How can I make money on mobile homes? I’m and new investor in Connecticut.
I’ll share what I know, and I am in an area where two friends of ours have made a LOT of money on manufactured homes. Personally, I relate the word ‘mobile’ to include aluminum sided trailers… manufactured homes are much better and where the money is.
Here’s how it works around here. First they get an empty, undeveloped lot at a dirt cheap price. They finance the installation of the utilities first. To do this you have to have both a solid team of pros and know THEY will handle much of the paperwork needed to file with the County. The other route is to talk with those who sell the Manufactured homes. They often offer a combined loan to cover both the purchase and installation of the manufactured home, with utilities and they handle all the paperwork. Once the home is in place you either rent out or sell at a profit, pay off the loans and you’re done.
Keep in mind two things… sewer and water. If there’s no sewer connection to the city line, you’ll have to install a septic tank. That involves (here in CA) a hefty land impact survey that can cost a couple grand alone before you even get the permit to dig the hole. Second thing is WATER. Again, if there’s no city water to the property (like in many Arizona lots in the desert)… you’ll have to convince the new buyers to go on a water-delivery service. (personally, I’d never want to do that… but some people get used to having a large cistern filled every month or so.)
The best approach is to find some crappy, falling apart trailer that won’t sell because no bank will finance a pre-'74 trailer. (Or a trailer that’s not on a permanent foundation.) For this you’ll need hard-money or cash to pull the crappy trailer off the property since you’re only interested in the land and built in utilities so you can put in a new, manufactured home and some trees. Big improvement, big profits.
There is money there, but you have to budget out your utility and contractors fees accurately along with the manufactured home loan. As with any REI, doing the homework up front is a must so you can budget realistically and know the selling value after the work is completed.
Geez! Try Lonnie Deals! 2K in, 10K out via cashflow!
That’s a good way to get started with low cash, and low/no credit.
When you say “try Lonnie Deals”, is that whats described in lonnie scruggs book “deals on wheels”?
Have you ever read this book and do you recommend it? im interested in MH investing and would like to get the best info to start off with.
Yes, he’s talking Lonnie Scruggs’ books…from what I’ve heard/read, Lonnie is King Guru of making money with mobile homes.
oh yes. For $30, buy DOW, and then go to work. You can get the other book if you like, or wait. DOW will get you off and running.
I strongly recommend Lonnie’s Books. If you follow them you will do well. Good luck!
Do you know if they have this books in cd’s or tapes?
buy the Deals on Wheels Home Study Course for 189
My mobile home doubled in value in the twelve years I lived in it. The home deteriorated a little (don’t all houses?), but the value of the land continued to rise.
Forget people’s prejudices and look at the numbers. In this town, for example, a two bedroom house rents for $800/month, and costs about $120,000. A mobile home gets $500/month, but you can buy one on real estate for $50,000 or less. The cash-on-cash return on investment is obviously higher with mobile homes.
Faster Equity With Mobile Homes?
Buy a house for $120,00. Put $20,000 down, and you’ll have a $100,000 mortgage loan. Amortised over 30 years at 6% interest, you’ll have a payment of $599.60. Of the first payment, $500 will go towards interest, $99.60 towards principal. In other words, you only built equity of $99.60. I’m ignoring appreciation, but only for the moment.
Second scenario: Find a nice mobile home for sale, and borrow only $30,000, at 8% interest, amortised over 10 years. Note the higher interest - this is always the case with “factory built home mortgages.” The shorter term is normal too, so you’ll be done with payments in 10 years instead of 30.
Now, despite higher interest and a shorter term, the payment will be only $363.99. The first month, $200 will go towards interest. That means the other $163.99 goes towards principal. You bought more house (built more equity) in this scenario.
A mobile home on land might appreciate more slowly than the “regular” house, but faster loan pay-down covers this factor. Pay less per month and build more equity! Don’t expect your real estate agent to tell you this. Don’t expect him to even agree with me after you explain it. I sold real estate years ago, and math skills were not a big part of the licensing requirements.
In the example given, you’d initially lose about $150/month on the house, after your payment, taxes, insurance repairs and other expenses. You’d break even or better with the mobile home, and after the loan is paid (ten years), you’d have a lot of cash flow, of course.
Mobile homes are cheap to maintain. The furnace died in rental I owned, the most expensive repair you’ll have in a mobile. I replaced it for $1,200, much less than a furnace for a larger home. For $200 you can have a mobile home roof tarred, instead of $5,000 to re-shingle a traditional roof. Windows, plumbing, doors - they’re all cheaper.
Property taxes cost less, because they’re based on value, and mobile homes have a lower value than stick-built houses. Insurance will cost less too, because you are insuring less value. The only precaution to remember here is to be sure you can get insurance. Very old mobiles may be uninsurable in some areas.
Mobiles have their own problems. Renters who have to rent for less sometimes pay late, for example. These issues are minor compared to the advantages. Your twenty thousand could buy you two mobile home rentals, with ten thousand down on each, instead of one negative-cash-flow house, for example.
Take an honest look at the numbers. The two investors in my town that own most of the mobile home rentals always have cash flow, and have millions in equity now. Other investors, following their prejudices, struggle to make money with their “nice” rental homes. So don’t automatically pass on those mobile homes for sale when you’re looking for a good investment.