Mobile Home Investing in a boom busted area?

Question

Thanks to everyone who's asked or answered a question on this forum.  I've been learning a lot about MH investing in the past few days just from reading the site.

My question is, would it make sense to invest in mobile homes in a boom busted area? Specifically, I am in Williston, ND and with oil prices being low, many of the oil companies and people have left.  Lot rents alone used to be over $900 two months ago but are now averaging $550.  Mobile homes that need a lot of rehab are around $15,000 and used nice 2 bed 1 bath is between $40,000-$70,000. To rent a 1 bedroom apartment is on average $1000/month vs. 5 months ago was $1500+.

Assuming that oil prices are going to rise again and the demand and pricing for housing will increase, would it make sense to buy, flip, sell, etc. on mobile homes in a park or mobile homes with land? Or should I start my investing portfolio in a different less volatile area of the country?

Jeffrey H. · Answer

@Taylor Mitcham first of all welcome to BP and we hope that you're learning a lot.  You've asked a really good question, and apologies in advance for the length, and perhaps some brutal honesty.

Let me first preface my response to your question with this: I live in Houston, TX and have worked in Oil & Gas for the last decade - I have seen firsthand the budget and personnel cuts that are affecting Bakken and Eagleford, along with the corporate downsizing and restructuring that is creating pain for many over the last two years.

This is a really risky strategy, based on hope and timing.  The reason this is risky is you and me don't have any clue when oil is going to reach high enough AND sustainable prices to restart most wells - translating into jobs and housing demand.  Even if OPEC decides today to scale back production it would take many months for the existing supply glut to rebalance and another 6 months to restart the wells and find the necessary personnel to oversee them bare minimum.

Lot rents are going to go down more before they come back up, and playing a timing game can make or break you.  Nobody knows the OPEC end-game yet.  They could keep production at current levels for 10 years, or they could cut it to zero for 12 months, and then restart the cycle to screw with us as the swing producer.  We just don't know.

What will you do if you rehab a mobile home and have 25K invested in it and can't rent it for 12 months, or renting for short term periods only to see your tenants turnover for a cheaper deal down the road?  Will you sit on it and hope or will you sell it for a loss and have it transported to somewhere with demand?  Neither of these scenarios are good.  When a likely outcome looks like this there also needs to be significant and likely upside to offset that - but it's not really there for me.  I can find these rents and demand in large growth area cities that don't have the boom / bust issues, so why risk it?

Remember the people that built new mobile home parks for the people displaced by hurricane Katrina?  It didn't work out well for them either.

In conclusion: hope is not a strategy, and without a solid strategy there is no reasonable guarantee you will make a return on your investment.

Account Closed · Answer

As a general rule , relying on uncertainty of timing, high risk etc , I feel, is more speculating , which is just a fancy word for gambling.  Goal is to be investing which means to identify risk, understand it, manage it , and hedge it if needed.  What is described above sounds more like speculating than investing.  Keep looking for something more established, more certainty, that can be obtained at a reasonable price.

Good luck

Taylor Mitcham · Answer

wow! I honestly didn't expect so much so quickly. Thanks everyone!

The basic message I read from all the advice is to look elsewhere. Hopefully I'll be able to find a more stable market relatively close to here.

Thanks again!!

Bill Neves · Answer

Hi @Taylor Mitcham

Welcome aboard.

"Mobile homes that need a lot of rehab are around $15,000 and used nice 2 bed 1 bath is between $40,000-$70,000" are NOT good deals. In our area a nice 3 bed/ 2 ba goes for close to $100k and more in good shape but if it need work it goes for $5-15k TOPS. 2 bedrooms less. And I'm in a good employment and income area.

Based on your scenario, we'd be talking to people about the ones you describe in the $2-5k range ONLY IF we had good prospects of getting rid of it quickly.

Hope that helps.

Yell if you any other questions.

Have fun!

Roy Oliphant · Answer

@Taylor Mitcham

A serious advantage I see in MH for this is the 'mobile' part.  Detroit's abandoned homes (resulting from a significant population decline) sell for so little because they are only valuable if you want to live in Detroit.  A mobile home in Williston may have enough value to move it to Texas where the population continues to grow.  Yes the cost of moving is high but so is the opportunity cost of abandoning it in Williston waiting for the next oil boom that may be 10 years down the road.

Being local, you should be able to easily find the best MHs available and follow the pricing trends so you will know what a good offer will be.  Hook up with someone on the other end that knows the local market in a better area (like most of Texas) and both of you can make something of this.

Thomas S. · Answer

The strategy you are considering only works for those that are already rich. The idea is that you would purchase at a far lower price than exists even now by taking advantage of those facing bankruptcy. This would only work in regards to purchasing MHCs as opposed to a depreciating asset like a mobile home.

If you could buy and hold, again assuming you already have money, then you could incur zero or possibly negative income with the expectation that when (if) the market improves you would sell at a high profit.

This will not work with mobile homes as they may be of zero value when the market returns.

Mobile Home Investing in a boom busted area?

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