the lot rent was $250 and the park across the street was at $550. The owners hadn't raised rent in 17 years because they didn't think people could afford it. That generation is selling or dying, and the next one is not running it as a nonprofit.
He thinks most lot rents have to reach at least $500 or the parks get demolished. He also points out that housing is now the fourth largest cost for the average American household, behind healthcare, childcare, and transportation.
You can weigh that argument how you want. I'd rather put it in front of you than pretend the tension isn't there.
If You’ve Got $250,000, Here’s the Rule
I asked Frank what somebody with $250,000 should be hunting for. His answer was one rule, and it's about financing rather than the property.
Never buy a park you can't get to a million dollars in value. The industry is bifurcated at exactly that line. Under a million, your only options are seller financing or a small town bank, which means short terms, higher rates, and a personal guarantee. At a million and up, conduit debt opens up: non-recourse, fixed rate, ten-year term, all of it.
So with $250,000 you're looking for a park you can buy at least a point over your interest rate, with room to fill lots, push rents, and cut cost. Then clean it up. A nice entry, rules enforcement, actual aesthetics. If you can get NOI up 50%, this industry allows a cash-out refinance fairly quickly, because the asset is so fixed in stone that lenders don't demand much seasoning.
What you don't want is a 12-space park three hours outside Nashville that's worth half a million when you're done. Those are brutally hard to finance and brutally hard to sell.
On sourcing: historically about half of what Frank bought came from brokers and half from cold calling and direct mail. Today he'd weight it toward cold calling and mail, because brokers are mostly shopping the larger deals and the asking prices often don't support a 20% cash-on-cash return anyway.
Before you make an offer on any of it, run the deal through a real model. You can use my Deal Analyzer for free.
The Risk Frank Actually Worries About
I asked what would kill this business. He didn't say interest rates or a recession. He said rent control.
His logic follows from everything above. Lot rents are already so low that if you cap the ability to raise them, the parks simply stop making money, and well-located land always has another use. The rent cap becomes a demolition order.
Key Takeaways
You own the dirt, not the homes. That single structural fact is why expense ratios run 30-40% instead of the 45-50% apartment owners live with.
The moat came from zoning, not from operators. Fewer than about 10 new parks get built a year while roughly 100 get redeveloped. Supply only shrinks.
Buy on the spread over your debt. One point over your rate is about 10% cash-on-cash, two points about 15%, three points about 20%.
Screen with IDEAL: infrastructure, density, economics, age of homes, location. Walk from anything unpermitted or in a floodway.
Never trust a seller’s expenses. Call the utilities directly, and always underwrite property taxes at your purchase price, not the seller’s assessment.
Demand is countercyclical. This is the cheapest detached housing in America, so the phone rings more when the economy gets worse.
Don’t buy anything you can’t get to $1 million. Below that line you are stuck with seller financing and small town banks. Above it, conduit debt opens up.
This article is adapted from a conversation on the Tyler Cauble YouTube channel with Frank Rolfe, who has owned roughly 500 mobile home parks. If you want a step-by-step path into commercial real estate, take a look at the CRE Accelerator.
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