My local market has nothing that cash flows using a 50GRM (2% rule). I’ve almost given up to tell you the truth.
What about mobile homes as rentals? Sure the appreciation isn’t there, but I can cash flow them. Does anyone mess with this? If so how do you determine real cash flow with the added lot rent? I am guessing adding it on top of the normal 50% operating expense? I would love to buy a park here, but again, gets back to that endless supply of folks who will pay way too much for them.
Checkout http://www.creonline.com/mobilehomes/wwwboard4/index.html to read up on some good mobile home discussions. Most people won’t touch them with a 10 foot pole, however they can be super profitable if done right. Someone on this or the other message board (above) was discussing how they are putting section 8 renters in used mobile homes and in turn she’s making a killing because apparently the govt does not make a distinction between manufactured and stick built homes when it comes to rental rates…its based on the # of bedrooms…at least in her state. So even though she’s not gaining equity, her ROI is potentially quite nice due to the fact she might buy a home for $3000 and get $600 /mo rent for it.
wow never thought of that with section 8. Thanks for the advice, it’s stuff like that that keeps me coming back to this board
I own a few mobile home rentals and really like them. I didn’t pay over $4000 for any of them, and they immediately started making me about $400-500 per month. You do have to subtract out the lot rent (only $100 in my area), but these things are cash cows. I have considered getting rid of them a time or two, but they make so much money that I simply cannot do it. I also find that maintenance is much easier and less frequent on my mobiles versus my apartment buildings. I wish I had a few hundred of them!
I have had this idea in the back of my head for some time. What would be better than owning a mobile home park in an area that you think will appreciate…?You have the land, water and electrical connections…You have zero roofs, doors, SR, siding, carpet ect to take care of. Yet the renters are paying off the land for you while it appreciates. Maybe bring in some of your own units if you like but truly no need. Same thing goes for RV parks except it would allot of turn over.
What would be better than owning a mobile home park in an area that you think will appreciate....?You have the land, water and electrical connections......You have zero roofs, doors, SR, siding, carpet ect to take care of. Yet the renters are paying off the land for you while it appreciates. Maybe bring in some of your own units if you like but truly no need. Same thing goes for RV parks except it would allot of turn over.
That sure sounds GREAT! Unfortunately, that is only the reality in fantasy land. In the real world, there can be a LOT of expenses that you didn’t mention. For example, in Ohio when you need to evict a tenant (mobile home owner) from your park, you can easily be looking at $1,500 by the time you pay the $1,000 setout fee, court costs, and attorney fees. That’s 15 months of lot rent out the window. In addition, you are paying property taxes, advertising, legal fees, entity maintenance, etc, etc, etc, just like with normal rentals.
All of this stuff sounds great on an infomercial or when some slick talking guru hypes his course, BUT THAT IS NOT REALITY!
Mike
Man you sure shot that one down. Every business has its ups and downs, if it was all ups than everyone would do it. Comparing it to house rentals appreciation aside. You would have to admit it would be allot less maintenance and hassle. Why would an eviction cost so much on your own property? Can’t you show the violations on paper and have a judge demand eviction? Where does all the money come from? Not calling you out just trying to undersatnd where you are coming from.
Mike - What is the $1000 setout fee for?..Who is that actually paid to?..Sheriff’s are only a few bucks for their part in the eviction process…You mention attorney fees/court costs separately…Just curious…Thanks…
Vmax,
No, I didn’t shoot it down, but I did introduce a little bit of reality. All of this stuff SOUNDS easy. In reality, none of it IS easy. The truth is that the vast majority of newbies fail. They fail because they don’t understand the real expenses and therefore don’t have enough cash flow to survive.
The $1,000 setout fee is what the court charges to tow away the mobile home (the setout). In normal rentals, the setout fee ($300 in my little corner of Ohio) is used by the court to pay for putting all the tenant’s belongings on the curb and then hauling it to the dump. With mobile home parks, the tenant owns the mobile home, so the mobile home must be hauled somewhere. That means someone must come out to remove the skirting; disconnect the utilities; air up all the tires; get the required permits; actually move the mobile home and take it to a storage lot.
Where does all the money come from?
FROM YOU!
Who is that actually paid to?...Sheriff's are only a few bucks for their part in the eviction process...You mention attorney fees/court costs separately...Just curious
That depends on what you call a few bucks. Here in my little corner of Ohio, it costs about $300 to have a normal tenant setout ($1,000 for mobile homes). This is an additional court cost and is paid to the court before they will carry out the setout. I listed court costs separately because you always have the original eviction court costs, whether the tenant leaves voluntarily or not.
In my area, you can do the setout yourself if you want to. I almost always do that. By doing the setout myself, I get almost all of the setout fee back. However, I don’t have a mobile home mover and there would be MANY other associated expenses if you wanted to move the mobile home yourself. Unless you moved a lot of mobile homes, it would not be economical to move the homes yourself (if that is even allowed).
Again, I’m not against mobile home parks, but I am for going after them with your eyes open. In fact, I have been looking for a mobile home park for about 2 years. I just haven’t been able to find one yet that will cash flow properly.
Mike
Sadly mobiles as rentals don’t generally work in my area. For one the prices on the home itself run far higher than other parts of the country. If that wasn’t bad enough lot rents are often $400 or so per month which kills cashflow. I would literally have to be GIVEN a mh to make it work since rent may be $800 a month and I’m already down $400 just on the lot lease and I haven’t added any other costs into the mix.
We are currently looking at renting out MHs on some land that we own. We are farmers that own land 12 miles from the largest city/town in Montana. We just bought the farm land for about 300 and acre and a nearby trailer house dump ( a real trashy park ) is bringing about $500 a month in rent for the trailer and the land. My business can easily afford to buy several trailer houses a year and set them up.
I am thinking $15,000 for a nice one and $5,000 to set up power, sewer, cistern, and phone.
Total setup of $20,000, income of $600 a month or $7200 a year. even at 50% expenses, you have your initial investment back in 5-6 years, and then. We have one trailer that we have rented out here for many years, and the last time we put in a tenant, we had around 40 calls to rent it. I can’t see much downside, my only hesitation is that I am busy with two strong businesses already, and am only interested in doing it if it is going to be fairly big ( more than a few trailers ). And not sure I want to deal with the hassle. I have looked at a trailer park in the nearby town that has about 400 trailers, almost no turnover, and very well kept and maintained trailers and yards. If I do this, I think a visit with the owner would be a good idea, it is one of the few trailer parks that I have seen where everyone seems to take pride in their trailers, so there IS a way to do it well.
DB
Another setback for investors considering SWMH/DWMH/TWMHs is the lack of financing options—as of this writing, hard money is the only option available…
Regards,
Scott Miller
Definitely can be a money maker if you have some cash though…
So how do you calculate the cash flow when you have a rented lot?
Here are the numbers I am working with, gross 650 minus 260 lot rent then dived by half for expenses??
Or do you split 650 for expenses then minus 260 for the lot rent then subtract your payment?(ooch!)
Mike - I’m shocked at your answer…I used to think that you knew what you were doing…Remember, this is a mobile home park…Just tow the mobile home yourself at 3am, park it a couple of miles away, and when the trailer trash living there wakes up with his hangover he’ll never know what happened and just take up living in his new environment…You save the $1000…I’m surprised you never thought of this… :beer
Remember, this is a mobile home park....Just tow the mobile home yourself at 3am, park it a couple of miles away, and when the trailer trash living there wakes up with his hangover he'll never know what happened and just take up living in his new environment
You’re right! I bow at the feet of the master! :beer
Mike
So no help with the formula?? I respect a lot of the minds on here, would love to hear someones opinion.
I am gonna say you just subtract the lot rent to get your real rent, then use the divide by 2 rule.
So my numbers are going to look like this, 8K for the home. Rents 650-700, lot rent 260. Cashflow around 200 a month (no debt service paid cash for home).
650-260= 390/2= 195
Sound about right?
I think 50% expenses may be a little high due to the fact that the park owner is responsible for certain things if they go wrong (like septic outside electrical, etc.). I would say maybe 40% is fair on average, but I must admit that my mobile homes cost a fraction of what my apartment building does in terms of maintenance and upkeep.
Just out of curiosity, anyone in California doing MH rentals? If so, care to share the rents, expenses, etc.?
That sounds like an episode of My Name Is Earl. :biggrin