Cash only investing in Mobile Homes - My plan

25 Replies

Hi All,

First time posting on here but I have been an avid reader of the forums for a couple years. Great learning tool.

I invested in single family homes in Houma, Louisiana from 2006-2009 and did okay, a couple rehab/flips and a couple rentals and it was profitable; however I never like the fact that I owed someone a note, in this case the banks. I also found myself using credit cards for repairs and I never felt good about that either. In 2009 I move out of state and sold all 4 homes and haven’t been back in real estate until 2014. I just didn’t have the time.

I now live in Poplarville, Mississippi a small town with a community college. The market is not hot by any stretch of the imagination, but I have noticed a lack of rental properties and the college is growing quickly, so I'm hedging my bets on future needs. I am fortunate to have a good salary and low level of debt at this time in my life, which affords me the cash that I am using to invest in real estate, specifically mobile homes.

I formed an LLC and bought 4.3 acres of undeveloped land for about $13,000 cash last year. Due to county restrictions I can only place 4 mobile homes on this parcel, but I'm not too concerned, each home will get 1 acre giving it a more family atmosphere, which is good in my area.

Water is city but sewer is individual septic tanks. I have someone to develop dirt pads, gravel driveway, place septic’s and run power. I have quotes and all will cost me about $5000 per home.

My budget for purchasing homes is $20,000 each including the moving expense if possible, this is the top price I will pay and only vinyl siding and shingle roof will do, also it must come with central heat & a/c and appliances. The market for homes in my area is very good and prices are fair, it also helps that I am in no hurry and I have cash. This lets me wait out owners, as we all know financing on older homes is almost non-existent.

Last week I purchased the first home, a very nice 2 bed / 2 bath for $14,000 cash, $2200 to move it and $5000 to get it rent ready (water, power, septic), it will be ready in one month. Next month I have my sights set on a 3 bed / 2 bath for $18,500 cash with same expenses.

When I’m done next year at this time I will have (3) 3 bed / 2 baths and (1) 2 bed / 2 bath. Rent will be $650 for 3 beds and $550 for 2 bed. For a monthly gross of $2500.

My total investment in two years will be about $102,000 on the high end.

Breakdown of returns:

Gross rent - $30,000

Expenses - $6700

NOI - $23,000

Cash on Cash return = 23% first year

CAP Rate = 22.55

Gross Rent Multiplier = 4.4

Estimated property value upon completion of $162,000

Cash is king right? With cash purchase only upfront and no debt my long term ROI is looking pretty good!

The best part is I have all my money back in 4 years and I’m debt free!

I’m putting this out there for you guys to punch holes where you see any weakness. So am I missing something or is this a solid plan?

Looks like a pretty good plan to me.

@Bobby Mitchell - I really like your plan. I don't have the experience to punch holes in it but instead I'd like to find out how you were able to raise the capital. Did you simply do it by living below your means and build savings over a period of several years as it sounds from your post or were there other things you did to build cash during that time? My wife is planning on finding and flipping furniture for some easy cash (and a hobby) and I was thinking about taking on a second job part time. This is the plan to get out of debt faster and to eventually build the capital needed for investing. Did you do anything like this?

Making money in mobile homes sounds very doable if you know what you're doing and this man with his mobile homes and his property and his plans certainly seems to know what he is doing.  

It sounds very profitable and the market sounds very good for mobile homes in the area he is concentrating on,

Flipping furniture?  That's very interesting. It doesn't, however sound like something you can make money doing.   My son used to do a lot of very profitable buying and selling and mostly on ebay.  In the most part he used to avoid buying and selling furniture.  It was dificult to make money on and very expensive to move.  Modern furniture was very profitable but that was about it with furniture.  I don't thing there is anything "easy" about buying and selling furniture.  Where do you even put it or hold it and it is so expensive to move!!  

People that we knew that sold "antique" furniture had stores and there was lots of holding costs connected with flipping furiture and we never found that was a profitable area.

Hey @Barbara G. , thanks for the feedback! How did your son make money buying and selling on eBay? Sounds like a hustle - I'm very intrigued by this.

I guess I could always drive for Uber if all else fails! 

Andrew, (not sure how to do the @ thingy)

In 2009 I sold my 4 rentals, my personal home, my boat and motorcycle and moved to a cheaper state...MS. I took all the profits and bought my land cash, put a hefty down-payment on my current home and I live below my means, i.e. no toys, no living like the Jones's, etc. 

Last month when my friend bought a new truck for $20,000 I bought a mobile home, his will cost him $40,000 in the end, mine will make me $100,000 in my life time. Choices.

 I increased my income at the same time by taking risk in my profession, I am a Safety Consultant for the Oil & Gas and Industrial Construction Industries. I work long hours and am away from home often. So, to answer you question, I do without and increased my income. Not everyone can do that but I had the discipline and the opportunity and a great wife that puts up with it all. 

I take all 'extra' income and put it into this project, this is my retirement and hopefully I will duplicate this several more times, I want six figures before I slow down. 

There is no magic formula, I learned several great lessons with my first properties I owned and I see the value in mobile homes, cheap to buy, easy to rent. 

Set a goal and stick too it. There is good debt and bad debt, however no debt make you a free man!

@Bobby Mitchell - that's some great stuff! I wish I had made the decision to stop spending money before I financed two cars at the same time. Then about a year ago we bought our first home and put in new floors, windows and AC. The AC was necessary but not the other things. Improvements cost us $40k and we are hoping that the value of our home has increased to offset those improvements. Now I am stretched too thin and paying down a lot of loans. Luckily there is an expiration date of about 3-4 years on most of those. 

As far as assets, I don't really have any of the expensive toys to sell. I do have a garage full of stuff that may get about $350 in a yard sale. My wife is being considered for a promotion in 60 days so that would be a great help to our bottom line and we are getting the discipline now so that when the day comes, the increased income won't result in increased spending as has been our M.O. for the last ten years. We both make a very decent income but we don't see any of it because we have had a high consumption lifestyle for far too long.

It's good that you found that discipline and took control over your situation to realize your goals. Good luck to you - your plan is a good one!

Yes my son made alot of money buying and selling. He had a very fast learning curve.  It took him at least a few years to find out what his niche was.  He went from knowing nothing to knowing lots of important things.

He was originally very computor negative.  He learned fast.  He did know the furniture bussiness.  He did know antiques but in the end that's not where he made the money.  He was an excellent buyer.  He bought almost everything that he could make money on.  He became an expert in lots of things.  In things he was not an expert on, like paintings, he got partners.  He bought  Esoteric things like Toys and Dolls.  He sold one doll last year for $26,000.  It was a doll most people would not have looked at twice as it was in piecies (unstrung).  He bought designer clothes and purses and Lous Vuitton trunks.    He bought everything that he could make money on.   Jewlery and Gold and silver.  He bought and sold.  He just honed his craft and learned everything about his bussiness.  

That's very cool @Barbara G. . It certainly does sound like he found his niche. My stepmother is very good at this as well, buying and selling primarily antiques and jewelry. It takes a lot of work and a lot of knowledge about the value of things, but then again so does RE investing. 

@Bobby Mitchell

Just type @ and start typing the member's name.  It will pop up at the bottom of the text box.  Click on it and you're done.

@Andrew Bondarchuk

There are ways to live like a King/Queen without spending so much money.  The problem is that to do so means making some sacrifices.  You may have to share your stuff.

Renting rooms to roommates.  Or better yet to business people for shorter terms.  You can charge more.  You also have an opportunity to meet new and interesting people.

Create a B&B.  Takes more work but has greater income.  If you don't have time to make breakfast, either hire someone or do just the B.

I quit my job from what we were able to make from just our own home.  Plus we now have a wonderful foster daughter to challenge us;-).

@Harold Anderson - the B&B idea is a very interesting one. The only issue is we don't have any spare rooms - we're in a 3 bedroom, besides the master for my wife and I, our daughter has one and my father in law that I take care of is in the other. It may not be much longer before the third bedroom is clear so I'll keep this idea in my back pocket. For now I am focused on keeping my money, not spending it, and looking for ideas to make an extra buck here and there.

The problem with your plan - OP - is that you are:

1 - pumping approx $80,000 into depreciating assets (mobile homes, which will depreciate steadily all the way down to being near worthless) - real estate investing is predicated on a foundation of assets which at least hold value.

2 - grossly underestimating your long term expense ratios

The land you purchase and the capital improvements you make on it (pads, infrastructure) will hold value - the homes themselves will not. So to calculate a real return you had better factor in the reality that your homes will rapidly lose their value.

Thus a large part of your projected cash flow is a return OF your capital not a return ON your capital - i.e. you are gradually liquidating your own business.

If you were buying near-worthless old homes for much less money, and buying land already developed as pads, to get your lot rent - that would seem to make sense. But the way you have this structured I think your cash flow is going to disguise the fact that 10-15 years from now the homes will have eaten up much of the value of your project.

And if you are planning on keeping those homes as rentals (i.e. you own them ) then your expense ratios are way out of wack with industry norms.

You also have not broken down your estimates of gross income by homes vs land. Your model is far too simple.

@Chris Reeves

I appreciate your taking the time to evaluate my plan. We all know every market is different and the plan I outline is purely subjective, I give you that. The value of $162,000 is based on projected rents at the point of break even for me, which in this case is 4 years.

To your first point of pumping $80,000 into a depreciating asset – Thousands of investors do quite well with depreciating assets such as mobile homes and mobile home parks, yes I might do better with a property that was already established or brick and mortar but that’s an option I’ve ruled out, we are quite rural with a good growth in single family homes but to pick up a 3 bed/ 2 bath traditional home would be $50,000 - $80,000 each so in the short term (10-15 years) I get more bang for my buck in mobile homes.

It’s a college town and good school district, but Mississippi isn’t known for its wealth so mobile homes are very common and easy to rent. The market for rentals is lagging behind here also. Duplex’s and Quad’s for sale in this area are far and few, and don’t give me the per door dollars I want without having to seek out financing and I’d prefer to pay cash.

Good point on the home expense ratios, I should allocate more for repairs. However “expense ratio’s out of whack” seems a bit excessive, I’m quite capable of replacing a roof, floor, wall or window, not much more than that in a mobile home. I’m also very particular about what I will buy, as with my first purchase, it's in excellent shape and move in ready.

I know these home will lose value. This is not a 30 year plan, 10 years tops on this project and I will cash out and reinvest, so I’m in line with you on that. The value of the “park” comes from its generated income just as any other multi-family asset, so I can’t see how I lose money if I sell before homes need replacing. I have yet to see rental rates go down.

I will have a return “OF my capital” in 4 years, so I don’t see how I’m losing money there either. As rents increase, expenses should stay relatively flat, barring any catastrophes. We do have hurricanes, but with my homes insured with a “replacement cost” clause I get a brand new home if it’s blown away by a storm, so bring it on!

Chris I will use your points to look deeper as I invest into other assets. This is not my "basket of eggs", I am looking at other properties and would structure them differently. I have a simple plan because I’m a simple man and this works for me, it’s only a couple miles from my home and fills a need in the community. 

@Bobby Mitchell

 I don't have experience in trailers, but have read in several places that the real money to be made in mobile homes is renting the lots. That being said, even with your depreciating assets, it looks like you would have sufficient cash flow to make you investment worthwhile. Keep us posted with your progress.

Originally posted by @Bobby Mitchell :

@Chris Reeves

To your first point of pumping $80,000 into a depreciating asset – Thousands of investors do quite well with depreciating assets such as mobile homes and mobile home parks, yes I might do better with a property that was already established or brick and mortar but that’s an option I’ve ruled out, we are quite rural with a good growth in single family homes but to pick up a 3 bed/ 2 bath traditional home would be $50,000 - $80,000 each so in the short term (10-15 years) I get more bang for my buck in mobile homes.

It’s a college town and good school district, but Mississippi isn’t known for its wealth so mobile homes are very common and easy to rent. The market for rentals is lagging behind here also. Duplex’s and Quad’s for sale in this area are far and few, and don’t give me the per door dollars I want without having to seek out financing and I’d prefer to pay cash.

Good point on the home expense ratios, I should allocate more for repairs. However “expense ratio’s out of whack” seems a bit excessive, I’m quite capable of replacing a roof, floor, wall or window, not much more than that in a mobile home. I’m also very particular about what I will buy, as with my first purchase, it's in excellent shape and move in ready.

I know these home will lose value. This is not a 30 year plan, 10 years tops on this project and I will cash out and reinvest, so I’m in line with you on that. The value of the “park” comes from its generated income just as any other multi-family asset, so I can’t see how I lose money if I sell before homes need replacing. I have yet to see rental rates go down.

I will have a return “OF my capital” in 4 years, so I don’t see how I’m losing money there either. As rents increase, expenses should stay relatively flat, barring any catastrophes. 

You made several points so I'll try to respond to them all in a list of items:

1 - As to the "depreciating asset" comment I mentioned it because as a portion of your entire investment, the part which will decline in value looks quite high - to me, anyway.

2 - On expense ratios - I didn't realize you plan to do maintenance/repairs yourself. Yes, if you do it yourself then maybe your ratios work. But if you want an accurate picture of the performance of the investment then assign yourself an hourly theoretical wage (as if you had to pay someone else) and insert how many hours you might spend working over the course of a year - and add it in to your calculations.

3 -  I didn't mean to suggest you need a complicated plan to make money - I meant the facts and figures you presented the forum are too simple for anyone to help you with. By that I mean - you don't have the numbers broken out in detail. Such critical factors as: a) How many $ per month do you anticipate the homes will drop in value in year 1, 2, 3, 4, 5? b) How did you derive your expenses?

4 - Be sure to calculate an appreciation factor for the land itself - hopefully the land will keep pace with inflation, which will partially off-set the depreciation of the homes.

Lastly put all this in a basic excel or google drive spreadsheet - doesn't need to be fancy - just the line items of revenue, expenses, appreciation of land and depreciation of homes - and get your total $$ number for each year (projected) then divide against the value of the entire investment to calculate your ROI.

@Chris Reeves @Bobby Mitchell

Sounds like a good game plan. I buy, fix and sell used mobile homes. Just started one this week and sold the last one 2 weeks ago.

The economy and market have changed since 2008. A lot of people cannot get a loan for the time being. So instead of buying, they have to rent. Rent rates are going up. In order to own something, they buy mobiles. A lot of people are buying Tiny Houses. They don't need 3000 sq ft any more. By the same token, older mobile home units pull more money now and depreciation doesn't matter.

The last one we did was a 1970 went for $28k cash. 

The one before was a 1968 and went for $25k cash.

The one before that was also a 1968 and went for $17k cash.

The one we're doing now is a 1972. We got it for $5k. Will put ~$5k in it and will sell for close to $30k. We just started Monday. It will take 2-3 weeks to upgrade. We are in a mobile home park and the manager wants to know when it'll be done. They have a list of cash buyers who want to look at it.

You're on land. Different discussion. But similar. 

So depreciation is a meaningless conversation on older units. If you are looking at 2000 and newer, which you mentioned, and wanting financing, comps and depreciation are discussed. But the way you sound like you're doing them, probably won't be of importance. If you keep them up, they maintain their price.

Have fun!

@Bill Neves

Bill sounds like your killing it! 

I'm not too concerned about depreciation, the goal for me is cash flow. We surely couldn't get the same returns here in Mississippi as you do up there but a remodeled home sold on terms or for cash is still a profitable avenue that I will take. I can pick up homes all day long at $3k-$5k cash and within a few week have it ready to sell.  I don't have a large selection of parks in the area, most home are on 1-2 acres. I kind-of prefer these as I will have the land as an asset and I could always place another home on the same property and rent it out. 

Are you doing the work yourself or do you have a trusted crew?

Originally posted by @Bill Neves :

@Chris Reeves @Bobby Mitchell

The economy and market have changed since 2008. A lot of people cannot get a loan for the time being. So instead of buying, they have to rent. Rent rates are going up. In order to own something, they buy mobiles. A lot of people are buying Tiny Houses. They don't need 3000 sq ft any more. By the same token, older mobile home units pull more money now and depreciation doesn't matter.

The last one we did was a 1970 went for $28k cash. 

The one before was a 1968 and went for $25k cash.

The one before that was also a 1968 and went for $17k cash.

The one we're doing now is a 1972. We got it for $5k. Will put ~$5k in it and will sell for close to $30k. We just started Monday. It will take 2-3 weeks to upgrade. We are in a mobile home park and the manager wants to know when it'll be done. They have a list of cash buyers who want to look at it.

So depreciation is a meaningless conversation on older units. If you are looking at 2000 and newer, which you mentioned, and wanting financing, comps and depreciation are discussed. But the way you sound like you're doing them, probably won't be of importance. If you keep them up, they maintain their price.

Have fun!

Hi Bill - fascinating post. Your logic is sound, and having just returned from three days in Seattle I will say that the older homes in the parks I saw (not that my sample is representative) generally looked quite clean.

But what you are saying seems, on the surface, to be the polar 180 degree opposite of what Frank Rolfe and co are telling people at their boot camps.

He claims that the homes in the date range you are discussing (60's and 70's) are worth merely a few thousand dollars - and that the biggest way to get in trouble with park-owned homes is to overpay for them. The numbers you are quoting sound like overpayments - at least according to Rolfe. He is saying that homes of that vintage are worth $2,000-$3,000. He also told us, if I remember correctly, that the tenants in the demographic who must live in mobile home parks generally don't have $30,000 or $50,000 lying around - and so rent credits, financing, or rent-to-own is necessary to get them in homes.

But what you are claiming you're seeing is very different.

Maybe I'm missing something? Not trying to be argumentative but presentingn all sides helps us learn, right?

If you really are able to buy a widget for for $X, put another $X into it, and then sell for $6X - that is fantastic. And for cash?

Is your market unique? 

@Chris Reeves

Keep in mind that MHP Bootcamp is only ONE business model - there are thousands of them in mobile home and real estate investing.  What works for one may not work for another.  While homes do depreciate for tax value quickly and it's not part of the 'model' to own homes due to maintenance and other expenses, it works for many others.  However, just b/c a home depreciates for accounting purposes doesn't meant that it simply falls apart and is worthless IF the owner maintains it, no one knows the true shelf life of older b/c many are still habitable and even really nice after 30, 40 years.  Many factors including climate but mostly it's how well kept the owner maintains just like any other home.

@Bobby Mitchell

  and others, here's a game changer that Rolfe himself is now promoting and could get you homes for nothing if you just want lot rent.  Here's the quote from the email they just sent out tonight:  "The CASH program from 21st Mortgage/Clayton is a game changer if you own a mobile home park, or are buying a mobile home park, with vacant lots. It is the first program ever developed for park owners that allows you to fill your vacant lots using zero out of pocket capital. Imagine being able to fill 10, 20, 30 or 100 lots without spending a dime of your own money. This program is revolutionizing the way that park owners approach filling vacant lots. We feel so strongly about it that we just ordered another 400 homes under the program. In fact, our team is the current leader in the U.S. in both applications and closings under this program. And every vacant lot we fill makes us around $30,000 in profit when we go to sell, or refinance, the park."

A program like might even make it profitable to build a new Mobile Home Park - another most MHP investors adamantly say no one can make money doing.  Keeps the game interesting when someone comes along and changes all the rules, don't it?!

@Bobby Mitchell

I work hard... At doing very little work. We hire out almost everything. I'm 65 so avoid work at all costs. :-)

I find and secure the deal. I schedule the crew and any work needed. My wife picks colors for staging and tile back splash, etc. She picks dark laminate one time and light laminate another time (if needed). We are finding that most people like laminate vs carpet. Easy to clean and keep up. Especially with pets.

We paint everything an off white and white ceilings. May do the outside, roof, gutters, deck, etc. Put it up for sale, sell and go on vacation. Last trip was a month. Then start another project. Next year Jan-Feb-Mar we're gonna be in Mesa, AZ being snow birds!

Have fun!

@Chris Reeves

You just were at the event in Seattle. Cool! 

You probably met @Jerry Lucker and @Robert Burns while there. We're friends. They have a great business model. Different but works for them.

As @Belinda Lopez says above -

Frank has a different business model and niche. And it is working awesomely (is that a word?) for him and Dave.

If it ain't broke...right?

Frank and Dave buy parks and the units aren't worth what they are for me one at a time. I'm small change to his high dollar deals. That's all.

My niche is just different. I'm comfortable doing this and it works for me. I would like to do a park but that's a bigger bite than I want to take at the moment. And I haven't been the MHU! :-)

Have fun!

@Bill Neves , what state (s) are you doing this in? Would you share the lot rent of the parks you operate in ?

@Jack Baczek

Sorry. Missed your note previously. 

I currently work in Washington state and have done deals in several states.

Lot rent in my area is $400-$500 average. There are a few parks under $400 and a few at $700 in the area. We stay in the $400-$500 rent range areas.

What are you working on?

Originally posted by @Bill Neves :

@Jack Baczek

Sorry. Missed your note previously. 

I currently work in Washington state and have done deals in several states.

Lot rent in my area is $400-$500 average. There are a few parks under $400 and a few at $700 in the area. We stay in the $400-$500 rent range areas.

What are you working on?

 I just figured it must be in a better market if the older homes are fetching those numbers. Based on those lot rents, sounds to be the case :) 

Currently looking for parks . Will look at a variety of factors , i.e. metro, location, utilities, tenant owned, or park owned, fixer uppers, stabilized . Looking for deals where the numbers make sense. Then try and see how the rest of the picture looks to see if it makes sense for a deal :) 

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