Is it worth it? Mobile Homes?

[Carl Rowles]

I'm getting more and more FB ads in my area for mobile homes for sale. Some have been redone, others are a "handyman's delight", but I'm curious if it really matters if all the numbers work? I guess there's just a stigma attached to them as being "less than" SFH or multi-family units, but if the numbers work, the numbers work, right?

[Jonathan Greene]

The barrier to entry is lower so they seem attractive, and to the person who knows what they are doing, they can be very profitable. But, it's a unique strategy that requires more knowledge than expected. Look up @Jason Velie, the "Trailer King". He knows everything you need to know to do this right.

[Jaron Walling]

@Carl Rowles Mobile homes are a niche of REI just like anything else. There are pros and cons to every type but mobile homes are pretty unique.

The main issue is land... or lack-there-of. Based on your post you're talking about buying the trailer, not the land. You're buying a trailer and a tenant pays the lot fees. Not every trailer is built the same nor is every park in the same location, but more often than not they are a depreciating asset. Trailers don't go up in value like conventional houses.

In my opinion to get the true benefits of buying mobile homes you want to own the land underneath them. If not you have to scale massively and deal with the PM that come with trailer parks. One of my best friends paid cash for a "handyman's special" trailer in 2021 for $9k. He spend $3k fixing it up, rented it for $700, but lot rent was $300. He sold it earlier this year for $15k. Do the math. He learned lessons but made pennies for the experience. This was during the biggest run up in RE prices since FOREVER. In his market he could have bought a SFH with $12k for the DP. I know this because I grew up there. He would cash-flowed the same if not more, loved it or hated it, and if he sold made significantly more $$$ for the experience.

[Carl Rowles]

An interesting situation. From the math side, it looks like he rented it for too little.  I guess I was looking at this as a low-cost of entry type of property that could provide some cashflow. I wasn’t really considering the appreciation/depreciation aspect at all. 

[Jaron Walling]

Quote from @Carl Rowles:

An interesting situation. From the math side, it looks like he rented it for too little.  I guess I was looking at this as a low-cost of entry type of property that could provide some cashflow. I wasn’t really considering the appreciation/depreciation aspect at all. 

 He was helping a friend in a weird situation but $700 was fairly close to what others rented for. When he sold it was basically a wash, less the cash-flow collected. There was no appreciation on the trailer.   

What's your time worth? He did the repairs and remodel himself. There was no scale and he didn't own the dirt. He made no money. I guess don't be in that situation if you buy a mobile home? Find something that cash-flows like crazy or don't buy it.

[Carl Rowles]

That makes sense. So if not owning the land, it needs to cash flow like a small river to be worth the work. 

[Jaron Walling]

Quote from @Carl Rowles:

That makes sense. So if not owning the land, it needs to cash flow like a small river to be worth the work. 

 Haha exactly then buy 12 of them! On paper they look great but in reality it's hard to make real wealth. I'm sure another savoy investor will chime in and change our minds, but that's my understanding of mobile homes. 

[Roger D Jones]

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

[Carl Rowles]

Quote from @Roger D Jones:

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

 So if I bought one for $7,500, and it probably needs a few thousand dollars of work (more than 1, less than 10). But it's a 3/2 and I think I could rent it for $1000-1200, has a lot of NEW things already in it (AC/heating, kitchen cabinets, appliances, flooring) but bedrooms need to be finished remodeling.  Lot rent is $365 and includes water. Can I still do simple 4 box calculation? 

[Roger D Jones]

Quote from @Carl Rowles:

Quote from @Roger D Jones:

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

Hi Carl. 
Sounds like a nice trailer with a lot of potential.  I own 13 trailers in one of my parks and I will tell you they are like baby chick eggs and we treat them like that.  So say you are into the trailer $12500 by the time you get ready to rent.  Lot rents could climb to $500 eventually and you can rent it for $1200.  You have taxes and insurance so that pulls another $100 per month- so you clear $600 per month.  Not bad... weekend vacation money.

But here are some of the things that can disrupt that.  Water leaks, problems under the trailer ie insulation falling, a tub cracking, a new roof, frozen/cracked pipes (usually in January- and plumbing companies simply will not respond to mobile homes), rotting siding, bad exterior doors etc.  We had a tub break and had to remove the entire end of the trailer to get the new one in.  I guess what I am trying to say is everything pencils in a perfect scenario with nothing going wrong.  And every time you get a new renter... it's four or five days fixing the place back up.  So yeah the $600 per month gets you and your husband a weekend away but you will be losing some weekends 'down at the park' also.  

Again- doesn't sound like a bad deal and if it was in my park I would buy it too, but then again I get the lot rent also.  Just some food for thought.
Roger

 So if I bought one for $7,500, and it probably needs a few thousand dollars of work (more than 1, less than 10). But it's a 3/2 and I think I could rent it for $1000-1200, has a lot of NEW things already in it (AC/heating, kitchen cabinets, appliances, flooring) but bedrooms need to be finished remodeling.  Lot rent is $365 and includes water. Can I still do simple 4 box calculation? 

[Henry Clark]

Money is in owning the lot as stated above.  Plus far less headache.  

[Carl Rowles]

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

[Roger D Jones]

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl
Sorry about my vacant response above.  It was early and I did not think my communication was very clear so I tried to delete the post but I guess it left your 'quote' in place.

So to answer your question- Yes.  Mobile homes are much more susceptible to repairs than SFHs.  Mobile homes are 'baby chick eggs'.  Everything is smaller, thinner and cheaper.  Water is the root of all evil.  I own thirteen mobiles in one of my parks and the only way it pencils is that we A) take very good care of the homes staying ahead on the maintenance, B) Rents are high in the area so we can charge $550 over the pad rent which is $450- so $1000 per month.  

You can look at a mobile home and see it as an easy rental with new carpet, trim and some paint but there are other bigger uglier expenses that can come up.

Roof Replacement, soft floors (water damage) in kitchens and bathrooms- most floors are particle board, exterior door replacement (special order), underbelly insulation falling, bad hot water tanks with rotten floor underneath (real joy), bad windows (water again), bad bloated siding (water), water damaged base frame around perimeter of home, cracked tubs (special orders) and frozen pipes (Good luck finding a plumber to come work on a mobile home- they do not exist). Now your husband may be willing to take these on but that is not much of a life for $500 per month. If you sub these out you will be wiping huge chunks of your annual NOI.

Now I not saying to not take the deal... just go in with eyes wide open. 

[Melanie P.]

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl, There are nice mobile home communities that include the parcel of land under the home. These homes tend to individually appreciate over time and are actually not bad places to live.

The places with the lot rent you have to decide if you want to be in the mobile home business and buy the park. Then you wind up with units in your park that default on lot rent and cannot afford to move the trailer. Most trailers cannot be moved or would cost more to move than they are worth. So, if a developer comes along and buys the mobile home park you will lose your entire investment. This does happen. Almost any use of land is better than a mobile home park - which is why most of these parks still around are in far off areas.

[Roger D Jones]

Quote from @Melanie P.:

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl, There are nice mobile home communities that include the parcel of land under the home. These homes tend to individually appreciate over time and are actually not bad places to live.

The places with the lot rent you have to decide if you want to be in the mobile home business and buy the park. Then you wind up with units in your park that default on lot rent and cannot afford to move the trailer. Most trailers cannot be moved or would cost more to move than they are worth. So, if a developer comes along and buys the mobile home park you will lose your entire investment. This does happen. Almost any use of land is better than a mobile home park - which is why most of these parks still around are in far off areas.

 Melanie 
I am not sure I would concur with your statement that any land use is better than a mobile home park.  Large investment groups and small investment groups have been scooping them up in batches over the last ten years.  Carlyles, Blackstone, Sam Zell and Apollo to name a few of the big dollar groups.  I get three calls a week on each of our parks from groups looking to buy and they are each far from any metro areas.  I would proffer that though that no one is building NEW mobile home parks with some exceptions for long term RV parks which continue to be developed.  Existing mobile home parks are in high demand for all investors large and small.

[Carl Rowles]

Aside from the stigma of them, it seems like they’d be a decent entry point for new home owners, given the housing market the way it is. 

[Jaron Walling]

Quote from @Carl Rowles:

Aside from the stigma of them, it seems like they’d be a decent entry point for new home owners, given the housing market the way it is. 

 It's a great entry point but like most things that was the good ole' days! It's hard to stay that today. My former boss lived in trailer like 25 years ago, and saved thousands before buying a real home. They're frugal with money and invest wisely. It was a sacrifice that paid off because him and his wife are The Millionaire Next Door (literally).