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Where are all the Mobile Home Park Investors?

Discussion in 'Real Estate Investing' started by Major, Jun 20, 2017.

  1. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Hey guys, been a little while since I have been active on this forum. This a great site. Have learned alot from many members on this forum.

    Just finished closing on my third mobile home park purchase and am loving it. Have 6 more in the pipeline coming up.

    This journey started five years ago when I was a real estate broker working two other jobs just to make the bills. Showing commercial properties by day, bouncer at a local bars at night. That crap got old.....quick!

    Granted, in 2012, being a new commercial RE broker in one of the worst real estate markets since the 1980's RE recession, was extremely tough. But, still managed to just get by with a house flip here and there on the side along with bouncing. Then decided to put up or shut up with the advise I was preaching to clients. I didn't want to be another statistic of the saying " those who can't, teach". Enough was a enough and it was time to get a seat at the big boys table. But there was one big problem, I had no real sum of money to invest....What to do?

    It was at this exact time I came across a book called, " Deals on Wheels" by the late Lonnie Scruggs. This book ironically was among a large stack of books on my fathers bookshelf. Originally printed in, I believe 1992, it was small, large print, and had pictures. Figured I would give it a shot. While reading, I noticed the prices and costs for investment in the transaction of these homes. But, I knew the book was outdated and the prices must be considerably higher and out of reach for my modest budget since 20 years have passed since its publishing. However, I could not stop thinking about it and figured I would check out a mobile home park I pass by on the highway on the way to the office everyday. To my amazement, the mobile homes were still at reasonable prices. It was time to do a little digging and see what I could get. Looked around the park and spoke to the park manager. Found a home, 3 bed 2 bath with price of $6,000 but needed a little fix up. Now the teachings of the book became real....This could actually work.

    Why take the risk myself? I had a coworker who was also younger and wanting to get some sort of cash flow in a commission based industry. Talked him into going in on the home 50-50. This achieved two things, allowed me to only put up $3,000 of my money and learn a valuable lesson in partnerships (that is another story). Besides, worst case scenario I lose $3,000 which I could get back in a few months if I picked up an extra shift or two at the bar. No bank would lend to me so I had nothing to lose.

    Bought the home, got the title, and became a mobile home investor (with a partner). Now I had a home that needed a little fixing up and no money to fix it up. After thinking about it in the car before I left the sellers home, I went back in to speak with he and his family. It was March, the seller stated he would not be moving until at least June because he did not want to move with only four months left in the school year with two children. I asked where would he go until the school year ended? He stated he would go to a local hotel or something. "Well why not just stay here, save yourself the move, and rent this home until you want to leave?" I asked. After a short negotiation, he agreed to stay at the home for a rent of $400 a month on a six month lease. I did the adding and it came to a total rent of $2,400. To my amazement he gave me back $2,400 of the $6,000 I just gave him. Wow..what a deal I thought. I am now have only $3,600 invested into the mobile home with six months to get some rehabbing money for when he moves out.

    Five months later the family moved and gave me possession of home. They did not get an money back for the last month as they were breaking the lease and agreed to the terms. I managed to save up $2,000, that my partner matched for a total of $4,000 to fix up the home. Installed new hvac, heat pump, paint, new carpet, and two scratch and dent appliances within two weeks. We are not invested into the home a total of $7,800. Put the home on market with a sign in the window and an add on craigslist. We had a buyer for $18,000 in four days. Buyer put $6,000 and agreed to a $450 payment for 4 years with 9% interest. My partner and I split the down payment 50-50.

    I had seen the light. Two days later the park manager called me to come to his office. The park manager, very pleased with work I had done, approached me with an offer for two homes they had just received possession of. I bought one home for $1,000 (3bed 1bth) and a second for $1,400 (large 2bed 1bth). My partner had not interest in flipping other homes, so I purchased these with the $3,000 down payment I received just two days before. Long story short, a month later, I sold both on a rent to own (now a rent credit program) with total down payments of $7,000 and total monthly payments of $925. With the previous home sold with my partner, I was getting a total rental payment of $1,150 a month. This opened my eyes and allowed me to purchase and flip an additional 4 homes that summer for a total of seven flips in eight months with a monthly rental income of $2,400 a month.

    With this monthly income and a small commission made on a sale of dentist office, I had $25,000 available to invest by the end of September. After this new found niche and wealth of first hand experience in mobile home flipping (mostly of what not to do), I did the math. The park I had purchased homes in was one of the biggest in the state. It had over 500 rented lots. With a $450 monthly lot rent and that many lots, the park had the potential to make $225,000 a month!! Get me a piece of that!! Let's take this elevator to the next floor, I thought to myself.

    I read everything I could online about mobile home park investing. Time was ticking, I had found the love of my life during this journey and wanted to get her hitched before she realized what she was doing with me. However, I made a promise to myself that I would never get into the position I was in only nine months earlier. I had to make X income before I would get engaged. That October I found a mobile home park for sale in a market I knew very well form executing a few leases in the area. I was able to meet with the owners, talk them down on price, and gained enough of their trust to seller finance the mobile home park. We closed on the property 30 days later. The park contained 10 mobile homes on 10 lots and a 3bed 2bth house. They agreed to a price of $215,000 and would take $25,000 as a down payment.....Perfect. The park had a low lot rent of $300 a month, two vacant mobile homes, and a vacant house for a total monthly rental income of $2,400 a month. My installment payment was $1,050 a month and tax/insurance of $550 a month for a total debt service of $1,600 a month plus water/sewer bill. Two months later, I had filled the vacant homes and house with paying tenants with lot leases and promissory note monthly payments. I also increased lot rent to $450 a month (area average). Within sixty days of closing, the park was had a monthly NOI of $3,800 a month.

    This park, along with the cash flowing previous mobile homes, allowed me quit two of my three jobs...yay!! Came across a killer deal on a 20 unit apartment complex near my home. I was able to assume the note on this property and give the owner a decent amount of walking away money.... FINALLY!!! I had the income and confidence to quit my job as a broker the day we closed. Two days later I purchased a ring and proposed when she got home.

    I never stopped expanding and strictly invest in mobile home parks. This year is the best yet so far. I don't understand why more people do not know about this industry. I love it.... The people are interesting to say the least but very appreciative that someone, like myself, would give them the opportunity to own their home. This niche has provided me with opportunity to completely change my life and gain my financial freedom. I am a huge advocate for mobile homes and see it as a means to the low income housing epidemic.

    Hope to hear from you guys and share advice/stories of this great industry. P.S. I just purchased a camera to take video and pics of what I do and think it could be a great value to provide up and coming investors an inside look. Let me know what you think. Thanks
     
  2. MidwestLandlord
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    MidwestLandlord Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Nice work!

    Scrugg's book is how I got my start too. Got away from mobiles after some time, but flipping mobiles gave me the war chest to do what I do now.

    I've tried on several occasions to buy parks, but the prices here are outrageous. (I watched a 15 slot park go for $550,000 last year, with lot rents of $399 [area average])

    There is so much money to be made in mobile homes, tons of NEED, and most people avoid it because it's not "sexy"

    But really, what's not sexy about someone paying you monthly on the home note AND paying you monthly for the lot rent?!

    AND they are happy to do it because they get to own their own home, and it's affordable. It's a win-win!

    Again, good work!

    Have you bought other parks besides the first one?
     
  3. Lex DeVille
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    Lex DeVille Sweeping Shadows from Dreams Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Will re-read your thread in just a bit. In town now. But was just discussing the opportunity with mobile homes with my wife. Bear in mind I know 0 about it, but it seems like an often overlooked opportunity for the right person.
     
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  4. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Thanks for the comment. The best deal are off market, like in any business. I agree, once a broker get his/her hands on a mobile home park listing the price skyrockets. However, the cash on cash returns and low overhead are unmatched in any other form of real estate (except maybe for NNN land lease).

    Yes!! I have purchased two additional parks. I actually wrote the article and this reply in the hotel room near the park I just closed on 18 days ago (55 unit). I currently have contracts on 3 other parks to close (hopefully 3 for 3). I became really active and aggressive 8 months ago when the election had ended and banks had finally opened up their vaults of money to lend at crazy low interest rates. It wasn't but 10 months ago you were lucky to get a bank to lend on a 60% LTV on a mobile home park with plus prime interest rates. Now I am getting rates up to 85% LTV!!

    Thanks again for the comment. I will be continuing the article and give out as much info I can for fellow investors. Want to pay it forward for all the help I had along the way from other investors.
     
  5. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Thanks for the comment!! Yes it is a great opportunity in an unsaturated market. This is not your average radio get rich quick real estate scam. There are plenty of ways to get involved without having to jump all in like I did. I know plenty of people who started out as just passive investors (aka money men) to learn the business with the first hand experience of doing a deal with a seasoned investor.

    Let me know what questions you have. Would be glad to help in anyway possible.
     
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  6. CareCPA
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    When you say "mobile home park," are these the stereotypical ones on TV where the tenants always have car parts in the driveway? Are these nicer ones where people take care of their homes? Or is it a mix?
    Are you putting new homes on the pads and renting the whole thing, or are you just collecting the lot rent? I couldn't quite tell from your post.
    Do you discount for a caretaker, or just hire out the grounds maintenance to an unrelated company?
    Have you looking into the over 55 communities as well? I imagine these are lower returns, but fewer issues.

    I've seriously considered this in addition to my more "traditional" rental properties, just haven't gotten the funds together to give it serious consideration.
     
  7. Jon L
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    I fixed up mobile homes for a guy back in the late 90's who bought and sold them. He typically doubled or tripled his money on them. Back then, he bought them for $5-$7k from the bank, and sold them for $15-25k or so. Typical fixing-up expenses were a few thousand. Sometimes, he would move the units to a different park to get better space rent or other perks.

    Typical things we'd have to do to fix up a mobile home:
    • clean out the previous resident's stuff (usually left-over stuff that wasn't moved.) Also included full refrigerators that had been turned off. (wear a gas mask so you don't smell the fumes)
    • Repaired the particle-board subfloor around the washing machine and sometimes dishwasher
    • installed new flooring in the kitchen - typically vinyl tiles
    • repaired the skirts around the unit
    • Paint the inside and outside
    • do minor landscaping
    • install earthquake mounts underneath
    • Move and then re-level the units after the move was complete
    He would also sometimes carry the paper or rent out the units after we finished the repairs. Loans on a mobile homes have much higher interest rates than standard mortgages.

    If you don't mind getting your hands dirty, its some good money.
     
  8. Azure
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    Azure Perpetual Motion Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    550,000 with a mrr of over 5000 dollars. Is that bad? Some of the property values you guys have in non major metropolitan American areas are nuts, outside of SV NYC Boston etc.

    Here in Toronto a 550k condo nets you 18-2200 in rent tops. Then you eat a few hundred on maintenance fees. Although I suspect the expected appreciation (30% yoy) outweighs that.
     
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  9. MidwestLandlord
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    MidwestLandlord Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Lol, big cities are a hoot.

    Went to my local MLS listings...

    First house listed at $550,000 is 4 bed, 3 full bath, 1 half bath, 5,640 sqft, a theater, a billiard room, an attached green house, 2 laundry rooms, and 18' ceilings in the main hall...on 4.86 acres.

    But yeah, a 15 slot park full of 8' wide homes at that price is steep for the area. The county won't allow new parks, so the prices went crazy.
     
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  10. Bigguns50
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    Bigguns50 Platinum Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    Good post and good work @Major !

    I lived in a park for several years. It was a middle of the road type....not trashy, not great. I thought and still think, it's a good market to get into. I watched the management work and man, I wouldn't want their jobs.

    Do you manage the parks or do hire management ?
     
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  11. Under-Dog
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    Under-Dog Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Wowzers! $550,000 in the LA area gets you a carton
     
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  12. ironman150
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    ironman150 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Thanks again for the comment. I will be continuing the article and give out as much info I can for fellow investors. Want to pay it forward for all the help I had along the way from other investors.[/QUOTE]

    Major, i am about to give my first LOI on a park. I can assume current debt and the owner has offered additional funds. I also have a private lender who verbally gave an OK to fund the rest (subject to verification of the books). This would be "zero down" deal.

    Seeing as i'm new (read that as scared). Can I ask you some questions as i slosh through this? I could use some guidance as to "what comes next" instead of learning it as it smacks me in the face.

    thank you
     
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  13. minivanman
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    This is one of the only things I've talked about and never done. Not sure why I haven't done it but just never have. I used to talk about it so much that some of my friends still bring it up sometimes and ask if I'm ever going to buy a trailer park.
     
  14. ironman150
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    ironman150 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I've been looking at for the last 5 years and just too darn scared to go for it. I'm going for it now and come hell or high water will succeed. If you want, i can keep you in the loop as to what happens. Or if you have any ideas, i'm all ears.
     
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  15. minivanman
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    minivanman Gold Contributor Speedway Pass

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    You bet. Keep me updated. I'd appreciate it. Thank you :)
     
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    Great post. My only question is what about the POA dues or lot lease payments?

    From what I understand, when you purchase a mobile home in a mobile home park, you're only purchasing the building and not the land that it sits on, which you have to lease. So I take it the key to this strategy is being able to flip the homes quickly in order to minimize your holding period correct?
     
  17. Motley crue
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    Great thread about something I've been interested in for a long time. I looked into Lonnie scruggs' method quite a bit but from what I understand it's now pretty much impossible to do because of the SAFE act. I'm curious how you dealt with that potential issue. Also if you don't mind me asking, if you didn't go through commercial brokers to find your deals on the parks, how did you find them?
     
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  18. MidwestLandlord
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    MidwestLandlord Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    I never paid lot rent, only utilities.

    The managers were happy to give 1-3 months of free lot rent if it meant I put a home owner in there that would likely pay them for years to come.
     
  19. ironman150
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    ironman150 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I'm buying the dirt underneath and renting the spaces to the home owners. In the park that i'm going after, there are also about a dozen homes that come with the park itself, so i will rent those out. If you are doing the homes only, you can flip them or rent them out. The key to your strategy is that they are very cheap compared to houses so lower cash to get into it.
     
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  20. ironman150
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    ironman150 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I use loopnet.com; cimls.com; mobilehomeparkstore.com; to find properties.
    SAFE & Dodd-Frank don't apply if i'm renting, just selling. I'm told rent-to-own is also okay though i'm not sure, so if/when i come across that an attorney will be involved. Also, selling for cash is okay.
     
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  21. Michael Raphael
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    How does one find a mobile park or ability to buy them, I looked into this and found it very difficult. I know a noobish question, but would appreciate a response.
     
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  22. ironman150
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    ironman150 Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Michael, see my reply to Motley Crew on where I find them. As to how to buy them, I purchased a list of private lenders and have been "dialing for dollars" ever since. When the deal is good enough, the money is there and i'm finding some real good cash flowing deals.
     
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  23. Michael Raphael
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    '

    Okay - Saw your post above - that was a fail. Hahaha So I am on these sites, typically on a residential I look for ROI, GRE, etc. What calculations do you make to determine a good property? How do you do this? Would you be willing to have a DM with me to somewhat train me on this matter.
     
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  24. SteveO
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    I had a friend from the golf course that started as a backhoe operator. He installed the underground plumbing and electrical on a number of mobile home park developments. They gave him part ownership instead of cash. He retired at 38 and never worked again.
     
  25. SteveO
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    Way to be a deal maker!!!!!!!!
     
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