Looking to invest into mobile Homes...

[Timothy Albright]

I've watched many videos on mobile home investing, also read article after article... I'm having a difficult time trying to understand ROI and cash flow with calculating lot rent. The videos I've seen has tossed around purchasing #s, Reno #s, to calculate a very impressive cash on cash return. Avg lot fees around my area is 210$-340$, I don't see how I can generate enough cash flow off a $8000 investment. (Per video)

[Brandon Sturgill]

@Timothy Albright It may be splitting hairs, but you're not truly "investing" in the trailers...they are personal property with the equivalent of a car title...a depreciating liability...no improvement to the land. What you are investing in is the real property...if you torture your data long enough it will tell you anything you want to hear.

What video are you referring to?...can you add a link?

[Timothy Albright]

@Brandon Sturgill

https://youtu.be/pdD0tPhif9o

2000$ purchase price , 2000$ Reno budget.

Buyer pays 1000$ down & 299/month for 60 months... for a total of $18,940. I guess I’m asking do people actually pay 299$ per month plus 200-300$ lot rent for a mobile home that cost the buyer 4000$.

[Jim Johnson]

Timothy,

The sort answer is- it depends on the market and the quality and size of the home. We have people that pay $450 a month on mobile home leases for singlewides and more for doublewides. But- that is selectively true. It really depends on the metro area, current space rents and you sort of base your rent / space rent total off the amount a 2 or 3 bedroom apartment might rent for int he area. 

Lets set up an example- 2010 Single wide, 16 x 66, 3 bedroom 2 bath in very good condition.

For instance, in Denver where space rents are like $750 per month, the prices you can get for home leases are quite small. Call it maybe $350 a month.

Now in Dallas where space rents are more like $450 or $500 for a park with the same amenities, that same home might fetch $450 - $550.

You need to really now your market because in some really small town in Nebraska where space rents are like $250, but the average income is much lower, that same home might be back to fetching $350. 

Your question is a good one, but one really needs lots of market data to answer it. There can even be some variance int he same metro areas so you really need to drill it down to a particular park. !0 mile separating 2 parks can be $100 a month in space rents and another $100 or more in a home lease payment. Wrong homes in the wrong parks will not lease or sell, and the right homes in the right parks will sell or lease prior to you fixing them up. 

[Timothy Albright]

@Jim Johnson

Thank you for the detailed reply... I’m currently doing my research for future park lot rent , mobile rent etc.

I'm trying to get a friend onboard and he's skeptical... basically he's wondering why more people isn't jumping to invest in mobile homes if the ROI can be upwards of 150%. Seems like you've done these deals and seem very knowledgeable on the subject, could you touch on this subject? Maybe give me a few talking points? Sorry if this is vague or all over the place.

[Jim Johnson]

I was investing in mobile homes 15 - 20 ish years ago when you could still owner finance them. That was prior to me owning parks. So I can really only speak to how I lease option in my parks, or lease in my parks. I do have some individuals that I have allowed to have investment homes in my parks and they lease the homes, and just pay me space rent. 

If I were going to get into the mobile home leasing business I would present myself to park owners as a solver of problems for them. most park owners, myself included, really do not want to mess with renting homes, we just want to collect our space rent. Home rentals and park ownership are really two businesses, and they require differing skill sets and different employee tracts. This is how I got pretty big in buying and selling mobile homes, the park owners would give me the abandoned homes and I would fix them up and sell them. At one point I had 50 homes I was financing in one park alone. In short, parks would give me like one home, and a few weeks later I would have it fixed up and ready to sell. Within a few days it would be sold, and then the park would give me a list of all of the abandoned homes and tell me which one I wanted next. So- how does that math work. If I was the person doing the fix and leasing, I would make an agreement with the owner you owe no space rent for a reasonable amount of time to renovate the home. Call that- 60 days. I would also have an agreement the owners manager could show your home, and maybe you 'spiff' the manager once it sells. Also- no space rent while the home is on the market- but only if the home is really marketed. Also- an agreement for reduced or no space rent for a reasonable amount of time if the home rental goes bad. A deal like this is win - win. The park owner needs to approve the renter, and so do you as the mobile home owner. A home will probably average in fix up costs a few thousand - 4 or 5 thousand to fix up. Some will be more if they are really trashed. If you get the home free and have no or very low carrying costs, you should at the very least be in a 50% cash on and in some cases more like 100%. Overall though, if the homes go bad every few years and you have to fix them up again, you will have another outlay of cash. Call it on average $2,000. So your returns lower to 25 - 75% depending on the market, labor costs etc... 

This only works if you are very efficient. I ran a full time crew (3 people) and had months of work in the pipeline. Once a established home went bad I had it back ready right away, maybe a week tops. We used the same stuff in every home so there was never a discussion on what carpet to buy or fixtures to use. If you are going to play this game you must know material costs and what a job is worth. I can walk through a home and know the amount of time within maybe 4-8 hours and the material costs off the top of my head. 

Here are the warnings-

you MUST have a win win deal with the park owners

you MUST have the managers on board, showing your homes

you MUST understand the rehab side- if you leave it too contractors you will loose your shirt

you MUST be true to your word, if you say something to a park owner- follow through

[Timothy Albright]

@Jim Johnson

Again thank you for all the helpful information and I intend on following your advice to the word. I’ve read before a park manager/owner can make or break this business. I inspire to buy a park after I have many deals under my belt and years down the road.

I’m a contractor by trade so I can handle all the Reno work top to bottom so that aspect doesn’t worry me and I’ll save money on the labor.

My only concerns would be any under lying raves or fees that I’m unaware of.... I know that Varies from state to state. I’m looking to make a move on my first unit... if you can find the time I’d love to get your 2 cents.

[Brandon Sturgill]

@Timothy Albright I think part of the issue with you tube is anyone can post anything they want...claim whatever they want without repercussion. I don't doubt this guys is making solid returns on this, but it's not real estate. Period. 

Renting trailers probably makes short-term cash, but it's not a long-term play...there is no tangible benefit to owning mobile homes...mobile home parks, yes...mobile homes...no. If you're ok with the assumption of risk, use leverage and get into real estate. 

[Mark Brogan]

@Timothy Albright, mobile homes in parks can be a wonderful investment long or short term, lots of landlords in my area only rent trailers, give them a try cause everybody else is believing that mobiles are a bad investment is great for business, they are the real affordable housing 

#trailertrashtotrailercash

#therealaffordablehousing 

good luck