4 reasons why mobile homes profit better than SFR

If you’re in an area with mobile home parks or land with mobile homes on them, you can benefit big by incorporating mobiles home into your investing strategy. Mobile home investing is often overlooked by investors who are more interested in the shiny-object of single family flipping or rentals.

By skipping out on mobile homes, they’re leaving a lot of money on the table because of the fear that they don’t appreciate, or if it's not on permanent foundation it’s not considered real estate.

But, if something is very profitable, does it really matter if it’s not on a permanent foundation or it doesn’t appreciate like coastal real estate?

If you can make pure cash flow of 50% ROI a year, or a 100% cash-on-cash return, or $50,000 on one flip… do you care if it’s a single-family house or not?

If you’re surrounded by mobiles homes and not taking advantage of the many strategies found in this low-hanging fruit niche, then you’re missing out on enormous profit.

Below, I’ve written about 4 reasons why mobile home investing is a good idea.

Why mobile homes?

1. Low-Hanging Fruit

When I was running around chasing Single-Family houses to flip, I was struggling. I was in an area with high competition and deals were hard to come by using paid marketing. I was literally, spending tens of thousands of dollars on direct mail in a 6-month period.

When I shifted to mobile homes, it was night and day.

In a 50-mile radius, I had hundreds of mobile home parks, yet I hear most investors say, “I don’t do mobile homes”. Most aren’t touching mobile homes, yet there are plenty of them to go around. Which leaves it for easy-pickins’ for me and the few that venture into it.

Not only will you find few investors that venture into this niche, but you’ll find a lot more motivated sellers as well. There are usually more problems in the mobile home communities. Mobile home owners usually (depending on area) purchase mobile homes because they don’t have the income to support the purchase of a single-family house. Lower income brackets usually mean more problems. And with problems, there needs to be solutions, which is where you come in to save their day.

Many motivated mobile home owners, but few to solve their problems which equals a low-hanging fruit.

2. Big Discounts

Getting a 50% discount on a $300,000 home is hard. Very few owners (even motivated) will easily sell their home for $150,000. But, getting 50% and more on a mobile home is much easier.

Mobile homes are priced below $100,000 (unless you’re purchasing brand new, with land, or in a celebrity-mobile home park). 50% of $80,000 looks a lot better than 50% of $300,000. It’s far easier for owners to part ways with $40,000 than $150,000, especially when mobile home buyers are fewer than the single-family home buyer.

But here’s a secret… 50% discount is actually too high of a purchase price with mobile homes. Often, mobile home buyers are purchasing at 20%-40% ARV. Some only want their all-in-cost to be a 50% of ARV. And motivated mobile home owners are happy to give up their mobile homes for that much because finding another buyer can take months, and they don’t want to pay another dime for space rent.

3. Low Purchase Price

Because a brand new mobile home cost around $120,000, you won’t find anything used at that price point (unless it’s with land or a celebrity park). In my area, a 1970’s trailer in a decent area and park will sell for $40,000-$60,000. So, if you’re purchasing them the right way, you purchase them for anywhere from $7,000-$15,000.

In fact, depending on the park, you can find them for $10,000 retail. Often, if you find a “cheapo” park where single-family trailers are selling for $10,000, you can purchase them for $1,000-$4,000 and buff them up a little, then put it back on the market for $10,000.

So if you’re brand new, and don’t have much money, you’ll only need $5,000-$20,000 to invest in these

4. Big Profit

Whether you’re looking at your annual ROI as a cash flow investor or your cash-on-cash return, the numbers on these little wagons are big… much bigger than the single-family residence.

There are a few ways to profit off these, but I’ll briefly explain 2 and show you the numbers.

Quick Flip

If you’re not interested in cash flow and rather make a lump-sum, flipping these to a cash retail buyer (or a loan qualified buyer if you find one), can mean $20,000-$50,000 of net-profit.

If you’re looking at a cash-on-cash return, that could easily mean a 100% return or more. My good friend Harvey Gronwald does this as his bread and butter here in Southern California. He does it with mobiles homes on land and in leased-lot parks. He’s one of the few that does it out here so they are easy-pickings for him.

Most other investors are afraid to flip these because with mobile homes without a permanent foundation it’s a little more difficult for end-buyers to qualify for lending. Most conventional banks don’t loan on this asset. However, it hasn’t stopped Harvey who’s able to find cash-buyers or buyers that actually do qualify for mobile home lending, while he profits big on one flip.

Cash flow

If you’re interested in cash-flow, you can easily make a 50% annual ROI on these which can equate to $200-$900 of cash flow a month. And if you do it the right wayTeasley(these are called Lonnie Deals)  you never worry about maintenance of the property.

Rather than rent them (however that’s another strategy one can use if the parks allow it or you have one on it’s own land), you sell them with payments; you become the bank. 

You’re selling it with seller financing.

When you sell with owner-carry-back, you open up the pool of buyers. Because mobile homes are hard to qualify with a loan, few retail buyers can get them unless they have $20,000-$100,000 in cash sitting in the bank. But most do have $2,000-$10,000 sitting there for a down payment and are happy to fork that over with $200-$900 of a monthly payment for ten years or less for the opportunity to own their own home.

When you run the numbers on a financial calculator, you’re looking at anywhere from 20%-50%+ annual ROI. And like I said, you don’t own the property any longer, so the cash flow is pure. You don’t have to budget for repairs.

Summary

There are a few other ways to profit big on mobile homes (listing them, moving them to land, renting the lot but selling the trailer, moving them to better parks, moving brand new ones into a space, wholesaling them), but bottom line, if you’ve got mobile homes in your area, you’re missing out if you toss those leads out or don’t go after them.

Take advantage of this low-hanging fruit in your area while profiting big. It’s not much more complicated than wholesaling or flipping SFR.