Should I get involved with mobile homes?

Question

I live in a town where one side of the railroad tracks is "good" and the other is "bad". The majority of  my town are renters and there is a fair amount of mobile homes. I'm a Dave Ramsey listener and he is totally against mobile homes. What are everyone's thoughts/experiences on this? Is it beneficial to rent out mobile homes if you screen the tenants well? Or does it make more sense to just own the lot and have the tenant bring their own mobile home ?

Ken Rishel · Answer

I respectfully must disagree with you.

First of all, in the United States at least, the buyers and owners of manufactured homes span a wide variety of the economic spectrum. I have dealt with many people whose incomes exceeded a $100,000 per year and whose credit scores were in the 800s which contradicts your broad statement. I have also had buyers and tenants and finance customers whose scores were in the high 500s and whose family income was around $30,000 per year, and a few whose income was under $20,000.

Given that the finance organizations I owned have made over 2 billion dollars in loans to people to buy homes, I would agree that we were always dealing with late payments and repossessions, but it was a very small percentage of the borrowers who ended up losing or abandoning a home.

If an operator is having all of the problems you listed, it is their own fault and often because they have little or no idea what they are doing. There are plenty of good people who pay regularly that live in manufactured homes and many others that would if the opportunity was available and correctly explained. If an operator is desperate enough to deal with credit criminals they usually lack knowledge about market research, advertising, selling, financing and credit underwriting which makes whatever problems they are having their own fault.

Rental strategy that included renting lots and homes was much higher but not any different that what you would find with owning apartment complexes. I am not a fan of renting manufactured homes but I am a fan of selling the homes, financing them if needed, and renting the lots.

Owner occupied homes in a land lease community is a cash cow.

Second, I didn't think Canadians were allowed to own and carry handguns.

Bill Neves · Answer

Thomas S.'s point was that saying it's the 'bottom of the rental pool' and 'nasty stuff in the drain' might be a bit much.

And yes I'm a long time investor with over 200 deals under my belt, 40+ mobile homes, so I know the market a little.

I've found that people are about as good as you expect them to be. Yes there are challenge tenants but not all. Screen them well before renting. Felonies and evictions show on a background check. I've only had to evict once. And I've had lots of rentals over 17 years of investing.

We've done mobile home deals down to 1968 model (2 of those) and made good money. So depreciation is in the eye of the beholder.

Cheer up! Not all renters are bad. Even in those nasty, depreciating trailers. 'nuf said?

John Arendsen · Answer

I must respectfully agree with @Ken Rishes. You can't paint an entire industry with such a broad bunch. You have succeeded in insulting a lot of very intelligent, well heeled and sophisticated folks in so doing.

True on one point. There are a lot of very run down  MHP's throughout the USA and other places that may fit your very broad profile. However, there are a lot more that are not run down, neglected or abused.

Personally, I have, still and will continue to invest in MH's and currently own quite a number of them. I have never lost money on one in the 3 decades I've been in the biz. But that's not to say that it's that way with newbies or the average lay person without any knowledge or experience.

The thing that rang my bell @Virginia Reasor was your comment about the prevalence of renters. If your in a heavily rental community and there happens to be a lot of MH's in them it could be a reasonable investment. But you definitely have to do your homework.

If the park communities are not in the path of progress but instead in a blighted or run down area where there's not much sign of future upward mobility (pun intended) then you need to be very careful if not simply stay away from them. Those are the ones that can get an investor in trouble for a variety of reasons.

However, if the MHP is in the path of progress and well maintained for the most part it could very well be a suitable investment. How do you know if the MHC is in the path of progress? You have to do your due diligence. You need to develop a history of the park, acquire local demographics, study the vacancy history if available, ask lots of questions, go to the building jurisdiction that regulated the particular MHC you're interested in, etc.

I fortunately live in the North San Diego Coastal community of Leucadia and I can tell you that what @Ronald Bourgeois has shared with you is certainly not a fit for this area. There are MH's that sell anywhere from 100k to over a million depending on the park and the location i.e. Malibu, Newport Beach, North San Diego Coastal, etc.

Account Closed · Answer

I am not a fan of renting out mobile homes.  I have seen the model, i believe it can work especially in a scenario where your lot rent is 250 and home rent is 850 and those may typically be the better markets ( housing wise) . There are some not so good properties and there are some really nice properties  and the same can be said for tenants.

Rachel H. · Answer

Just like there are different types of neighborhoods with single-family homes, mobile homes are no different. There are good communities, bad communities and middle-of-the-road type ones. The key is to learn your market. Find neighborhoods that cater to your personality and style of doing things. Work with clientele you feel comfortable with. This principal holds true no matter what you invest in whether it be single-family homes, mobile homes, or commercial real estate. Hope that helps. Good luck!

John Arendsen · Answer

Boy, @Brandt Smith and Thomas S. I'd sure hate to be in the MH biz in your neck of the woods. My little nest of MH investments is along the Norh San Diego Coast and I can tell you from over 30 years in this biz doing everything and anything there is to to in it that I've never once had the kind of tenants you're describing.

Many of my former and present tenants and clients are very well healed. In fact there's a few millionaires I run with that not only own manufactured homes and rent them out, Use them as a vacation or 2nd home and/or own MHP's they love living in MH's.

So sorry to hear you folks out your way have such poor tenants. I certainly wouldn't want to be dealing with that either. YUK!

John Arendsen · Answer

I'm with @Bill Neves & @Ken Rishel 100%.

Gentlemen, I know I came off a little sarcastic, if not crass, in that last rant. But I just don't believe in painting an entire industry with such a broad brush. I don't know you Bill and I've never met you Ken albeit I'd sure like to get to know you both.

I have read a number of your very clear headed, intelligent and knowledgable articles and posts along with all the comments and replies and you are spot on in the way you articulate and handle yourself Ken.

Bill, you're no rookie in this biz either I can tell. You are the type of folks that I enjoy networking with and possibly even getting to know at some point. There's more and more very interesting things happening in this industry today than ever before. There's also myriad ways to capitalize on it.

There's much newer and better product on the market than ever before. Old homes must be replaced with new homes, parks need to be upgraded, converted, etc. HUD and MOD's are flying off the shelves for multi story, multi family, condo, du, triplex, quad, small apt. building, mid-rise motels/hotels, etc.

I think you get the message

But even more importantly I'm getting excited about all the new folks out there, young and us, who are looking at various aspects of this industry and wondering where they might fit in? Or, perhaps how those who have had decades of experience might reinvent themselves?

I'm for helping folks like that out in any way I can. Be it just lip service on threads like this or more.

The tiny house movement is in. At least in my backyard. However, I'm not suggesting we try to reinvent the wheel by figuring out how to legitimize, package and market this fledgling cottage industry; that will be coming soon enough.

The engine and niche I'm referring to is quality affordable housing thats already here and totally ready to fly off the shelfs. That engine will be driven by the largest, most energetic, well educated and bright demographic in our economy today. The Millennial.

I don't know about you folks but I'm gleaning an inordinate amount of questions and thoughts about our industry than I've ever seen before; and not just on BP;

Being more on the retail end of this biz often gives me the opportunity to witness the different trends that loom on the horizon over time. What I'm seeing now is a whole new and exciting thing. In fact I get the same warm fuzzies that I did when I was on the line at Golden West in the 60's during my college days.

Me thinks we should do a wee bit more listening.

Natalie Kolodij · Answer

I freaking love mobiles.

I live in a market where the average home cost is $666k. And a house that would rent for $2k a month will cost you at least $400k to buy.

I bought my last mobile home for $50. Yep. $50. It was sold literally 2 days later because it was in a park that read more like a high end campground than a trailer park. She bought it pre-renovation just because she wanted to live in the park so badly. I spent $4k fixing it up and it sold for $12k.

It's REALLY HARD to find a park that will let you rent mobiles in it. That being said. I've found a few.

People will give you huff about it depreciating and being cheap bla bla. Yep all totally true.

But If I could have rented the trailer from my above example it would have brought in about $1000 a month on something that I literally spent $4,000 on.

I think they're awful for a buy and hold.

I think your park will determine your quality of renter.  (the other mobile I did was in a park that was like a country club, gated community, several pools, gym, outside kitchen ect)

And I think as a cash flowing property they rock.

The worst part about them is trying to hang towel bars. They're not built to normal spec and the studs are never the right distance apart and it makes me throw several bars before I get it. But other than that they're awesome.

Ronald Perich · Answer

I lived in a mobile home park for a couple of years. We owned the home. A well-run park is no different from a well-run HOA. You have the rules you need to follow or they boot you out. There are about a dozen or so communities within 15 minutes of where I currently live. Some of them, you do need a bodyguard to enter at night. Or at least need to take a shower after you leave. Others are in better shape than the majority of neighborhoods in the area.

The reason many of the parks are in such disrepair is because the mom-and-pop owner is in their seventies, is still running it like they did when the built/bought it 40 years ago, and have just given up.

Other parks are just plain run poorly because the owners have the same attitude about the residents as have been expressed here. Every one of them are bottom-of-the-barrel folks.

You get what you expect. If you expect your residents to be trashy people, if you expect that allowing the underpinning to fall away and not have any recourse, if you expect they will always be late, it will happen.

But you really don't want to rent out a mobile home, at least not within a park. This is where you find a decent used home and sell it to them on terms.

Should I get involved with mobile homes?

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