Is it worth it? Mobile Homes?

Question

I'm getting more and more FB ads in my area for mobile homes for sale. Some have been redone, others are a "handyman's delight", but I'm curious if it really matters if all the numbers work? I guess there's just a stigma attached to them as being "less than" SFH or multi-family units, but if the numbers work, the numbers work, right?

Jaron Walling · Answer

@Carl Rowles Mobile homes are a niche of REI just like anything else. There are pros and cons to every type but mobile homes are pretty unique.

The main issue is land... or lack-there-of. Based on your post you're talking about buying the trailer, not the land. You're buying a trailer and a tenant pays the lot fees. Not every trailer is built the same nor is every park in the same location, but more often than not they are a depreciating asset. Trailers don't go up in value like conventional houses.In my opinion to get the true benefits of buying mobile homes you want to own the land underneath them. If not you have to scale massively and deal with the PM that come with trailer parks. One of my best friends paid cash for a "handyman's special" trailer in 2021 for $9k. He spend $3k fixing it up, rented it for $700, but lot rent was $300. He sold it earlier this year for $15k. Do the math. He learned lessons but made pennies for the experience. This was during the biggest run up in RE prices since FOREVER. In his market he could have bought a SFH with $12k for the DP. I know this because I grew up there. He would cash-flowed the same if not more, loved it or hated it, and if he sold made significantly more $$$ for the experience.

Jonathan Greene · Answer

The barrier to entry is lower so they seem attractive, and to the person who knows what they are doing, they can be very profitable. But, it's a unique strategy that requires more knowledge than expected. Look up @Jason Velie, the "Trailer King". He knows everything you need to know to do this right.

Carl Rowles · Answer

Aside from the stigma of them, it seems like they’d be a decent entry point for new home owners, given the housing market the way it is.

Roger D Jones · Answer

Melanie I am not sure I would concur with your statement that any land use is better than a mobile home park.  Large investment groups and small investment groups have been scooping them up in batches over the last ten years.  Carlyles, Blackstone, Sam Zell and Apollo to name a few of the big dollar groups.  I get three calls a week on each of our parks from groups looking to buy and they are each far from any metro areas.  I would proffer that though that no one is building NEW mobile home parks with some exceptions for long term RV parks which continue to be developed.  Existing mobile home parks are in high demand for all investors large and small.

Jaron Walling · Answer

It's a great entry point but like most things that was the good ole' days! It's hard to stay that today. My former boss lived in trailer like 25 years ago, and saved thousands before buying a real home. They're frugal with money and invest wisely. It was a sacrifice that paid off because him and his wife are The Millionaire Next Door (literally).

Melanie P. · Answer

Carl, There are nice mobile home communities that include the parcel of land under the home. These homes tend to individually appreciate over time and are actually not bad places to live.

The places with the lot rent you have to decide if you want to be in the mobile home business and buy the park. Then you wind up with units in your park that default on lot rent and cannot afford to move the trailer. Most trailers cannot be moved or would cost more to move than they are worth. So, if a developer comes along and buys the mobile home park you will lose your entire investment. This does happen. Almost any use of land is better than a mobile home park - which is why most of these parks still around are in far off areas.

Roger D Jones · Answer

CarlSorry about my vacant response above.  It was early and I did not think my communication was very clear so I tried to delete the post but I guess it left your 'quote' in place.

So to answer your question- Yes.  Mobile homes are much more susceptible to repairs than SFHs.  Mobile homes are 'baby chick eggs'.  Everything is smaller, thinner and cheaper.  Water is the root of all evil.  I own thirteen mobiles in one of my parks and the only way it pencils is that we A) take very good care of the homes staying ahead on the maintenance, B) Rents are high in the area so we can charge $550 over the pad rent which is $450- so $1000 per month.

You can look at a mobile home and see it as an easy rental with new carpet, trim and some paint but there are other bigger uglier expenses that can come up.Roof Replacement, soft floors (water damage) in kitchens and bathrooms- most floors are particle board, exterior door replacement (special order), underbelly insulation falling, bad hot water tanks with rotten floor underneath (real joy), bad windows (water again), bad bloated siding (water), water damaged base frame around perimeter of home, cracked tubs (special orders) and frozen pipes (Good luck finding a plumber to come work on a mobile home- they do not exist).  Now your husband may be willing to take these on but that is not much of a life for $500 per month.  If you sub these out you will be wiping huge chunks of your annual NOI.  Now I not saying to not take the deal... just go in with eyes wide open.

Carl Rowles · Answer

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses.  Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

Henry Clark · Answer

Money is in owning the lot as stated above.  Plus far less headache.

Is it worth it? Mobile Homes?

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