Cashflow Doesn’t Have to be Sexy!
By Adrian Smude, Author of How to Buy Mobile Homes
Investing in Mobile Homes
There’s never been a better time to invest in mobile homes! Yes, even the old “trailers” so many people seem to fear. Mobile homes are affordable housing. With mobile homes, the cashflow potential is higher than with traditional housing, and mobile homes are still a hidden niche in the real estate investment world.
In most parts of the country, there is an affordable housing issue where demand far outweighs supply. Not enough affordable housing is being created to meet this demand. To further add to this issue, in a recession the demand for affordable housing increases. Let’s say for example, you have a dual-income household, and this family is just barely getting by each month. In a recession, if one person loses their job this household will now no longer be able to afford their rent. This means they will move down a “rent level”. This shift in rent level continues until they find affordable housing that meets their new financial situation. Adding more demand for affordable housing to the already low supply. Most mobile homes are already in the affordable housing space, which means while we might be able to raise rents, more importantly, we will have demand. High demand means mobile home investors can choose the very best resident to live in the property and won’t have to worry about going without rent!
Cashflow investors love mobile homes! The return on investment (ROI) can be much higher when purchasing mobile homes. This is especially true with older units- particularly mobile homes built in the 1960s and 1970s! There are many factors that allow us to invest with a higher return, for example: there is less demand, there can be higher risk, and financing can be tricky unless you understand how. Like with all investments, it can feel risky or even scary, but that is why it is so important to educate yourself.
There are many factors that should be considered when analyzing a mobile home deal. Let’s look at two examples from the central Florida market.
Example #1- Mobile home built in 1997
3-bedroom 2-bathroom double-wide with a fenced quarter acre lot with a shed.
Purchase price: $83,500
Closing costs: $2,200
Repairs: $19,900
Total money in the property: $105,600
Private money borrowed: $70,000
Personal money invested: $35,600
Predictable monthly NET* income: $795
Cash-on-cash return: 26%
*Income after paying taxes, insurance, repairs, and fees.
Example #2- Mobile home built in 1968
2-bedroom 1-bathroom with a third of an acre fenced lot on a dirt road.
Purchase price: $7,500
Closing costs: $580
Repairs: $10,500
Total money in the property: $18,500
Owner-financed: $6,500
Personal money invested: $12,080
Predictable monthly NET* income: $320
Cash-on-cash return: 31%
*Income after paying taxes, insurance, repairs, and fees.
“The riches are in the niches” -Pat Flynn
Let’s bust two of the top myths!
Myth 1: All mobile homes are “Trailer Trash”
Location, location, location! This is what we have always heard about real estate. Location is the key to investing in areas that might be considered full of “trailer trash” or “aluminum castles.”
The structure of a home does not determine the quality of the neighborhood or person living in the structure. People make the difference. The neighbors collectively determine the quality of the neighborhood. You can find wood-frame houses, concrete houses, and mobile homes in rundown areas and in prosperous areas. I make it a point to not purchase mobile homes in unsafe areas. There are many areas where mobile homes sell for prices very similar to site-built homes.
Myth 2: All mobile homes have lot rent.
It is not true that all mobile homes have lot rent. Lot rent is any additional fees assessed for renting the space (“lot”) for the mobile home. Only homes where you do not own the land will have lot rent. This typically occurs in a mobile home park where you pay the mobile home park owner a monthly fee- lot rent- for the right to park your mobile home.
I mainly invest in mobile homes in which I own the home and the land. These can be in a neighborhood of just mobile homes, where each person owns their land and home. It can also be a few acres owned by the same person that owns the mobile home.
If you are tired of fighting other investors for a deal, then you need a niche. Less competition helps those that understand the niche be more profitable. Not to mention, institutional buyers have not moved into the mobile home market yet; this is especially true with older mobile homes. People that invest in a niche and then educate others will quickly become a local expert in that niche and market.
Bonus tip: Did you know sellers of older mobile homes know you can’t go to a bank and get financing? These sellers aren’t new to the topic of owner-financing. When structured right this can be very profitable for you and the seller.
It’s time to take ACTION!
“Education without action is entertainment.” -Laura Halverson
“Take massive imperfect action.” -Bill Morillo
“Your action proves your faith.” -Ken Holmes
What’s the next immediate action you can take? Stop leaving money on the table! After your quick learning curve and with appropriate action, you’ll have predictable income you can count on for the rest of your life.
It’s time! Profit from this niche while your competition is still unaware.
About the Author
Through sharing his ideas, success, and failures Adrian hopes to inspire YOU to take action and create a life pursuant to your passions! Although Adrian has invested in notes, single-family homes, mobile homes in parks, and wholesaled properties, Adrian settled in the niche of Mobile Homes with land. He has also created a great system to allow him to live his vision of being geographically free!
Adrian is passionate about teaching to ensure the knowledge from his mentors is passed on. He also wants everyone to have the life they dream of. Adrian’s goals are to educate and inspire you to take ACTION!
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