Mobile homes as revenue properties...

[thecoach]

So I was on our local MLS listing today and I found a pile of mobile homes in the same trailer court up for sale as well as a few in surrounding towns. The lots are rented out though. I'm looking at picking up my first revenue properties to rent out within the next year. Would buying mobile homes as revneue properties be good or bad? The rent on the lot is $370 right now, but going up to $520 in October. the average price on the mobile homes ranges from $40,000-$80,000 for 800-1000 sq. ft homes (the trailer park is in the city in a decent location). There are also homes in a town close by for $20,000 and the lot rent is staying around $370. Currently where I live the economy is booming (Saskatchewan, Canada...we're kind of an economical anomaly right now) and vacancy rates on rental units are very low, real estate prices have recently levelled off and are starting to fall a little because we are just starting to feel the lag in the slowed economy (we're a huge province for exporting potash, uranium, oil and other natural resources, so we are just started to feel the effects now), but rent prices are staying high. The house I live in right now is roughly 600 sq ft (finished basement, detached garage, etc) would rent for around $1000/m. I guess my biggest question is: Does the fact that these lots are rented lots make this a bad deal? Should I stay away from these things and look for a low end rental home or something where there isn't a lot rental involved?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[razda]

coach,

The rent on the lot is $370 right now, but going up to $520 in October.

The lot rent at $370 seems to be ok, but it seems to be high at the $520 amount. I would be worried that with the cost of the lot and the MH would become prohibitive for potential renters/buyers. Since you can't do much about the lot rent you will have to buy the homes as low as possible.

the average price on the mobile homes ranges from $40,000-$80,000 for 800-1000 sq. ft homes

Do you have cash to purchase these MH? Around here, it is quite difficult to get any financing for mobile homes. As a general rule, banks and other lending institutions would not lend money on them durring the good economic times and now that the economy is haveing some trouble the financing will be harder to find. Its quite possible you will have to pay cash for each one so the lower you can get the price the better off you will be. Also the price will determine the monthly payment you can accept. The monthly payment on the MH + the lot payment will equal what your renter/buyer will pay.

Does the fact that these lots are rented lots make this a bad deal?

I don't know if it will or not. You will have to decide what constitutes a bad deal. Typically mobile homes will rent/sell for less that site built homes. Plus it is alot harder to get financing for them. If you do find financing, you won't be able to spread it out for 20 - 30 years like you would for most other kinds of real estate.

Also keep in mind that the value of each home will go down in value, even in good economic times. In todays economy I would expect the depreciation would be even quicker. If you bought a MH at $70K now, in a few years when you or someone else trys to refinance it it hay only be worth $45K and now you can't get rid of it unless you do owner finance. So is it a good deal? I don't know, you will have to look very closely at the numbers and make a decision. If the MH is bought at the right amount, is in good condition, and rented/sold to good people then money can be made. You just need to be very careful.

 

[thecoach]

Forgot about the financing on a mobile home. I do have roughly $60k in equity in my current house that I currently pulling out in the form of a LOC (plan to use it for investment anyways), so some of the smaller ones I could do on that easily.

I guess the biggest thing I'm looking to do is make use in my increased cashflow that I'm about to come into (I'm aquiring a block of business in my financial practice that will increase my cashflow by roughly $25k/year and I have the opportunity to do the same with 3 other blocks of business, plus my only debt is a $400 mortgage payment a month, which is countered by $600 of rental income from roomates/renters). I'm at the point where I want to take the plunge into picking up my first revenue property and want to make sure I'm doing right (AKA the fastlane way). Noticed those MH and was a little curious about whether they are worth it...guess I'll have to crunch some numbers.

Thanks for the tips so far!

 

[kurtyordy]

Many parks will not allow landlords. Find this out first.

That being said, I have yet to see a MH as a good investment unless you are buying below 10k and seller financing it to the next guy. Which is also the workaround to the no landlord policies.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Mental Rental]

Most of my comparable investing as been in low-end urban slums, which is not a lot of fun, and I'm guessing mobile homes are better for rental agreement investing. That said, I think I'd rather sign a rental agreement with a group of college students, for low end rental investing. You usually can't enforce a judgment on rednecks when they default, whereas you can usually get college students to have their parents co-sign the rental agreement, and you CAN collect from them.
Just a few thoughts,

 

[CamInBoise]

I tend to agree with the wisdom about buying at least a mostly if not totally depreciated MH. The idea of "investing" in a depreciating asset doesn't seem like it would be worth it if you could spend a little more money on a site built house, collect rent on it, then sell an asset years later that has probably appreciated. (probably being the operative word given the current real estate situation)

 

[EasyMoney_in_NC]

I tend to agree with the wisdom about buying at least a mostly if not totally depreciated MH. The idea of "investing" in a depreciating asset doesn't seem like it would be worth it if you could spend a little more money on a site built house, collect rent on it, then sell an asset years later that has probably appreciated. (probably being the operative word given the current real estate situation)

Agree completely.
If you REALLY want to be in the mobile homes business, either: own them for cheap and expect a lot of up keep. Or, own the dirt, not the unit. Easy money, little to no liabilities and much less hassle.
If you have the stomach for mobile home renters then buy the units for 10k or less and only spend what is absolutely necessary to keep them habitable.....bring your shot gun when collecting rent

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[kidgas]

I would look into purchasing the land under the mobile homes and collecting the lot rent.

 

[Dhappy]

Mobile homes are one of the best investments out there in real estate if bought right. Most people who talk about how bad mobile homes are get there info from listining to other people who heard it from people and so on that say it is bad.There are a small group of us mobile home investors out there that are making a killing and would take a mobile over a house any day of the week. I must admit I'm glad most people think this way as it keeps the competition way down..

 

[nedsports]

Buy them and do a lease with an option to buy after a year. They pay the lot rent and all the expenses and if they don't pay you full after a year then they defaulted and you keep the 5k or so deposit and all the rent they paid for a year, and if they pay than great! Since the home is on leased land than kicking them out is as easy as a car repo.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MJ DeMarco]

Bump ... I get the feeling MOBILE HOMES are going to be a great investment in the next 10 years with the credit crunch and tightening mortgage standards.

 

[LazyAmericano]

Another nice thing about purchasing mobile home parks is that the owner is often open to owner financing - as many banks do not loan on parks. Of course some do - but the general situation makes it more likely to get owner financing.

 

[arfa]

Interesting thing about mobile homes that there are many different kinds of them (mobile homes, modular, manufactured, trailers) and it's very important what are various legal regulations in your specific area. In my area in Canada the municipal bylaws forbids them and that's too bad - the housing here is way too expensive to be good investment.
But in US there are some areas where it could be transformed to real properties and there is no difference (except for the price). I think this thread gives valuable info about modular homes vs. mobile homes:

Modular Homes VS mobile home - Manufactured Homes Forum - GardenWeb

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[kwerner]

Bump ... I get the feeling MOBILE HOMES are going to be a great investment in the next 10 years with the credit crunch and tightening mortgage standards.

Agreed. And with the combination of unemployment figures hovering around 9% and the number of foreclosures increasing nationwide, I believe there will be many people looking to get into more affordable housing.

This is the direction I've decided to head after researching my local housing / Realtor statistics. Plus, I think it's going to give me a good opportunity to discover whether or not I enjoy real estate investing without putting up a lot of capital - a chance to get my feet wet without jumping in, if you will.

As I progress and get closer to attaining my first deal, I'll start a new thread to track my progress (hmm... maybe a blog too:idx. Wish me luck!

 

[CashFlowDepot]

Hello Coach

Mobile homes in parks are a great investment.

The good news is you can get in cheap and make a lot of money fast.

My good friend Lonnie Scruggs teaches how to buy cheap old mobile homes - usually less than $3,000. Then, before you even do any repairs, sell the mobile home with seller financing for $9,000 or more. You will usually get about $1500 down and monthly payments of $300 ( give or take $1000)

It won't take long for you to get all your money back.

Or, you can work with a private lender who will put up all the money in exchange for half of the cash flow, then you won't have any of your cash tied up in the mobile home.

It is fairly easy to do 1 - 2 of these a week. Do the math -- at $300 per month cash flow per home, how long will it take you to replace your income?

I've personally done many of these "Lonnie Deals" so I know they work.

I also got an option to purchase a package of 64 mobile homes for $400 each. Before I had to put up any money, I sold them all at auction for $1500 - $8900.

So, there are multiple opportunities in mobile home parks.

Many are looking for a more affordable place to live and a mobile home fills the bill nicely.

Let me know if you have any other real estate questions. I've got many years of experience and I've wholesaled more than 1,000 houses, rehabbed, and have a single family house rental portfolio that provides a very nice lifestyle.

Jackie

 

[Russ H]

Welcome Jackie,

Not sure if you've hung around these forums much, but it's customary to post an introduction on the intro section, telling us about yourself. Some of the details you give in your post above would be most appropriate.

The more we know about your background and general areas of expertise, the more friendly you'll see the community towards you.

There are dozens of "gate crashers" who land here each month, try to impress w/their book-learned knowledge and stories of what their 'friends' have done. So many of the regulars around here tend to be a bit cautious-- they've been burned plenty of times by these folks who have lots to say (and advice to give), but little real-world experience to back it up (we call them NNWKIAs-- "No Net Worth Know It Alls)

You don't sound like one of those folks.

So it would be great to get an intro from you.

You can post as much-- or as little-- private info as you feel comfortable with. You also don't have to post specific details of deals or even the exact business you're in (but it helps).

Welcome to the fastlane.

-Russ H.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[bflbob]

Agreed...

I just bought my first one yesterday...a bank-owned REO (just like the houses I buy)...

I'll post more details after I finalize and execute on my exit strategy, but would love to know who here (if anyone) is doing Lonnie Deals...

Love the concept of Lonnie Deals. My son did a presentation on them at last year's B&P.

Now...if only he'd done more than a presentation :smug2:

 

[WildFlower]

If you could buy the land then maybe.. but, your putting in good money into something that depreciates is something I wouldn't be excited about.
Why not buy apartments/condos/townhouses?

That's like buying an old car and leasing it.. what happens in 10 years? The car is worthless. That's why car rental companies have strict guidlines as to when they dump the cars.


Maybe find a dump.. fix it up and then sell it but, you can do this with stick built.

What are the rents on apartments in your area and deduct that 520.. that's about how much your going to make on renting.

You have a cost you can't control. I would say no on this.. unless you can own the land.

 

[WildFlower]

Agreed...

I just bought my first one yesterday...a bank-owned REO (just like the houses I buy)...

I'll post more details after I finalize and execute on my exit strategy, but would love to know who here (if anyone) is doing Lonnie Deals...

Are you owning the land? Or is it in a lot?

We have only done one mobile home sitting on an acre.. or something.. It was a great deal at 155% ROI in 4 months.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WildFlower]

It's in a mobile home park, so the land is owned by the park owner...

Why did you stop after that first deal? It sounds like you had a great model for generating income!

Thanks.. we didn't stop.. just did only one mobile home. Most deals were stick built.

 

[Dhappy]

Wildflower,

When you buy and sell in a park,it is the same as a buy here pay here car lot.
These people only care about the monthly payment. I never worry about the MH going down in value, because it does not matter to this type of buyer.

I have done many lonnie deals and made great money.

Example of a average deal.

Paid 3k for a old mobile in a park.

Ad in paper, 3/2 mobile, needs TLC. 100% owner finance,no interest, $500 dwn, $299 a month for 59 months and you own it. The phone will ring off the hook.

As far as the mobile being hard to sell once it is 10 years old is not the case. The mobiles I buy,sell and rent are 30-50 years old and still move like hotcakes.

I also like mobiles on land the best,but only because I like to be in control and not have to deal with the PM bull.

 

[Runum]

DHappy, I am assuming your buyer has to pay lot rental as well. How do you deal with it when they don't pay the lot rental and the PM is not happy? Also, if the buyer fails to pay you, how do you handle it? Eviction or foreclosure?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Dhappy]

This happens about 50% of the time. I have sold the same mobile 5 times over the years. This is not a problem, because it keeps the income stream coming in.

All parks are different, Some will want you to guarantee the lot rent and others will go after the buyer. After the first buyer pays me for a few months I have most if not all of my money back. I then use the down from the new buyer to pay for any unpaid lot rent and then sell it again. Getting the mobile back is just like a car. You have to repo it or have them sign it back over to you.

I like to keep the mobile in my name if I can until they pay me off. Then it is just a simple eviction.

 

[Runum]

Thanks. One more question. Are there any property taxes? If the MH is still in your name and there are taxes, you are liable. How are they paid?

 

[Dhappy]

Your dead on,you sound like you have been doing it for years.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Runum]

Good stuff, thanks. I do know that in Texas many of the mobiles on land have had their titles surrendered to the state. The house is then considered a part of the land. Texas also tried to pass a personal property tax many years ago. It failed but it would have taxed your cars, boats, ATV's, travel trailers, mobile homes, etc... Some states may have that tax in place.

Thanks for your help guys. +++speed
Oops, sorry JScott I have to spread speed around before I can speed you up.

 

[Dhappy]

Thanks Runum,

You were one of the first to make me feel at home when I starting posting here.

You add priceless value to this site.

 

[Runum]

Thanks Dhappy. One more tax question. When you sell the property on payments at a profit, when do you owe income taxes on the profit? Do you owe it when you collect the money or at the time the contract is signed? Is there a legal way to minimize the income tax?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[WildFlower]

DHappy

I get what you are saying. I meant 10 years on top of a 30 – 40 year old home. Certainly a 10 year mobile isn’t that bad of shape unless it was highly neglected.

We have never dealt with a lot in a park. It was on an acre and the land was sold with it. It was a rural part of Nevada.

That certainly is a great ROI. I wouldn’t want to mess around with the mobile home lots in the parks around here. The meth use in Northern Nevada is the highest in the county at 25%...(Trust me .. you know the users, it’s easy to spot when they are missing teeth and their mouths are caved in.) they are scary parks with gang bangers, meth labs, etc. I don’t want to be a financer and deal with that monthly. I’m open that a mobile home park sitting on a beach is much nicer. Location makes a difference.

We did that deal because we knew we could exit quickly and get the bank to take a hit because of the location and we owned the land.

What’s interesting and hasn’t been brought up yet is if you have to move the MH or get rid of it. That’s expensive right? Well… at the ROI you are making it would be far cheaper to just abandon it and let the owner of the land deal with it. Which brings me to the question of the contract between the renter and the owner of the land? I’m guessing this isn’t much of a problem but, how would that work? What if the land owner doesn’t want to renew the lease? OR is that possible?

PS .. Man Texans don’t mess around if you default on your loan at the beginning of the month by the end of the month, your house is on the auction block! Of course many banks wait more time than that because they don’t want any problems.

 

[WildFlower]

Thanks Dhappy. One more tax question. When you sell the property on payments at a profit, when do you owe income taxes on the profit? Do you owe it when you collect the money or at the time the contract is signed? Is there a legal way to minimize the income tax?

I would suggest getting a CPA to do your taxes. There are so many write-offs in real estate but, you have to do it properly and they know all of them.

It's possible to make a lot of money and yet have very little income in regards to taxes. Especially if you have buy and holds where you are accepting rental income. A good CPA is the way to go.

If you're worried about it talk to a CPA first... and ummmm I saw Dianne Kennedy on here somewhere... she's a wealth of information on this topic.