Would you rather have one rental stream from a single $200,000 home or 40 rental streams from forty, $5,000 mobile homes?
Clearly, forty rental streams is better than one rental stream. If you own these mobile homes in an area like mine, the going rate to rent a 2-bedroom, single-wide mobile home is $500 a month. This amounts to $20,000 in monthly rents vs. the $1,000 a month you’d get renting that single-family home.
How to Acquire 40 Mobile Homes…
Mobile home investing trumps investing in single-family houses because mobile homes generate far more income at a fraction of the cost.
One way to do it is to string together forty separate “Lonnie Deals” where you buy the mobile home in a mobile home park and gain the park owner’s permission to rent or sell the mobile home to others.
This is certainly possible in areas with high population and many parks, but isn’t as feasible in smaller towns with fewer parks. Some park owners just say “no” to off-site owners renting or selling to others.
The best way to make your $200,000 yield 10 to 20 times more is to buy a mobile home park yourself. You can still find 8 to 15-unit parks for under $200,000. They often come with park-owned trailers.
If you decide to go this route, you’ll want to run the park yourself for a while because it will likely need work and won’t generate enough income to pay a manager. But add a second park of similar size (or buy a first park of 30 units or more), and you’ll earn the income needed to make repairs and pay someone else to manage the park(s).
Low Vacancy Rate = Reduced Risk
I agree that stick-built, single-family homes are certainly more physically attractive than single-wide mobile homes. But if you own one stick-built home and lose your tenant, your vacancy rate is 100%. If you own 40 mobile homes and lose a tenant, your vacancy rate is only 2.5%.
But what about resale? Won’t a single-family house bring more capital gain than reselling a mobile home? Maybe in dollar terms if you were lucky enough to buy low in an area where prices have bottomed out. There aren’t many places like that anymore. Home prices are still falling in most areas. In fact, The Washington Post reports there are 13 million homes worth less than their mortgages right now and nearly 4 million more in some stage of arrears or foreclosure. That’s a lot of downward pressure on prices that still needs to play out.
A used mobile home, on the other hand, can easily be sold on payments for double or triple your original cost because you offer financing. But why sell at all? If the market allows $500 a month rent on a $5,000 mobile home, that’s the equivalent of getting $20,000 a month rent for that $200,000 home. Who wouldn’t want that deal month after month for the rest of their life?
People are Downsizing
In today’s worsening economy, people will be trading down in housing far more than trading up. Mobile homes are the most affordable “single-family homes” available. In a bad economy, I sure prefer offering the most affordable product to a market that is growing larger every day.
I believe mobile home investing trumps investing in stick-built homes because mobile homes generate far more income at a fraction of the cost and appeal to a far greater number of people. That makes your investment far more secure. Your comments are welcomed…
I have been looking for a small mobile home park for some time.The problem is lack of finances.I am Canadian residing in Manitoba so it is difficult to find affordable parks for sale close by.I think that south of the border will give me better opportunities to maybe purchase with owner financing.
Wait, so why would anyone sell a mobile home park if it is generating that much cash? and if it isn’t, what is the most common cause, and how do you remedy it so you can profit?
(question for biggerpockets.com: is there a way to be notified if someone posts a response to our postings?)
Hi Daniel,
In my experience, the #1 reason why sellers want out of a profitable park is landlord burnout. They’re tired of dealing with bad tenants — the drama, the collections, the repairs. I’ve heard it said that every landlord burns out within two years, unless they are Superman, in which case they burn out in three.
To succeed with mobile homes, it is absolutely imperative that you always have a manager between you and your tenants. This reduces your calls and on-demand duties by 90%. I’ve owned my first park for ten years now and I’m still calm, sane and have no desire to sell. During the few times when I’ve been uncalm, insane and wanting to sell, it has been because my manager had gone bad.
When you encounter burned out landlords selling profitable parks, you have a potential goldmine situation. They are motivated, but they are used to the cashflow. They don’t want the shock of having to pay the big capital gain tax if they get all their money at closing. They don’t know where to place a big chunk of money or who to trust with it. They typically just want to retire with a good, secure, passive income. They are excellent candidates to ask for owner financing, which pays a higher interest rate than savings, secured by the park that they know so well.
As for unprofitable parks, it is usually because of tired or lazy management — bad collections, vacancies, deferred repairs that anger existing tenants, or landlords who are afraid to raise rents or transfer utility costs to tenants.
The remedy is good management. Jump in yourself, make the repairs, make the collections or evict, fill the vacant units at higher rents, transfer utility bills to tenants over time, hire an attentive manager that lives in the park, manage your manager, and then raise rents every year to stop losing ground to inflation.
Every job and every investment has its occasional bad moments. I’ve found mobile home park income to be 90% passive and the best way to generate retirement income. You can “retire” as soon as your monthly income exceeds your monthly personal bills. You don’t have to save up $2 million and try to live off the 1% interest they’re paying today. You don’t have to worry about the brokers or stock market stealing or losing your life savings. If you need a raise, you can raise rents, reduce expenses or buy another park. If I’d known about mobile homes when I was younger I’d have been retired by age 25 instead of 52.
There are many reasons an owner would sell a great cash flowing mobile home park. As an example, I have a seller who owns several MHPs in the same general area. Each park cash flows quite well. He wants to sell one of the smaller parks so he can use the cash to expand one of his larger parks by adding self-storage units. He is also offering partnership positions in the park he wants to expand.
The bottom line is that real estate continues to be a creative business and mobile park owners are like everyone else: they are open to making even more money.
If you have $200,000 in the bank to buy a park…
I would LOVE to get started in mobile home park investing but how do I get the $$$ to purchase? And how to locate parks for sale . . . there aren’t very many near where I am.
Everyone’s skills and circumstances will be different so it might be helpful to share how I started.
I spent hours and hours on the CREOnline.com website reading their free how-to and success stories. I was drawn to mobile homes so I focused there. That led me to Lonnie Scruggs’ articles, which I devoured. I then ordered his two books “Deals on Wheels” and “Making Money with Mobile Homes” https://www.creonline.com/catalog/scruggs.html and read them cover to cover.
For some reason, I was drawn to buy an entire park rather than individual units like Lonnie. In “Making Money with Mobile Homes” Lonnie has a chapter describing how his daughter bought an entire mobile home park. It is called “If You Snooze, You Lose” and is on page 125. I reread that chapter 50 times and used all that info when I bought my first park with a down payment of just $1,000. You can read my success story about that purchase at https://www.creonline.com/mobile-home-park-deal-creates-retirement-fund.html
The banks are very conservative right now so low-down deals are getting harder. But 30 to 50% of all mobile home parks have no mortgage at all, so that means the owner can carry 100% of the financing, using their own park as the security. If you don’t make the payment, the owner can take back his park — collateral that he is very familiar with. Plus he gets a 6% (negotiable) return from you. This is far more secure that getting an all-cash sale, paying a huge capital gains tax and then trying to find a safe place to park that money at a decent return. Some brokerages are now just stealing clients’ money and most people have lost their shorts in the stock market. Seller financing looks great compared to that.
When dealing with sellers, one way to get around a big down payment is to spread the “down payment” over the first 12 or 24 months. In other words, you make balloon payments every 3, 6 or 12 months to fund the “down payment” in addition to your regular monthly payments. If you structure it right, park profits will make that payment. You may earn little or no profit for the first year or two this way, but it gets you into the deal.
Another approach is to get half the money from a bank (giving them first position on the loan) and getting the other half from the seller. The seller then gets half his money at closing and gets monthly payments from you. The bank will be protected with first position and only 50% loan-to-value. You make mortgage payments to the bank and the seller and if the deal penciled out, you’re happy with the income. The seller is happy to get a big down payment (the bank’s 50% loan) and happy to get monthly income (your payments to him). You’re happy you got in the deal for little or no money down. I used this process to get my first park. I got 70% from the bank and 28% from the seller. I chipped in $1,000 (2%) down payment. All parties got what they wanted out of the deal.
New real estate investors don’t have the experience to realize that motivated sellers will often adapt to your needs if they are convinced you will run the park well and make your payments. For some reason, they HAVE to sell. You do not HAVE to buy that particular park. So you have more leverage than you realize.
I’ll be submitting an article on how to find parks soon.
Hi Mike,
I’ve been looking for information on mobile homes, so I really enjoyed your article.
I met and purchased Lonnie’s books many years ago. Though I’ve been involved in a variety of Real estate investing, I’m really interested in mobile homes – it seems like a no-brainer. My husband and I recently moved to the Memphis area and there are numerous parks here. What’s interesting is that the prices seem to be higher now than what the Lonnie deals suggest. The sellers are asking for $20,000 etc for a single wide. Are they crazy or have the values really increased? Anyway, we backed off for a while but I still have this desire to invest to invest in them.
Curious if you have any additional articles or updated resources on mobile home investing?
Would love to hear back from you,
Thanks so much,
Jodi
Hi Jodi,
I’ve seen people trying to sell mobile homes for $20K+ in the Wyoming and Minnesota areas I haunt. I’m sure their homes are nice but those aren’t the deals you want. You have to look at many ads to find a motivated seller with a low price and maybe even owner financing. But they are sure out there.
I have driven through Tennessee several times (that doesn’t make me an expert on the market there) but I feel certain you can still find $3K to $5K singlewides for sale. There is always someone who just wants or needs to get out of that trailer fast and is willing to discount to do it.
I’d drive the parks as Lonnie suggests, watch classified and shopper ads, find the online multiple listing services in your area and speak to Realtors. In addition to looking for signs in parks, I’d speak to park managers to see if they have any vacant trailers looking for owners. Some park owners just want the lot rent, and may have gotten the trailer free through abandonment, so may sell cheaper than you’d imagine. You’ll also be establishing a relationship that will help get their OK for you to resell or rent the trailer you buy there.
Once you get through your first deal you’ll get the experience and see this isn’t that tough. You’ll gain confidence and your second deal will go far easier. You’ll then keep improving your process and one day wonder why you didn’t start this years ago.
The single best source of how-to info about mobile homes and parks is right on this website. I learned everything I needed to know to start successfully buying trailers and parks right here.
Very Helpful! Huge Thanks Mike
Hi Mike,
You were so kind to reply to me about finding affordable individual mobile homes. I’ve since read your article on Mobile Home Parks which I found very interesting. Our goal was to start seller financing homes and surprisingly we’ve come across a park for sale. An older gentleman has a 50 lot park he owns outright. What’s interesting is that he rents the homes (which are old models 1960’s – 80’s) on a weekly basis (which we would prefer to sell the homes). He is 77, has no succession plan, is asking 750,000, appears to be motivated but not very interested in seller financing. We thought about throwing out some offers, and here’s my question to you: You mention in your article normal sales price is 10 times NOI. My husband is in a completely different industry and they typically pay 4-6 times earnings. So, is 10 times NOI always the norm in the mobile home park industry? Greatly appreciate your knowledge and feedback…. thank you! Jodi
Hi Jodi,
You may have the makings of a deal here. You have an elderly seller who owns his park free and clear and is running it in the most difficult way possible — weekly rentals. It may be more profitable to do it that way, so keep an open mind and consider maintaining his system if the operation justifies it. It’s a safe bet he is tired of all that tenant contact and all the problems that come with turning over units so often so he could be quite motivated.
Ten times net operating income is just what the mobile home park industry typically gets based on past sales. I sure didn’t establish that, but I quickly saw it seemed to be the norm after penciling out many many deals in all parts of the country. Typically, the more passive the income, the higher the multiple of NOI. If a business requires lots of owner presence, the NOI multiple can be as low as 1 or 2. My banker says every industry has a ballpark norm.
When looking at making an offer, just make sure you get the seller’s numbers before making it. The park may be generating more than $75K NOI a year now, so he may be asking less than 10X NOI already. I’ve seen parks sell for 5X NOI and I’ve seen them listed for 15X NOI. It’s really what the buyer and seller agree to. But using the “norm” 10X number can help get a higher asking price brought down to something more reasonable. Also don’t take the seller’s numbers as gospel. You can ask for a due diligence period of 30 to 60 days in your offer to verify all numbers.
If the seller has an aversion to owner financing, you might ask how he plans to use the proceeds. There is ample evidence that money invested in stocks and mutual funds can easily be lost. If it isn’t lost, it is sometimes stolen by dishonest and failed brokerages. If the seller loses that money he has nothing. If he mortgages the park to you on payments, he gets his income stream back if you don’t pay. Plus, you will likely pay up to 6% interest on your loan to him, where he’ll never get that in other investments. Investing in you, with his park as collateral, is far safer than investing anywhere else.
Finally, as part of your offer, schedule closing to fall on the 4th, 5th or 6th of the month. You can require the seller to turn over the rest of that month’s pro-rated rents at closing, which saves you from collecting rents that first month and greatly reduces the amount of cash you have to pay at closing (or lets you walk away from closing with cash in your pocket). The seller will also have to turn over any security deposits he holds at closing, pushing more cash your way. You can also ask the seller to start your first payment 90 or 180 days after closing to give you time to make repairs or upgrades. Everything is negotiable!
Mike,
You’re awesome. Thanks so much for the quick reply! I know you’ve written a couple of great articles, any chance you do any consulting? 🙂
i own 3 mobile homes on the east coast of florida. I did lonnie deals on these three homes. These
deals were done over 2 years ago,and I have not had a default on thes homes yet. some info
to be aware of if you are a new investor is;
1. If buying mobiles in a park for investment,buy as cheap as possible. Fix up home without
remodeling.sell on a note. Stay away from corporate parks.They will raise lot rent at least one
time per year. If investing in Florida you need a brokers license to sell used homes. Insurance
will be a problem because citizens is the only insurer of mobiles,and it is expensive.You can make
money if you buy cheap and sell for double what you payed for the home.
If you try to rent and the lot rent is high you will be hardpressed to make the investment pay off.
Thanks for your info. I got a bunch of question. Would love to talk to you. Not e mail My phone is 772 370 7959. Leave message and I will call you with questions. Thank gene
Own the land, not the trailers.
Jack, I sure agree that owning just the lots is far easier than owning the trailers too. The cash flow can be higher renting the trailers, but only if you select and keep good tenants and can find good, reasonably-priced repairmen, and a good manager to keep it all running well.
I own two parks. One owns all the lots and the majority of the dwellings. This park makes more income for me but is far more difficult to operate. The other park is 98% lot rentals only and is far easier to run. This park is the farthest from my home, which makes its easier operation a blessing.
You bring up a great point. New mobile home park investors should really try to purchase a park with lots only and as close to home as possible. In the real world however, the number of available parks in your area may be limited so if you want into a deal, you may have to buy a park that includes rental trailers. Our first park did. I’m glad it did because it exposed us to more challenges and educated us about the entire world of rentals. Now we have the skill sets to buy either type of park.
Another advantage of park ownership is that when tenants have to sell their homes, they usually come to you first. You can get tremendous deals this way. Since the trailer is already set up on your property, you are the obvious first buyer. Since it is expensive to move, you have a cost advantage over other buyers. Since you have to approve whoever moves into your park, you have another advantage.
If you buy a trailer from a tenant or buy a park that has rental trailers, you can always sell them on “Lonnie Deals” to eliminate the repair, taxes and insurance expenses. If you pick a good buyer, you’ll also get off the vacancy wheel. Or if you are game for higher income but willing to keep more balls in the air, try the trailer rental route.
Pluses of Lot-Only Rentals
Easier to manage park
No billing if utilities included in rent — your tenants just automatically send their fixed lot rent payment each month
No or very little turnover of tenants — few people ever move a mobile home once set up
Less turnover means fewer ad costs, fewer showings, fewer crime & credit checks, no cleaning or fixing units between tenants, many fewer phone calls
No extra tax or insurance costs for individual homes
No repair calls or expenses for homes — you just keep underground pipes and street lights working
Less drama — owners usually behave better than renters
Park appearance can be better since owners have more pride in their dwellings
Easier to sell a lot-only trailer park
Minuses of Lot-Only Rentals
Harder to evict a trailer owner than a renter (at least in WY) because of the expense of moving trailer
Less potential income
Sales price of park will be less due to lower income than well-run park that offers rentals
What do you do with a person when they own their mobile but do not pay space rent? Also, how do you find out who owns the park as you state to stay away from one that is corporate owned.
Thanks
Hi Charlotte,
In the 10 years I have owned parks I have never had to force a tenant to haul his trailer out of my parks. I have had several late or no-payers who owned their trailer but rented my lot. In those cases I negotiated purchasing their trailer and credited their unpaid lot rent toward my purchase price. I always came out very good financially because I now rent those trailers and the rents have far exceeded the price I paid.
Here is a link to a success story of one such trailer I purchased from a late-paying and difficult tenant. After staying on him about slow paying and rule violations, he decided to move and sell me his home.
https://www.creonline.com/20k-mobile-home-free-and-clear-plus-cash-flow.html
I have been fortunate to have never taken a tenant to court. Yes, I have eaten losses from trailer-renters who have skipped out on rent or utilities or caused damage. But the business is so profitable that I can absorb those losses as a cost of doing business. I don’t let anger eat me up or the court system take over my life. If the tenant is bad, it is usually worth a loss just to grease their departure from your park. Consider it an investment that trains you how to better select tenants in the future.
One of the other posters suggested never buying from a corporate owner. I don’t have experience doing that so I have no opinion on the matter.
To learn the identity of the owner, ask the Realtor to arrange a meeting for you with the owner of the property so you can learn all about it from the source. This meeting will give you all the info you need about the park and the ownership problem the seller is trying to solve. Asking the right questions will also dislodge how the seller plans to use the sale proceeds. Now you have the info you need to structure an offer that works for everyone. You’ll also have the chance to build rapport with the seller. The better the seller likes you, the more flexible terms he’ll consider.
Other ways to learn the identity of the seller are to look for the property’s website, Google the property name, phone number and address or just call the property phone number and ask directly who owns the property. You can also call or visit the county appraiser’s office with the property address and they will reveal the property owner.
I owned a park in WV and sold it I am looking for a nice park in and around South Florida I live in FT Laud F:L
and ready to buy another park.
I just finished reading Lonnies two books “Deals on wheels” and “Making money with Mobile Homes” One question I have is it necessary to meet with an attorney every time your ready to sign or have signed a
Mobile Home purchase agreement or Sales agreement? Or is it something we do solely and keep in our personal possession? Also in regards to credit checks, do you run them on every potential buyer?
Hi Tas,
I customized Lonnie’s forms for my parks and situations and then had my lawyer go over them to make sure they were legal in my state. Once that is done, you just keep using the same forms, just filling in the blanks without having to go back to the lawyer.
I do run a credit check on potential buyers so I know what I’m facing. If the report shows problems I discuss it with the buyer and then decide to approve or not. In some cases, a buyer with bad credit could become a renter for 6 to 12 months, build a good payment record with you and then you could sell to them later.
I understand that parks can prevent you from renting out a mobile but how can they prevent you from selling a mobile? Can they allow a cash only buyer – and not allow a buyer to make monthly payments?
Also, I know a fellow that had a few ‘Lonnie’ deals going. He was getting around $150 per month for the average monthly payment. When a couple of the loans went bad he was in rough shape. As the lien holder he was then responsible to the park for the lot rent – at $450 per lot. At that rate he would need the income from another 6 deals just to break even. He ended up in a serious negative cash flow position and the park ended up owning most of the homes. I’d appreciate your comments.
Hi Jerry,
A reputable park owner can’t stop a tenant from selling a mobile home or restrict it to a cash sale. He CAN decline to rent the lot to a buyer who will be a bad neighbor, safety problem to other tenants or someone with such severe credit/income problems that he can’t pay the lot rent. So smart park owners make sure their tenants know they MUST have prospective buyers complete a lot rent application BEFORE trying to close the sale. In a worst-case scenario, a mobile could be sold to someone the owner won’t approve to live in the park and the mobile will have to be moved out of the park. Nobody wants that.
As for the buddy with the deals-gone-bad, he made several mistakes that can be corrected in the future.
First, I’d make the buyer send me proof of his lot rent payment every month when he sends me his home payment. I’d also make arrangements with the park owner to tip me off if my buyer was ever late on lot rent. The sooner I learn he’s behind, the better chance I have of fixing the problem. I’d put a clause in my sales contract that the lot rent must stay current or his home loan with me defaults.
You don’t mention how much down payment your friend asked, but the larger the better. This can provide a buffer to cover expenses for a couple months if a buyer bails out. Also, with a park with such high lot rents, you need a bigger down payment. Lonnie deals typically get $500 to $750 down. I’d increase that in a high-rent park to at least $1,000 – $1,500 and I’d be asking at least $300 to $350 a month for the monthly payment on the home. The more you get up front and per month, the harder it is for the buyer to walk away. And if he does walk, you get to keep everything he paid, erasing most conceivable losses.
In my experience, Lonnie deals work best in parks with $150 to $250 lot rents because it allows you to keep the home payments lower so more people qualify for the mobile home you’re selling. The higher the lot rent, the higher you want to adjust your other numbers. But you must balance that with what the market will bear. Higher prices may take longer to sell.
If you encounter a walk-away buyer, you can get the home back immediately (in WY anyway) if you add an abandonment clause or a 10-day-no-pay-and-repossess clause in the installment sale contract. I learned the hard way to never change the title to the buyer’s name until he paid off the home loan. Then if he defaults, the title is already yours. You can then immediately resell the home and collect another down payment from the new buyer to pay off any expenses the last buyer dumped on you.
Everything is harder with fewer homes. If you have one home and lose the tenant, you are 100% vacant. If you have 10, 20 or 30 homes, it’s no big deal to have a few vacancies. This is yet another reason to own an entire park rather than a few individual homes. But everyone has to start somewhere. If you learn under adversity, the silver lining is that you’ll gain skills that will last a lifetime. I’d tell your friend not to quit the business, just make adjustments on his next deals.
My fiancee and I just bought 3 mobile homes in different parks. We paid no less than 4000 or more than 5000 for these homes. 2 were move in ready while 1 needed more tlc. We advertised these on craigslist as rent to own and my phone blew up with all the calls. Depending on the home and the area we offered them for 500 to 1000 down with pymts at 450 per month including the lot rent. We are financing them for 4 years and it also generated a great buyers list of people looking for more of these deals. Now I need to find some more.
Hi Mike! Great article. I am very interested in getting into all of this but certainly have a lot to learn. Here was an ad on craigslist today for a nearby park to me. What do you think?
For Sale to settle estate. Mobile Home/Trailer Park that has 42 spaces. Currently the lot rent is $105.00 monthly and a $15.00 month for sewage. It has its own sewage treatment plant. It has 1 water meter from the water company and then it has its own lines and meters to each space that you read every month and charge the space for the water usage. The water company discounts the water which means you make money on the water also. There is between 4.5 and 5.5 acres. There are only 17 spaces rented at the present. When my grand father was alive it stayed full but when he passed away my grand mother tried to keep it going but she passed away in December and was 91 yrs. old and wasn’t able to keep up with things. Rent on similar places in the area are higher so it should be raised but she never would raise it. All mobile homes are owned by the individual but you could put some of your own on it and rent those if you wanted to.It is being sold to settle the estate of Glynn and Blanche Tipton. It is located about 2 miles out of Irvine. Asking $115,000.00. I am listing this for my father which is 75 and is not able to take care of it. NO TEXT or E-MAILS. PHONE CALLS ONLY
Hi Andrew,
Sorry for delay, just saw your post. If I lived in the area of that park I would be all over researching it. It has several great elements right off the bat — low price, high upside if you increase rents and occupancy and no park-owned trailers (easier to run park and far fewer expenses). It also sounds like you have a motivated seller and an old property which can mean it’s paid off which might allow for owner financing.
Potential downfalls:
Sewer plant. You’ll need to verify this still works well, what’s involved in upkeep and is it grandfathered in for continued use by city, county and state governments?
Vacancies. Are there enough jobs in the area to realistically envision filling the park? What has changed since grandfather had it full? Is there a mobile home dealer nearby where people could buy new or used trailers to place in this park?
Just using rough numbers, it looks like the park would more than pay for itself at that asking price right now. This might be a great first park to purchase!
If you jump in, read all of Lonnie Scruggs free articles on this site, along with all the other mobile home park how-to articles here. This will help you develop a list of questions for the seller so you maximize your info collection when you get a showing of the park.
I’d dive right in because if you snooze you lose! Even if you don’t buy it, you start educating yourself by penciling it out, meeting the seller, looking at the park and negotiating. I looked at 3 or 4 parks to learn enough before everything fell into place to buy my first one.
Good luck!
MJ
Hello, I am 42 and looking at doing something similar to this. I own my own home free and clear and it will sell for about 120K here in the Phoenix suburb of Buckeye. I want to sell my home and invest in about 10 manufactured homes in 55+ (retired) communities in the Mesa, AZ area. I am thinking of targeting the 55+ market due to the “fixed” income and more “stable” environment and them taking pride in their home. I am seeing many selling for around $2k and I am assuming they will need some elbow grease that my wife and I can do and then rent out. These communities charge about $500 per month rent and then I am seeing many for around $1K per month. So I am looking at profiting (gross0 around $500 per month. So my view is if I can buy something for $2k and rent it out for $500 profit, I will break even in 4 mos and then everything else is gravy, Please give me some advice or direct me so I can start learning. My SFR is going up for sale in about a week or two and then I will be ready to start in a couple of months. Thank you, Justin
Hi Justin,
If your numbers are accurate in your area then this is a great plan. I’d double check your 55+ mobile home sales prices though. $2,000 sounds low to me for the over 55 crowd. They usually have the nicest homes and get the highest prices.
Another speed bump to overcome is getting the permission of the park owners to allow you to rent out the homes you buy in their park. Park owners want control of who moves into their community to keep out druggies, alcoholics, criminals and domestic abusers. I own two parks and allow subletting to a couple of people I have approved to do so, with one of them being my park manager who owns a few homes, rents them out and pays me lot rent.
I’d also recommend buying as many homes as possible because that spreads the risk of a bad tenant or slow payer or vacancies over many units. One property with a vacancy is 100% vacant. 10 properties with a vacancy is 10% vacant. You’ll also want to generate enough income to pay a manager to oversee your properties and handle the daily activities like showings, collections, appearance issues and supervising and/or performing repairs. If you don’t have a manager, you’ll soon burn out. You can start without a manager as you grow, but if you stop at too few units to afford a manager, you’re buying yourself a frustrating job rather than a passive income stream.
I suggest reading every article on this site written by Lonnie Scruggs and buying his two books, “Deals on Wheels” and “Making Money With Mobile Homes.” I’d also read every article here about mobile home parks and landlording. There is a big learning curve involved to become a successful landlord, but it is certainly worth it to get a mostly-passive income stream that you control!
P.S. With some more research and self-education, $120K may be enough to buy your own 30+ unit mobile home park using bank and seller financing. 30 units seems to be the magic number where paying a manager becomes affordable and the park will then throw off a few thousands in monthly profit to pay all your personal bills, allowing you to ‘retire.”
Good luck!
MJ
Most mobile home parks have older mobile homes. How do you get property insurance on the older mobile homes?
Hi Ron,
I haven’t had any trouble getting insurance on the older homes or the parks. I have just used a local insurance broker. I’ve heard insurance is trickier to find when just starting in a new industry, but I haven’t experienced that with trailers or trailer parks.
Hi Mike. I am the owner of a small MHP in Florida and I have an offer on it. It was my husband’s park, but he died a few years back and I am retired and wanting to move it on. The park, with one stick house, has 11 mobile homes, but from what I can tell, my husband failed to have the titles transferred to him. At this point, there’s no identification on the trailers and I don’t know how to get the titles. Of course, he went through escrow on the park and it was recorded with the county and I am up to date on the taxes, but I’m wondering if there’s a way to get the Titles at this late date. Do you have any ideas? And, if I can’t get the titles, can I still sell the park. I’m willing to carry paper, with a decent down payment, but I don’t really want to hold onto this park indefinitely, especially since it’s in Florida and I’m not.