Conversion of Mobile Home to Section 8 for Ultimate Cash Flow

[Jordan Graham]

Hello,

I am very close to purchasing my first rental property and believe that I have potentially discovered the ultimate way to cash flow in higher priced markets.

I know I already made some of you cringe with the title but here it is again. Mobile. Homes. + Section. 8.

Before you run for the hills, hear me out.

So here is my plan and I would love some feedback on if anyone has tried or what their experience with Section 8 tenants has been. I know S8 gets a bad reputation but it all comes down to screening! Have certain screening standards in place for ALL tenants, HUD or not.

Based on HUD Fair Market Rents, rental rates vary in every city, state, and even zip code. But here's the thing, you find an AFFORDABLE home (aka mobile home) in an UNAFFORDABLE part of town. For example, there are areas of SD where you can find a completely updated or new 3+ bedroom manufactured for $150,000 in a zip code where HUD will pay you $4,500+ a month GUARANTEED. Now I'm not a mathematician but after mortgage and lot rent that sure sounds like $2,000 (give or take) in cash flow A MONTH.

And oh yea, contrary to popular belief, mobile homes actually do appreciate in the right cities, especially if the land underneath is owned.

Another bonus is that most mobile homes are seller financed so you don’t have to deal with the scrutiny of a bank or the high down payment of non-owner occupied investments.

If there are any agents in San Diego that can help me narrow down some of these properties within this criteria, please reach out to me and we can discuss a game plan.

Cheers

[Dan H.]

Some comments:

• The value is in the land.  This is the primary flaw in the concept.  
• It is rare for individual mobile home in a park to own its land.
• The homes are depreciating assets.  The way they appreciate to match inflation is if they are kept in new condition which it expensive.
• No way will section 8 tenant choose to live in a mobile home over a regular home at the same price point.  This implies that your rent point is askew.  
• I have seen mobile homes for a lot less than the price you indicate.  There is various reasons for this but one is that they are at the price mercy of the lot owner.  It is the lot owner that will experience the appreciation because (back to first bullet) the value is in the land.  This implies that if the surrounding home has a 10% rent appreciation, the mobile home lot owner will also be striving for a 10% rent increase.  Meanwhile the home has gotten older and typically less desirable.

Good luck