While starting a new side business of real estate investing it can be important to take some time to understand the field you are climbing into. Additionally, once you have more and more clarity it can be prudent to try and stack the deck in your favor as the real estate investor.
When starting in a new area of real estate investing or revamping your current process let us begin by taking the path forward with the least amount of hurdles between where you are currently and the rewards of having a profitable and consistent investing business.
Over the past decade there are a few areas in which I have seen new investors struggle where there is no need to be struggling. The below list is a brief outline of just a few of these areas when it comes to mobile home investments inside pre-existing mobile home communities.
Mobile home communities can be owned by a large corporation or just a single person. Parks will have a variety of rules and restrictions that all residents must follow.
With a quick call the information below is easy to obtain and analyze. During this call do not mention your intentions of buying and reselling mobile homes within their park. This is reserved for a later discussion with the park management.
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One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Park Lot Rents
Mobile home communities typically are realistic when it comes to the amount they charge for monthly pad-rent or monthly lot-rent. With that said there are greedy parks that over charge their residents for the land and some of these residents may eventually move away. While starting to invest in individual mobile homes inside parks aim to be inside parks that charge an average price from the general area. If you call around to 10 parks in one zip code and every park charges $400-$500 per month, do not go through the park that charges $600+ per month.
A rule of thumb is that you cannot charge more per month for a park with a gate and pool, but you can charge more for a mobile home with more bedrooms compared to a smaller mobile home. In short a higher lot rent will typically reduce your cash flow monthly compared to a park with a lower lot rent.
Additionally if you are in a hot-spot area where the lot rents are all over $650 per month then aim to travel inland or to a different area to find areas with park lot rent below $650 per month to start. Here you will find more affordable mobile homes and less of a cash buyer demand, both of these are good for us as investors.
Some parks in certain areas around the country cater to a “senior citizen” experience. Whether you are the required age to live in this park or not you could likely purchase a mobile home investment inside the park however I will advise against this on your first few deals. When selling a mobile home inside a senior park you are eliminating a large demographic of your buyers.
Some parks have other unique age restrictions, such as no minors staying in the park over night, no one under the age of 40 may live in the park, and/or only persons older than 65 may own in the park. Either way stay away from these parks until you understand this business and have a few deals under your belt.
If you are looking to purchase a mobile home inside a park that only rents mobile homes to tenants versus allows the tenants to own their own homes you will not have much luck. In short make sure that every mobile home park allows owner occupants to buy/own homes within the park and not just rent the homes.
This is not a deal-breaker piece of criteria in my book but many of your future buyers will have or want pets. Some parks completely forbid any pets and other parks will only allow certain pet weight limits. For your first few homes inside parks aim for the path of least resistance and only invest in parks that do allow most pets.
In conclusion many parks are fair game but do not restrict who you may resell to or who would be a good candidate based on park requirements and approval. Investing in individual mobile homes inside pre-existing mobile home parks that allow all ages inside, allow pets, and have average or below-average lot rents will drastically help you get started with less resistance through your first few deals.
In the next article we will be looking specifically at the mobile homes and manufactured homes themselves under the same spot-light of investing with the most ease.
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