Mobile homes

[Doron Rice]

Hi All- I'm new to BP and real estate investment in general. I'd like to start small and I've heard that mobile homes might be a good market to start in (ie good return with small risk, if true). Does anyone have any input/experience regarding this investment? Thanks so much!

[Bill Neves]

@Doron Rice @Salvador Senar Jr. @Denny C. @Tim Ball

I'll chime in here, too.

I have purchased mobile homes on land, or city lots, also.

I mostly do mobile home in parks. I know many investors who mostly work in parks also. Why?

Much lower cost of entry starting out and ongoing. Last 3 deals I did netted very nicely and had awesome ROI. I sold them for cash. I've been marketing for cash buyers and the current market is supporting that. Not everyone has the cash. I sell to those who do. :-)

I could sell for a higher price if I financed. Leave something for the next person. Pigs get fed and hogs get slaughtered, right?

It's also very much a people business. Park owners and managers can be a pain. I've learned the hard way to do my due diligence. So I only work in parks where I have a good relationship. 

As @Curt Smith mentions above, one mobile home on a lot, I own, and with a rent to own tenant has comps right at $100k. I got it for a lot less in a foreclosure, distressed purchase. Not every buyer can qualify for this purchase option, though.

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I can buy, fix and flip between 5 to 10 mobiles in parks for the same $100k. And my returns are much better.

Financing is an issue.

The Dodd-Frank rules and regs limit how you can do financing. I work with several investors who deal almost exclusively in parks, with financing thru traditional and private lenders. 

i.e. One local investor who is doing current mobile home deals, not 5 years ago, uses a Mortgage Loan Originator to qualify people and charges 24%. I thought that was high and grilled them for over an hour on the particulars. 

They ask people to PLEASE get their own financing. It is a higher risk so the rates go up.

It is not usury and people are happy to get the loan when traditional lending won't touch the project. They still need a 650 credit score, no felonies no evictions, to qualify in most parks.

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NOTE: Please save the ripping about high fees, gouging, predatory, etc. 

Current economy is dictating these loan rates, just like hard money does for non traditional investor deals. People who want to buy a car will sometimes pay 27-39% if they want the car. It's the market. Mobile homes in parks are bought and sold just like cars, with a title just like cars, in most states.

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Approx 10% of housing is mobile homes. Home ownership is at the lowest rate since 1972. 

People, generally, are having increased issues with getting loans. Can't fog a mirror and get a loan any longer. Recently lost a home due to the real estate crash, working part time or 2 part time jobs due to economy, self employed, etc. Their options are rent, with prices climbing. Construction is still behind demand. Do landlords ever raise rates in a short supply, high demand market? 

In my area Portland, OR a 1 bedroom apt in a multi-unit building averages $900/mo with no private parking IF you can find one at that price. Local parks are $400-$700/mo for space rent.

Mobile homes sell anywhere from cheap at $5k to $100k in this area. Higher in other areas.

So a person, couple, family can buy a mobile in a park, pay off the home and pay half the rent they would in a common wall, apartment. And they own their own parking, yard, 4 walls and ceiling. No people running in the apt above them or down the hall.

Which is better?

Not sure if anyone has noticed but the world is changing. AND people can still get the 'new form' of home ownership. For many that's a mobile in a park.

It's not a lay down, easy business. It takes work. I know some won't agree with this type investing, but it works if you work it. 

Please read my NOTE area above.

Have fun!