All Forum Posts by: Joe Hines

Thanks @Jay Helms  I like that idea, too.  

Hey Sean,

I bought a mobile home on a 1.5 acre parcel 3 years ago to expand a larger, adjacent property I already owned (it's near Live Oak in North Florida).  The mobile home is one of the most productive and profitable rentals I own in terms of net profit (80%) and cash on cash return (30%).  The downside is that, as they age, the maintenance costs definitely increase.  They aren't structures that are built to last; all of the systems like electrical, plumbing, etc are just cheap and they are vulnerable to cold snaps.       

Like any LTR deal, if I can find the right MHs, in the right locations on single, stand-alone lots and for the right price, I'd probably buy more of them.  Seems like they've become much more expensive, however, and that has pushed them from the top of my priority list.    

As others here have said, it fails the 1% rule and that raises a red flag for me.  Unless I was planning to live in it one day or it was meeting some other very important strategic goal and I was paying all or a substantial amount in cash I'd pass.  Just a lot of risk there and that can put a drag on your overall portfolio.  

Hey @Chris C. You did a really nice job on the interior. Very impressive. I have to agree with others that sod and staging would get this baby moving. I understand that you definitely prefer the flipping side of the real estate business, but you'd do great if you rehabbed and converted to SFH rentals. Good luck!

@Dylan Collier  I live in California, but grew up on North Florida (Lake City) and invest in that area.  Looking a little more at Alachua county to diversify, like you. 

The posters above who describe this as a general guideline have it right.  It's highly market dependent, too.  I my market (North Florida), it's more like a 1% rule.  There are a few note's I'd add to the 1% rule:

Don't forget the additional costs at purchase:  I use the 1% rule as a guide when I'm purchasing and you must remember to include any additional repairs or costs it will take to get the property in production.  So if you are looking at a $50K property and you're going to need $20K to make it habitable (total cost $70K), then your 1% rule suggests you'd need $700 per month, not $500.  

Sometimes you have to think strategically:  I've ignored the 1% rule if I feel the property is a strategic purchase.  For example, if it is adjacent to a property I already own (I place a little more value on contiguous properties as I think it may offer additional opportunities or flexibility in the future).  I've also ignored the rule when I found a residential property that was lot zoned commercial.  I also like properties that have double lots, more land, etc.  After a few years, even properties that I purchased at below the 1% rule are now above it due to rent inflation.  

1% Rule leads to the 50% rule:  I've noticed that if I stick to my 1% rule, I predictably land in the 50% to 60% net range (before personal income taxes).  This includes insurance, taxes, minor repairs, etc, but not capital improvements like a new roof.  I'm also fortunate in that I can avoid financing in most cases.  

Hope you've found all of this useful.

My rentals are near Gainesville, in the Lake City area which is about 45 miles away, and I've been considering expanding into the Gainesville market.  Looking for middle-tier SFHs for buy and hold strategy.