Mobile Homes

[Scott Kelley]

Hi all, I'm just curious your thoughts on mobile homes as rentals. I just recently came across a couple of units that I could either pay cash for or even use a credit card to pay in full, and then have instant cash flow.

It's something I haven't considered, my goal has been to buy single or multi family and hold that.

Is there a higher vacancy rate in mobiles typically?

Thanks
Scott

[Tom Goans]

I am a believer in small deals and investment opportunities that have the broadest appeal - there are more buyers for Chevys in all economic times than Caddies. With that said, manufactured home vacancy rates should not be a problem. My business plan always maintains a goal of being the best value among my competition.

I also prefer all cash investments. Then, I am in a position to outperform the competition that has to worry about cap rates, making loan payments, and hard economic times. Generally, my rental rate is so competitive, it generally takes less than a week to re-rent a place. When the Thrifty Nickel comes out on Thursday, generally by Saturday evening the place has a new tenant and I have a deposit to make.

Based upon more than 25 years of experience with manufactured home ownership, mobile home parks, and manufactured home communities, I have found investing in manufactured homes (better terminology from a sales point than mobile home) to be an area less traveled. No “wholesalers/flippers/rehabbers” and very few real estate agents. Thus, yields can be greater and property values are less inflated.

The big plus is how economical manufactured homes are to acquire. My average cost of the homes I once owned was $2500.00 with monthly rent amounts of $550. The last one I bought cost $8,500 for a 2-year old 3 bedroom 2 bathroom house. This one rented for $650. All had wallboard interior walls - not sheetrock. Should a section of a wall become damaged and need replacing, Lowe's and Home Depot have in stock a selection of replacements from which to choose. Put in a new 8x4 sheet and minutes later you are done.

When researching, the park manager can be your best birddog for investment opportunities. Maybe not today, but become their respected friend and problem solver and your phone may ring in the future. They will be the first to know of a repo. Be the managers problem solver. Just like apartment managers, they are always confronting tenants who are less desirable and cause many headaches. Be that beacon of light. Be an investor who will bring in more desirable tenants who will not only follow every park rule, but will be examples of an improvement.

I have had park managers invite me to join them for a meal every time they saw me. If a tenant of mine was not being as desirable as the manager and I required, the park manager contacted me and I took action that second. I solved the manager's problems and contributed to the desirability of the park. In fact, the rent went up in the park. We all were winners, including my tenants.

Manufactured homes and mobile home parks can be an excellent and successful way to get exposure to the real estate investment world.

Good luck with the research and have fun.