Cash only investing in Mobile Homes - My plan

[Bobby Mitchell]

Hi All,

First time posting on here but I have been an avid reader of the forums for a couple years. Great learning tool.

I invested in single family homes in Houma, Louisiana from 2006-2009 and did okay, a couple rehab/flips and a couple rentals and it was profitable; however I never like the fact that I owed someone a note, in this case the banks. I also found myself using credit cards for repairs and I never felt good about that either. In 2009 I move out of state and sold all 4 homes and haven’t been back in real estate until 2014. I just didn’t have the time.

I now live in Poplarville, Mississippi a small town with a community college. The market is not hot by any stretch of the imagination, but I have noticed a lack of rental properties and the college is growing quickly, so I'm hedging my bets on future needs. I am fortunate to have a good salary and low level of debt at this time in my life, which affords me the cash that I am using to invest in real estate, specifically mobile homes.

I formed an LLC and bought 4.3 acres of undeveloped land for about $13,000 cash last year. Due to county restrictions I can only place 4 mobile homes on this parcel, but I'm not too concerned, each home will get 1 acre giving it a more family atmosphere, which is good in my area.

Water is city but sewer is individual septic tanks. I have someone to develop dirt pads, gravel driveway, place septic’s and run power. I have quotes and all will cost me about $5000 per home.

My budget for purchasing homes is $20,000 each including the moving expense if possible, this is the top price I will pay and only vinyl siding and shingle roof will do, also it must come with central heat & a/c and appliances. The market for homes in my area is very good and prices are fair, it also helps that I am in no hurry and I have cash. This lets me wait out owners, as we all know financing on older homes is almost non-existent.

Last week I purchased the first home, a very nice 2 bed / 2 bath for $14,000 cash, $2200 to move it and $5000 to get it rent ready (water, power, septic), it will be ready in one month. Next month I have my sights set on a 3 bed / 2 bath for $18,500 cash with same expenses.

When I’m done next year at this time I will have (3) 3 bed / 2 baths and (1) 2 bed / 2 bath. Rent will be $650 for 3 beds and $550 for 2 bed. For a monthly gross of $2500.

My total investment in two years will be about $102,000 on the high end.

Breakdown of returns:

Gross rent - $30,000

Expenses - $6700

NOI - $23,000

Cash on Cash return = 23% first year

CAP Rate = 22.55

Gross Rent Multiplier = 4.4

Estimated property value upon completion of $162,000

Cash is king right? With cash purchase only upfront and no debt my long term ROI is looking pretty good!

The best part is I have all my money back in 4 years and I’m debt free!

I’m putting this out there for you guys to punch holes where you see any weakness. So am I missing something or is this a solid plan?

[Bobby Mitchell]

Andrew, (not sure how to do the @ thingy)

In 2009 I sold my 4 rentals, my personal home, my boat and motorcycle and moved to a cheaper state...MS. I took all the profits and bought my land cash, put a hefty down-payment on my current home and I live below my means, i.e. no toys, no living like the Jones's, etc. 

Last month when my friend bought a new truck for $20,000 I bought a mobile home, his will cost him $40,000 in the end, mine will make me $100,000 in my life time. Choices.

 I increased my income at the same time by taking risk in my profession, I am a Safety Consultant for the Oil & Gas and Industrial Construction Industries. I work long hours and am away from home often. So, to answer you question, I do without and increased my income. Not everyone can do that but I had the discipline and the opportunity and a great wife that puts up with it all. 

I take all 'extra' income and put it into this project, this is my retirement and hopefully I will duplicate this several more times, I want six figures before I slow down. 

There is no magic formula, I learned several great lessons with my first properties I owned and I see the value in mobile homes, cheap to buy, easy to rent. 

Set a goal and stick too it. There is good debt and bad debt, however no debt make you a free man!