Renting mobile homes?

Question

Hey guys, I'm new and trying to figure out the best way to get started in the REI game.

I was just reading Lonnie Sruggs' book, the part that deals with the SAFE Act. From what I can tell, the SAFE Act/Dodd-Frank applies to seller financing, but it doesn't apply to renting out the home a.k.a. being a landlord.

So, if I didn't mind being a landlord, and the park was ok with renting out homes, would simply buying and renting out mobile homes be a good way to go?

I'm asking because even though I eventually want to get into stick-built REI, right now I doubt I could get financing for it. (I haven't tried to get pre-approved yet, I'm prolly going to try in a month or so, I have a lot of reading/educating myself to do still)

I also don't have the cash to buy a double wide w/ land, and not sure how the financing works with those or if I could even get financing for it. But buying a mobile home in cash for $10,000 or less wouldn't be a problem for me.

John Lowe · Answer

You're a young guy just starting out, with not much cash or assets. Don't worry about Dodd Frank, your biggest hurdle is getting started. If you think that a Lonnie Deal is the most accessible method for you right now, then do it. Structure the deal so the numbers work (with MHs you should recoup your investment in no more than 2 years). Don't take advantage of anyone, make the deal a win-win for all parties involved. The Attorney General is not going to send a SWAT team to your door because you violated RESPA/SAFE/TILA/HMDA/EOCA/FCRA/GLBA or any other consumer lending act that I've failed to mention.

One of the advantages that MH deals have over most RE deals is the yields are very high. This makes attracting money easier for those who don't have a track record and connections. Lets say you use $7500 of your own money to do a Lonnie Deal that has  a 65% yield. Then you can tell your aunt or your boss or some other acquaintance about your deal and ask them if they'd like to buy a piece of it and earn 18% (they should find that very attractive). So now you've recouped your original investment and you've got a deal under your belt. Repeat the process again. You're building negotiation skills, expanding your network, learning how to find and structure deals.

I'm not suggesting building a RE empire using the techniques in Deal on Wheels, consumer lending is a highly regulated industry. What I am saying is don't be overly concerned about the rules of a game your not even playing. Once you're an active RE investor, you can modify your strategy. Many times in life, imperfect action is better than inaction. Don't worry about crossing the i or dotting the t, just do the best you can, and get started.

Curt Smith · Answer

@Ryan Moore Hey Ryan expand your view of real estate.  There's 100's if not 1000's of deal types.  You might search BP on direct marketing, yellow letters.  Start a consistent yellow letter marketing campaign for vacant or absentee owner houses that you wholesale to other buyers for a small fee.  Some houses you find this way are low equity where you offer to long term lease option from the seller for very little down and you basically just pay a rent that covers the sellers mortgage.  They move on and you make the rent margin over what you are paying the seller... Lots if low cash ways to control real estate and make money.

Leslie A. · Answer

Hi Ryan,

I don't rent mobile homes in a park, however, I do rent travel trailers in a mobile home park with an RV section. We currently have 5 rented in this park.

I've been doing this for 6 months, so don't have a long track record. My experience so far has been really good. I have good renters that pay on time almost always. I charge weekly rents with a deposit and a lease.  So my renters are not transient. I've only had one move out so far.

After paying lot rent and the electric bills my cash flow before repairs (which are minimal) are 350-520 per month each.   Management has been super easy and my renters are great to work with on the whole.

Dan Dwyer · Answer

Hi Ryan

I live in Southern California so I may be way off, but if you told me you were going to buy a mobile to rent out to others in a mobile home park any where in so cal I would tell you to RUN from that idea, it is horrible. Everyone who has ever gone against that advice (my relatives on 2 separate occasions) have lost their money and spent a fortune on aspirin. Here are a couple of reasons why. The tenant must be park approved. The lot rent never stops and lot rents can increase. If the park gets nasty with you because they get mad at you or your tenant they can tell you to moved the coach out of the park. When you go to sell park must approve new buyer. What if you find the ideal park that everyone, owner manager are so nice and they aren't mad your making money in their park great right, NOPE because they sold it the next month to some people who want you gone.

I own 2 manufactured homes on private land that both stay rented to good families and I am doing very well with them, they are cash cows. I also own 2 stik built homes and they do not return near the cash as I have paid a lot more for them and have loans on them. BUT in this area stick built will outperform when I go to sell by a very large margin.

I would recommend private land. Find a partner. I don't think any bank are doing non owner occupied on manufactured homes.

Remember Mobile Home Park RUN

Good Luck! Step One Find the Deal

Brian Mathews · Answer

Every area is different in regards to mobile home investing.   What works for me in my area of Texas may not work 50 miles away.   Do not borrow from grandma or your boss.   Take your time, be patient and be your own man.  If you don't have credit, start building it, you are still young.   Get a credit card and pay it off every month.   Get a personal loan from a bank and pay it back.   The problem with borrowing from grandma is she is going to scrutinize your every move and purchase until she's paid back, Thanksgiving dinner is going to taste bad sitting across from her.  And never borrow from your boss or even ask.   That's the best way I know to find yourself unemployed, it would definitely change the way I feel about my employees, it would be awkward.   There is nothing like knowing your about to get hit up for money, I personally do not lend money to anybody.

Mark Gruetzmacher · Answer

Renting in parks around here seem to work really well.  My lots rents are in the lower 200's and the rents are in the $600-800.  Tenants pay the utilities as well.  If the renting in parks doesn't work out you can always sell off the home.  There are always people here looking for cheaper homes to buy.  Depending on your market renting in the parks might be a option for you.

Ryan Moore · Answer

Thanks for the advice Dan, that pretty much sums up the conclusion I'm rapidly coming to.

I think it might very well be a better idea to go with either mobile homes with land or stick-built properties, problem is I would need to get the financing to get started; which seeing that I'm only 25 and don't really have any credit built up or enough income to convince a bank to give me a loan, it places me in a bit of a quandary.

Finding a partner would also be difficult, I don't really know anyone with money or good credit, no one even in my extended family is very affluent. I have my grandma, who has money (no idea how much, but everyone tells me it's a lot) but I think it would be a hard sell. She likes me, but I don't enough to loan me anything past 4 figures, if even that much.

I also have my boss, he's a millionaire, but he's also the biggest Scrooge McDuck I've ever met in my life. It's hard enough to get him to pay for a roll of duct tape, so selling him on an investment opportunity would be a hell of a long shot.

That being said, I do have a little over 20k in liquid cash that I've been socking away since I started working, so I have that to work with. Although, I'd rather not invest all of it, because I like having a buffer, just in case.

Ryan Moore · Answer

My area is a bit different, all the parks are located on a body of water, either a lake or the ocean. So the rents (and the average household incomes) are quite high. Most of these parks are 55 and older, so the tenants would probably be desirable.

However, I'm only 25, and from what I've read, most parks do not allow you to rent.

So far I haven't yet found any mobile homes w/ land for sale in my area, most are in the next state over (Pennsylvania) and I'm both not sure how out of state investing/landlording would work, and not fully on board with investing outside my area.

Guess I'll just have to go talk to a bank and see how much I could finance, and look hard for either mobile homes w/ land or cheap multi-families.

Paul Ewing · Answer

I rent MHs on land both singles and doubles.  One thing is that in this area, most of the MH parks are not very desirable and the people that are left there are the lower end of the rental pool that I really would rather not have in my units.  While financing is hard to get outside of private money, 21st Century has indicated that they do financing at not horrible rates (high 8% range) for investors with 20-30% down.

Renting mobile homes?

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