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5 Obviously Simple Reasons to Invest in Mobile Homes in 2010

by John Fedro on January 2, 2010 · 23 comments

  
reasons to invest in mobile homes

Mobile home investing usually happens one of two ways; you invest in mobile homes attached to “land you own” OR you invest in a mobile homes that are “not on your land” (typically land rented in a mobile home park).  Today, let’s talk now about mobile homes located on rented land (in mobile home parks)!

  1. No Closing Costs - No title insurance, no property taxes or insurance proration, fees, surveys, doc stamps or other costs that typically come with home ownership! Mobile homes that are located on rented land, such as in a mobile home park, do not close at a title company or attorney’s office; I mean, they can but it would be pretty silly.  Mobile homes in parks are considered “personal  property” and for that reason it’s as simple as buying or selling an automobile, boat, or refrigerator
  2. Free Bird dogs – At the start of my career I was embarrassed to tell people I that I was investing in mobile homes for profit.  I mean, “Really!?”  My friends and colleagues were sure to laugh at me.  What happened?  No one laughed; in fact my fellow investors were happy!    They were happy because now they could do something with all the mobile home leads they that had been stacking up over the months.   I was having new and seasoned investors bringing me finished deals or great new leads on a silver platter every day.  It is still amazing to me that no one seemed to know what to do with “Ready To Go” leads that came in from regular marketing efforts.
  3. Avoid the crowds - When I started calling this stack of sellers I had gotten, I had expected for most of the homes to be already sold or numbers changed.  To my delighted surprise 9/10 of the homes hadn’t been sold yet and the desperate sellers were ready to play “Let’s make a deal”.  I remember to this day the voices of desperate mobile home sellers, telling me how other investors wouldn’t even talk to them because they had a mobile home – many times the seller simply wanted to deed the home over and leave.
  4. Got 50 Bucks? – It was for this reason that I started buying mobile homes.  I didn’t have cash or credit when I started investing.  Let me tell ya, “Mobile homes in parks can be very Inexpensive.”  I have gotten many complete homes (appliances included) for 100% FREE!  Start with an initial investment capital of hundreds of dollars NOT thousands.
  5. Going, Going, Gone! – What’s that you say, “Good luck selling a mobile home and making money in this market!?”  True your chances of selling a used mobile home in a park for “All Cash” are slim.  I’ll be the first to admit this…  The fact is that not many mobile home end-buyers have $5,000 – 80,000 cash lying around to buy a used mobile home.   But there is a “World Full” of Serious Buyers ready to own their own home.  Our target buyers have had some credit challenges in the past and may not be bank approved; but they DO have a clean record, savings account and good job history PLUS they have $2,000-$5,000 Cash for a down payment and the ability to make monthly payments.

So there you have it…  For a very minimal investment and knowledge base you have added a complete deal to your portfolio/EMPIRE.  Keep up the good work!

Everyone have a Profitable and Eye-Opening New Year!

- J Fed

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{ 22 comments… read them below or add one }

[email protected] January 2, 2010 at 11:18 am

Timely post for me John, Mobile/Manufactured homes are on my list for 2010.

I’ve stayed away from them until now. It’s about time I throw a few in my experience box and grow it from there. I’ve learned that you can pick them up so cheap that it isn’t hard to cashflow on them. We’ll see how it goes

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Shae Bynes January 2, 2010 at 11:28 am

Great post, John and welcome to the blogging team!
.-= Shae Bynes´s last blog ..Finding the most motivated buyers =-.

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Shae Bynes January 2, 2010 at 11:31 am

Hey John, just curious…if you lived in South Florida (which is substantially more prone to hurricanes than Tampa), or in Kansas/Texas (areas more prone to tornadoes) would you still invest in mobile homes?

I know I’m always surprised to see that people live in them in these areas.
.-= Shae Bynes´s last blog ..Finding the most motivated buyers =-.

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Joshua Dorkin January 2, 2010 at 11:52 am

That’s a great point, Shae! I’d be interested in your thoughts as well, John.

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Stephani Davis January 2, 2010 at 4:50 pm

Great post, John!

I can certainly attest to his #2 point, as I was one of the investors feeding him all of my mobile home leads. :)

Welcome to the Bigger Pockets blogging team!
.-= Stephani Davis´s last blog ..Happy New Year Everybody! =-.

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[email protected] January 2, 2010 at 8:00 pm

Thats funny! Are you going to start keeping them for yourself now or keep giving them away?

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Neil Uttamsingh January 2, 2010 at 5:06 pm

J-Fed,

I liked your article. I hope that you write more on this topic.

I know nothing about mobile homes, however, this is why I love real estate. No matter what your investment strategy is, there are so many ways to make it work, and earn some extra bucks.

I look forward to reading more of your articles!

Best Regards,
Neil.
.-= Neil Uttamsingh´s last blog ..Me Gusta Real Estate! =-.

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J. Lamar Ferren January 3, 2010 at 4:37 am

Hey John,

Is it true that you need to have a permit in order to invest in mobile homes? If so, is it hard to get one?
.-= J. Lamar Ferren´s last blog ..Should We Continue Marketing Through The Holidays or STOP Now? =-.

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John January 3, 2010 at 5:00 pm

thanks EVERYONE for the welcome!

I am truly honored and happy to be contributing here! Mobile homes really are an amazing real estate vehicle. I hope my passion for these types of homes comes through in the articles for everyone.

Shae, Great question! I have successfully manage to miss every successful hurricane in Florida but other parts of the state and country routinely get hit with natural disasters. With proper precautions we try to make the homes as secure as possible. That being said a mobile will still be the first thing to go with any class of hurricane! Insurance helps – which is fantastically inexpensive $200-400 year, passed onto my buyer.

but honestly I’m never too worried. Why? 1. Because they are so easy and plentiful to buy & 2. I always make all my initial investment back with in 10 months (max). after that its all profit! And selling the homes to an end buyer rather than simply renting the home takes some liability off me to paying for necessary repairs.

- John

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Shae Bynes January 6, 2010 at 7:50 am

John, wow insurance IS cheap. I guess that makes sense considering that replacement costs are rather low. Thanks!
.-= Shae Bynes´s last blog ..It’s a small world after all… =-.

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Neil Uttamsingh January 3, 2010 at 5:12 pm

J-Fed,

This is very interesting! You make your money back in 10 months? Wow!

You said that you sell the mobile home to a buyer.

Are you essentially doing a rent to own then with these mobile homes?

Regards,
Neil.
.-= Neil Uttamsingh´s last blog ..What is RSS and how do I use it? =-.

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Missy January 3, 2010 at 10:11 pm

Hey, J-fed:

I recently moved (well 3 years now) down south (Mississippi) from the north (Chicago) and have noticed a slew of low cost properties. Some good, some not so good. But the mobile home thing definitely sounds interesting.

Is your site down? Went to visit and am getting an error page of sorts. Would love to hear more.

Cheers,
Missy
.-= Missy´s last blog ..SEO For Wordpress Bloggers =-.

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John January 5, 2010 at 12:01 pm

hi Missy,

Yes my MH investing info site, mobilehomemadness.com, is temporarily down for maintenance! Perfect timing i know. Im getting a new programmer and it should be up and running in no time. :)

For more info in the meantime I’ve hosted a separate blog at http://www.johnfedro.wordpress.com

thanks for reading and pointing that out,
Cheers – John

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Tyler January 4, 2010 at 5:16 pm

Mobile homes I think are going to get less and less popular as they are replaced by green prefabricated homes. These homes have all of the benefits of the mobile home, and even more since it looks like any other home.

-Tyler
.-= Tyler´s last blog ..oct_0179.jpg =-.

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John January 5, 2010 at 11:54 am

J. Ferren – To my knowledge and experience there are no licences/permits needed to invest in mobile homes. (no one has ever asked me to show any kind of investor’s licences) In parks you may be referring to a dealers licence; A dealer, similar to a car dealer, if quick-turn (buy and sell) over 10 mobiles (not including land) in a year. Numbers not exact but you get the point. I use personal property trusts and don’t “sell” homes quick enough to require a dealers permits. I would never want one anyway. I have moved homes from spot to spot and in those cases an electric, plumbing, setup permits need to be pulled (a simple fee and trip downtown).

As far as mobiles attached to your own land; you’re buying and selling your own real property so no licences are needed. Check your state to be certain though. I’m not sure what you have heard or were referring to but I sure hope this helped. Homes that already exist either in parks or on land; 1. buy nice home 2. fill with nice fam 3. forget about it, collect payments!

Neil U. – 10 months in my experience is all the time it takes to return your initial cash investment OR to payoff a small seller held mortgage. lol, it was 7 months for the longest time then i bought a really really nice mobile and really wanted to add it to my empire (so therefore i was emotional about it and didn’t negotiate as hard, so I paid a little more than usual). But yes, 10 month max ROI (that ive encountered).

I sell the homes with a collateral assignment of interest in trust. Most parks don’t like the terms “rent to own”, but between you and I, it’s a combination of rent to own & seller financing.

Tyler – Going “Green” is certainly the future! I was recently talking to the head of the local mh builder here in texas and was told current and future plans are for implementing many new green features into their new models. No one Ive talked to seems worried about mobiles going the ways of the dinosaurs. IN fact back in 03 Warren Buffets company Berkshire Hathaway purchased Clayton homes, the county’s largest seller of mobile homes. So id invest with ease! And remember you don’t have to stop with just mobile homes; invest in the world, but make quick loot and cash flow in the mean time.

I’ve spent a ton of time around parks and mobiles on land; and for now they are one of the last affordable housing that many Americans have (if they want to own something) those green houses are really fascinating though and i think people should soak up all the info they can.

- J. Fed

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Gene January 5, 2010 at 11:41 pm

Hi John,
I really enjoyed reading your postings and those who commented. We own some mobile home parks in Mississippi and Illinois and would be happy to work with anyone who wanted to bring in homes to sell or rent to own.
You can check out our website at http://www.woodmoorproperties.com , go to the projects tab on the list on the left side of the page.
Best to you,
Gene

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Tammy Phelps January 15, 2010 at 3:18 am

Wow! Great blog post. As a multi-unit investor, educator and coach this couldnt be more timely. I am currently coaching 40 students on multi-unit investing and in addition to the obvious apartment acquisitions my focus for the past 2 years has been to provide knowledge on mobile home communities and self storage facilities which if acquired properly provide an incredible ROI, not only to our portfolio and our students but to our private equity partners as well. Most sellers will carry back with 20% down because they know if a buyer is interested and the units are “park-owned” when a seller wants to sell, then they almost always have to seller finance as traditional financing won’t get approved due to the mobile homes being a depreciating asset. When the mobiles are resident owned then the bank counts the income from the “lot rent.” When selling a property with “park-owned” homes if a seperate LLC is created and those units are placed into it and the lot rent is seperated out on the income statement then financing is easier to obtain as long as the seller can provide 2-3 years of history on the seperated income. Also as a purchaser of mobile home properties its always advantageous to build relationships with and talk to the smaller, local banks in the area of the property. If they do in-house underwriting of their commercial loans the probability of you getting a loan approved is much greater. As a mobile home community owner of several properties I can attest to the truth that these properties are truly “Cash Cows!” Where else can an investor acquire a 3 bdrm/2ba home for well under$5,000 in great condition (Repo’s), invest approx. $2,500 to transport it, set it up, and get it certifed with the health dept? Now you either rent it out at the same market rent or better yet sell it on “Owner Financing” for $18-$20,000 at 14% for 7 years. You do the math… As our accountant says, ” There is nothing that can even come close to providing this type of a ROI!”
Better yet… Purchase it inside of your self-directed IRA and all profit is tax FREE.

The sweetest part is that most residents stay an average of 7-9 years because once they pay the cost of moving & set-up they usually don’t want to have to pay the moving cost again. Treat your residents with the respect they deserve and I am here to say they will stay with you forever. Our average length of stay is 18 years.
You only need a few mobile home communities of 50-100 units to acheive Financial Freedom!”
The reality of most investors as they look at me cross-eyed when I tell them I invest in mobile home communities is their perception of what society and they label them as, “Trailer Parks!” We all know how difficult it is convince the reality of someones perception right? So I don’t even go there….instead I just look back at them cross-eyed as well and smile all the way down the road as I am offf to sign another LOI on a mobile home community where the seller has agreed to carry back the financing… 20% down…amoritized over 30 years with a 15 year balloon at 7 %. Oh did I mention that I also negotiated in the LOI terms that my first payment wasn’t due for 6 months because I need time to bring in 10 neused homes and get them sold on owner financing. Darn, I forgot to mention the 4% acquisition fee I am getting at settlement. Yeah! I know that really means no money outta my pocket to acquire this property, but hey who cares anyway… “It’s JUST another trailer park!”

Respectfully,
Tammy
R E A C H~ Real Estate Apprentcieship in Commercial Housing
Founder of The Real Deal Investment Clubs of MD & VA
Capstone Investment Acquisitions

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Misty January 16, 2010 at 3:54 pm

John- I want exactly what u said in you original statement. Im looking for a mobile home in Bakers CA that the owners will carry the papers with about $2500 down..Possibly 400-$700 per month payments but I cant find anything at all yet. I have to be out of here by feb 1st. Do u know any place out here thats available?

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Tammy Phelps January 17, 2010 at 2:04 am

Misty,
Have you thought about placing an ad on Craigs List of what it is that you are looking for?
It’s Free and hey… you never know! I’ve had great success with Craigs List.
Wishing you all the best!

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Misty January 17, 2010 at 1:15 pm

I have been Mrs Phelps and still cant find anything. Were really having a hard time finding a place at all that the owner will carry. Id think someone out there would do it. The mobile we were looking at was only 20,000 but it ended up falling through because the park was 55+ only…Hope we find something soon

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Cliff Stevenson November 22, 2011 at 10:20 pm

Well, based on the date of this post, I’m late to the party.

We’ve helped a few clients recently get into mobile homes. In our market, we require 5% down for financing, but the last mobile home we sold was sold for $20,000. The down payment was $1000. It needed work, but in a market where these things sell for $80,000 to $120,000, I would say we’ve seen some pretty solid investments in mobile homes.

It’s not our area of expertise, but I’ve been pleasantly surprised with a type of home we never saw ourselves selling.

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John Fedro November 23, 2011 at 10:11 am

Tammy, I love the sound of the passion I read in your voice. Mobile home parks themselves are crazy money makers when they’re filled and running right. I have never owned a complete mobile home park, nor do I teach other to do so. From my experience mh parks are a great deal of management, whereas the number of homes I control require little to no management once a good buyer is in place. I wouldn’t be opposed to purchasing a park in the near future though (wink-wink). Thanks for responding.

Misty, I apologize for the long delay in seeing and writing this response. I assume you are no longer looking for a mh for yourself but I do still hope you think of mobile homes (the individual units) as a great money making opportunity. We have closed dozens of deals in California this year with less down and per month that you have written above. There is no magic, only correct daily action and persistence. Let me know directly if you’d like more help. I hope you have found a beautiful home that you just love.

Hey Cliff, thanks for responding (or else I wouldn’t have seen anyone elses’ questions) and reading. Would you say the general interest for mhs buyers has risen, declined, or remained the same since 2008?

- John Fedro

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