MOVING OPPORTUNITIES
On New Year ’ s Eve 1967 , daredevil Evel Knievel attempted to jump over the fountains at Caesars Palace in Las Vegas . Falling short , he crashed spectacularly , suffering a crushed pelvis and femur and fractures to his hip , wrist , and both ankles . He spent several weeks in the hospital recovering .
More than two decades later , in 1989 , Evel ’ s son , Robbie Knievel , successfully made the jump his father had failed to complete , becoming the first person to ever clear the iconic fountains on the Vegas Strip .
So why did one jump end in disaster while the other ended in glory ? Because Robbie mitigated his risks . He studied his father ’ s jump and determined his father ’ s choice of motorcycle , a Harley-Davidson XR-750 , was not ideal for the jump .
Robbie decided to go with the lighter and more agile Honda CR500 motocross bike he had been using up to that point because , unlike the Harley , which was built for dirt track racing , the Honda was built for jumping in motocross events . By making this one important decision , Robbie was able to mitigate the risk of crashing and successfully made the jump his father had missed decades earlier .
In 2020 , many Americans experienced a different type of crash . As COVID-19 ravaged the U . S . economy , unemployment shot up to levels not seen since the Great Depression . Many workers suffered economic hardship from which many are still struggling to recover .
In 2008 , amid the Great Recession , the country suffered a similar economic crisis . Emerging from that economic disaster , many of those affected individuals vowed to never be caught in that situation again . They decided to mitigate future risks to avoid the type of economic devastation they had just suffered through .
Recession-proof cash flow , the idea went , would compensate for any loss of employment income . Recession-proof appreciation would protect against inflationary pressures during a downturn . Alternative assets , those uncorrelated to Wall Street , would ensure continuing cash flow and growth .
Those investors who learned from their mistakes in 2008 , just like Robbie Knievel learned from his father ’ s mistakes , mitigated the risk of future disasters like the one in 2020 by turning to recessionresistant assets that offered ongoing income and growth — essential to not only riding out a storm , but also for achieving financial freedom .
What assets did the survivors of 2008 turn to that helped them weather the 2020 disaster ? Many looked to income-generating real assets . By investing passively , investors were able to generate earnings around the clock as well as create multiple streams of this income — allowing them to move more and more away from a dependence on labor income .
The real asset class many investors gravitated towards was affordable housing .
As demand in all other classes of real estate dropped in 2008 , demand for affordable housing bucked the trend . Loss of jobs and a reduction in income forced many to downsize in housing .
In the years since the Great Recession , affordable housing has been in short supply as homeownership has become more and more elusive to more and more Americans — and the gap between supply and demand has only grown since 2008 .
Knowing what we ’ ve learned about the
demand for affordable housing in the past decade , it should come as no surprise that the one segment of the affordable housing asset class that was not only recession-proof but thrived during the COVID-19-induced downturn was mobile home parks ( MHPs ).
While other segments of multifamily saw reduced occupancy , increased delinquencies , and reduced rents in 2020 , MHPs saw occupancy rise and rents increase . 2020
has proven passive investments in MHPs through private equity or syndications are ideal for mitigating risk and avoiding future economic disasters .
What makes MHP syndications ideal for mitigating risk ?
Recession-Resistant Income . Despite the name , mobile homes are not particularly mobile . It costs an average of $ 7,000 to move a mobile home less than 100 miles . This ensures operators of MHPs a consistent , reliable source of cash flow from rock-solid occupancy rates .
30
COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2021