Would mobile homes be a good alternative investment?

[Shari Posey]

I started to look for SFRs but kept getting outbid, then went to condos thinking they are less popular but I still keep getting outbid. The prices just don't make sense, so I'm looking for other options.

I'm thinking about mobile homes and have started doing some research. I have a mental problem with them but I think I can get over that if the numbers make sense. I'm hoping it won't be so competitive in the MH arena. I want to buy within 4 hours of LA, I've only got $80k to invest with and I want to generate at least $1000/mo cash flow. In my local area, the space fees are really high so I think I'll have to go out to a more rural location.

Any thoughts or advice??

[Jon Klaus]

Thanks for the heads up Jason Grote

My experience is with mobile homes on their own land, not in parks. I'll let Fedro or someone else talk Lonnie deals, which are harder nowadays with the SAFE act and other bureaucracy.

Mobile homes can cash flow better than comparable conventionally built homes. They also depreciate faster. Part of this is the stigma associated with them, and part is that they just wear faster. Or they used to. Mobile homes built over the past 10-15 years tend to be higher quality, and with maintenance can have a long useful life. They can be immobilized with permanent foundations and skirting. I bought one recently that was completely bricked with garage and room additions on a slab.

Even though the homes themselves depreciate faster, they tend to be on more land, which can counteract the faster depreciation. All of mine are on at least on acre. They are also in areas with population growth of at least double the national average. They are paying for my land bank.

My rent demand is strong. It is now very rare that I have a vacancy that lasts more than a few weeks. My average rent is $900+ and I have a couple that rent for more than $1300.

I have sold several over the last couple years, all for more than I paid in 2009-2010. I've sold some for double what I paid.

They've been hard to get bank financing for both for me, and the owner occupant, but that is loosening up. I recently sold one to FHA buyers with FICO's in the 620 range. Still hard to get investor financing.

My portfolio works because my tenants want spacious homes in the country for affordable rent. I only buy in desirable school districts which also drives demand.