Questions about the Reality of Mobile Home Investing??

[Garrett Wallis]

Hello BP members,

Hoping the experience of this community can help shed light on some of my concerns. I have been reading some of the discussions on here for awhile specifically because our family has been interested for some time in investing in cash flow focused investments. Our background has been equity investments, but with the market returns and interest rates where they are we've been looking for a change of strategy to capture yield. Our first plan was to get into the storage unit business, but I think we've found the Mobile home (or RV park) business more enticing. However with the Cap. rates as low as they are and virtually zero experience in the land lord business we've decided to get our feet wet by basically creating a portfolio of homes which would basically act as a "synthetic" mobile home part. I've been researching the topic for awhile trying to understand the economics of the business and where the "value" can best be unlocked, but it always seems that all the articles I find are a lot of talk with very little substance. So I have a few questions for the community, which I hope can be answered with some real world experiences to help me better understand the realities of the market. Any input or advice would be greatly appreciated!

1. Our plan is to buy the properties with all cash and then have looked at both strategies of either renting them out or selling them with owner financing. To me I see the route of owner financing as me the investor really entering the financing business rather than the real estate business, however I do see the upside for returns as lender cause your value is in bringing credit to an under-served market which comes with a premium. My question is, Is there a specific Mobile Home "Price Range" where for me the lender in Owner-Financing I will have the largest pool of buyers who can't find conventional financing?? I've seen homes for sale at different price points from $15K, $30K, and $60K, but am curious if all or which of these price ranges is really in a market that requires Owner-financing to facilitate a sale?

2. My second question, Are the 10% interest rates on owner financing loans a reality anymore or has enough conventional financing come into the market to push down borrowing cost?

3. My third question, How much does the price point of the Mobile home you buy dictate the potential "percentage" returns of your investment? Do the cheaper $10k-$20k homes provide better returns than the $40K-$50K homes on a relative basis? To me its seems that as far as rent goes that rents have a fairly sticky floor, and probably don't fall in proportion to the decline in the Home Value you purchase due to the fact that at its core you pay rent for a place to live and that fact alone makes up a large amount of the value inside a rent payment. That thought might be wrong, but thats just me.

Basically, I'm trying to understand which part of the market as far as Home prices go has the most potential for value as an investor, and at what point in home prices are you no longer providing a service as far as financing goes because your potential buyers can find loans from institutions on their own. Any help is appreciated!!