I Switched to Mobile Homes - Posted by Sailor

Real Estate Investing Real Estate Gurus
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Posted by Sailor on May 29, 2006 at 07:16:04:

Developing park infrastructure is not only time-consuming & expensive, but many counties have made it almost impossible to meet current regulations w/out going broke. I’m not saying it can’t be done, but it is an expensive long-term development process. One of the advantages of buying an operating mhp, even one populated by bottom feeders is that there is ca$h flow while you turn it around.

Kevin, I think there are a lot of possibilities for you to pursue, & the MH group on this site is not only knowledgable, but I’m sure you’ll find them supportive. Good luck, & I look forward to meeting you soon–

Tye

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I Switched to Mobile Homes - Posted by Sailor

Posted by Sailor on May 28, 2006 at 10:24:32:

I see frequent requests from newbies who want to know how to get into REI w/little or no $$$. I’ve been doing REI for more than a quarter of a century & have sworn off SFRs. Even though some markets are down from a year ago, I find that even the bread & butter properties are not only too expensive, but the mkt ioutlook is not that bright. I switched to mobile homes as my preferred form of affordable housing (for which there will always be a need), & found it to be surprisingly profitable. Example #1, paid $500 for a 3/2 & spent 2k on rehab. Sold on NNN L/O for $12,995 w/2k down. Because I don’t have to pay a mortgage, all the $$$ every month (including 14.75% interest) goes in my pocket. Example #2, paid $1400 for a 2/2, which I rent for $450 mo. I did have to move it & add a $150 dishwasher. I expect that unit to be a $$$ machine for a long time to come.

There are several ways to make $$$ w/mobile homes, from buying a single unit, to land/home deals, to mobile home parks. I was surprised to discover what a versatile investment MHs could be. A long of what I learned was @ Scott & Tony’s Boot Camp last year, which was a real bargain. It was so successful (we all LOVED the full-day field trip) that quite of few of us are repeating the experience in August. I’ve heard that the Early Bird discount is expiring on 15 June, so be sure to make your reservation ASAP (Good News, spouses are 1/2 price now!). For info:

http://www.creonline.com/mobile-homes/land-home-bootcamp.html

Most of the Boot Camp alumni are in the MH discussion group on this site, & we Chat Wed eve (9 pm ET), so are available to answer questions. The networking alone is worth the admission, so do come join us later this summer–

Tye

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One thing I just don’t get about MH - Posted by Mike

Posted by Mike on May 29, 2006 at 19:40:24:

I have read Lonnie’s Deals on Wheels. The concept is great. But, the one thing I don’t understand is this. You essentially become the bank for your buyer. You create a passive income stream by owner financing the note. So far so good. But, after that note is paid off, you have nothing left to show for it. Yes, the return is terrific. The cash flow is great, for the time the payor is paying, but at the end of the term, you still have nothing left.

Example. Let’s say you start with $100k. You buy 20 mobile homes at 5k per home. You sell each home at 10k per home. You collect 36 payments at 9% interest. That’s $318/month that you collect. So, after year one, you’ve collected $76,000. That’s a 72%ROI. Pretty nice return. You get this 72% for 3 years. If your counting on living on, say, $50,000 per year and re-invest the rest, it seems like you’ll run out of capital within a few years.

Contrast that with taking that same $100k and buying 5 SFH at 100k with 20k down. Let’s say PITI is around $750/month and you can collect around $950/mohth. You probably won’t see any real cash-flow for many years. But, at the end of the loan payoff, you have 5 free and clear homes that will provide a nice retirement and cash-flow for life.

I’m not saying Mobile Homes are a bad strategy. In fact, I’ll admit that I’m probably missing something pretty huge since so many people are doing it.

Thanks.

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Re: I Switched to Mobile Homes - Posted by Kevin - WA

Posted by Kevin - WA on May 28, 2006 at 14:58:14:

Tye,

This is not a “dig” or “challenge,” but a genuine question: the examples that you mention above, are they “once in a lifetime” examples? In other words, that sounds great but if you can only find that deal once a year then it is kind of like getting the pre-foreclosure with $90K in equity.

I have had some opportunities to pick up mobiles, but have not done it because they are hard to finance. But these were 2000 Oakwoods for $40,000 - it sounds like you are dealing with an older-type of unit.

I am going to look into this bootcamp, it sounds interesting. Thanks for your post.

K

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Re: I Switched to Mobile Homes - Posted by Ryan (NC)

Posted by Ryan (NC) on May 28, 2006 at 12:37:56:

Tye, I’ll second your recommendation. After reading about investing in SFH and looking for a couple months and not finding any properties where I could at least cover the payments if something went wrong, I started looking for another avenue which was my way of staying in my comfort zone.

I stumbled into the MH forum on accident and my thinking was that we could afford to cover a lot rent payment if everything hit the fan so to speak… Fast forward 18 months and financial freedom was put into my hands at the rip old age of 28 by Lonnie, Scott, Tony, Karl, Bruce, and the rest of the folks at the MH Forum. Fast forward another 6 months and my wife will be joining me on the 1st of June.

If you are looking to turn the equity in your current properties in to cash flow to ditch the JOB or if you are trying to get started with a low outa pocket I highly recommend the MH Boot camp as well. It has been worth way more than the initial cost to my family and me.

Best wishes,
Ryan Needler

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Re: One thing I just don’t get about MH - Posted by Sailor

Posted by Sailor on May 29, 2006 at 20:25:02:

Mike, I have never advocated that anyone put all his/her eggs in one basket. I don’t have all my $$$ in MHs or in my MHP, nor do I have it all in RE. Not only is diversification the answer to long term financial survival, but one must change strategies & goals @ different points in life. When one is young, aggressive leverage is a valid strategy for long-term goals. However, @ my age, a good income stream is more important. I don’t care about long-term appreciation, 'cause only my offspring are going to realize it. Your examples contrast one strategy that provides current income w/the other example that does not. I can’t say which one is better for your situation, but you might consider a combination of investments. These examples aren’t quite so simple. If you buy 20 MHs to L/O, you w/probably get 10 of them back, allowing you to re-sell them, thus extending your income stream. You can also allow buyers to trade-up. If buying a bunch of MHs, you’d probably also do a some of them as land-home deals or invest in a MHP. Then even when your deals all paid off you’d still be able to rent the land. (NOTE: Just because you buy MHs doesn’t mean you have to sell them. The majority of mine have been rented 20-30 years.) Your 2nd example uses leverage as a strategy, which means you have to rent most of the $$$ by taking out a mortgage. By the time you cover maintenance, there is no postive ca$h flow for the life of the mortgage (except when rent increases). The advantage is that you get rent in today’s $$$, while paying w/yesterday’s $$$. Your choice of investment depends on whether you need the income now or later. MHs aren’t for everyone, but it’s a good place both for folks to get an inexpensive start in REI, & for those of us more interested in income than paying off a mortgage. I also know people using a variety of MH & MHP strategies to provide good livings for their families, as well as in providing for their futures.

Tye

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Re: I Switched to Mobile Homes - Posted by Ryan (NC)

Posted by Ryan (NC) on May 28, 2006 at 23:37:59:

Kevin,

These deals are common once you start looking for them, the lack of financing for the older homes creates more motivated sellers on homes that still have a high demand in the market. Once you’ve done a few deals it is extremely easy to create deals that yield 50% to 200%+ cash on cash returns and higher cash flow than most SFH Deals with less risk in my opinion.

Off the top of my head here are just a few of the deals that we’ve done in the last few months…

89 2/2 nice condition, purchased for $2500 L/O collected $1000 option money and the tenant/buyers decided to move and gave the home back the next month. (which still baffles me) L/O?d again for $9500 w/ $750 option consideration and $250 per month for 48 months $950 Buy out and end of term. Total of all payments $14,700. Profit $12,200 / yield around 400%

92 Fant 2/2 Excellent condition paid $2000 plus move and setup expenses of 2500, add an extra 350 for a few misc. repairs, paint, and a stupid mistake I made involving the hot water heater and we have a grand total of 4850 in the home. L/O’d for $14,500 $1000 option consideration and $265 per month for 90 months option buyout 1450. Total of payments $26,300. Profit $21,450 / yield 82.46%

89 Fleetwood 3/2 in good condition paid $3800. L/O’d for $11,300 with 2000 option consideration plus they pre paid the first 2 months rent which was really nice. Our payments are $265 per month for 65 months option buyout is $1130 putting the total of payments at $20355. Profit $16,555 / yield 176.65%

74 Conner in good condition, paid 2750 plus 40 for a window L/O’d $5800 with 500-option consideration and 150 per month for 60 months, option buyout 580. Total of payments 10800. Profit $8010 / Yield 77.21%

90 Oakwood needed some minor work, which turned into a bathroom remodel in a not so nice park. Purchased $3500 repairs 650 total invested $4150. L/O’d $8900 w/ $750 option consideration $235 per month for 44 months option buyout $890. Total of payments $11980. Profit 7830 / Yield 79.21%

These examples assume that we’ll never get any of these units back, which from my experience is highly unlikely. For a case study on what happens if it don’t work out I’ll use the first unit we purchased about two years ago.

93 Redmond 3/2 ok condition. Paid 2750 plus 667 in back lot rent, Sold on a note for 7800 12.75% w/ $500 down and payable 225 per month for 36 months. The buyers paid for a year and left taking the hot water heater with them after we collected 3200 in payments… Repaired for 180 plus 125ish to recover the kitchen floor. Rented it for 2 or 3 months at 260 /month and got it back again. L/O’d again for $9300 with $750 option consideration and 270 per month for 60 months option buyout 930. Total payments if this money pump finally dies with this tenant/buyer $21,600. Total profit 17878 / as for the yield I’m not even sure how to calculate it at this point but as Lonnie says it?s ?Good Enough?

Then there are the parks, which will be spitting out right at $2500 per month by the end of July. There is little ?Pride of ownership? to owning a bunch of old MH?s, but the chance to spend today fishing with my wife and kids instead of spending 10 hours in what used to be my office and still coming home to find a check in the mail box beats pride of ownership to me any day of the week.

Hope to see ya in August.

Best wishes,
Ryan Needler

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P.S. - Posted by Sailor

Posted by Sailor on May 28, 2006 at 15:49:23:

Forgot to mention that Steve (WA) w/also be @ Boot Camp & usually participates in our Wed (9pm ET) Chat. He’s a great source of info & support.

Tye

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Re: I Switched to Mobile Homes - Posted by Sailor

Posted by Sailor on May 28, 2006 at 15:44:23:

Kevin, I’d never really considered mobile homes until last year. Folks are doing these deals every day of the week, & I have a waiting list of prospective tenants & buyers. I can tell you there are MH investors in WA doing very well, & they aren’t paying anywhere near 40k. Here’s one of last weeks posts from someone in your state: http://www.creonline.com/mobilehomes/wwwboard4/messages/64682.html

To see some of my stuff in NC (the $1400 deal is shown in the “New Unit” album), go to: http://www.picturetrail.com/sailorpics

Kevin, be sure to get Lonnie Scruggs $30 book, Deals on Wheels, available on this site. That’s the original inspiration for most MH investors. Plan to read & re-read it several times before Boot Camp, & bring it w/you to be autographed. Looking forward to meeting you in August–be sure to arrive Thurs for our get-together that evening. All the cool kids w/be there!

Tye

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Re: I Switched to Mobile Homes - Posted by Sailor

Posted by Sailor on May 28, 2006 at 15:57:08:

Although Ryan & I started in MHs about the same time, I have learned a BUNCH of stuff from him, & he is a never-ending source of inspiration. Definitely look up his informative posts in the Archives of the Mobile Home Discussion Group. Here is Ryan’s article Jeanne posted under Success Stories on this site:

http://www.creonline.com/success-stories/ss-311.html

There are other MH success stories there, as well. I’m happy to report that Ryan w/be joining the rest of us @ Boot Camp!

Tye

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Re: I Switched to Mobile Homes - Posted by Kevin - WA

Posted by Kevin - WA on May 29, 2006 at 24:29:40:

Ryan,

Thanks for your insight.

Can you elaborate on the $2500 “parks?” Are these parks made from scratch? You bought 3-4 acres, but in pads, and started renting spaces? Do they teach how to do this at the boot camp, or in the book(s)? I ordered Lonnie’s books today, so I hope they come by Friday or Saturday.

Part of my problem is that I was looking at “manufactured homes” rather than true “mobile homes.” I believe that the deals are probably there, I just have not been looking for them at all.

Thanks again,

K

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Re: I Switched to Mobile Homes - Posted by Kevin - WA

Posted by Kevin - WA on May 28, 2006 at 15:59:50:

Tye,

Thanks a lot. I placed my order for both books, hope they arrive soon. I am sure that that will clear up a lot of things.

One question - where I am they seem to be closing a lot of parks and turning them into SFRs and other buildings. Is there anything that can be done to protect against this? Is it just a guessing game, hoping you don’t pick a park that sells out to developers?

Thanks,

K

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Re: I Switched to Mobile Homes - Posted by Ryan (NC)

Posted by Ryan (NC) on May 29, 2006 at 10:37:00:

Tye posted a link to the story in this thread, they are exsisting parks bought using an owner carry-back and the methods that Scott and Tony teach at their boot camp. The net cash flow we’ll be putting in our pocket is right at $2500 /month with 5k outa pocket for the down payment and everything is right on target to make it happen by the end of July.

Once you start looking for trailers some really neat things start to happen to your income stream. :wink:

Best wishes,
Ryan Needler

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Re: I Switched to Mobile Homes - Posted by Sailor

Posted by Sailor on May 28, 2006 at 17:09:42:

I don’t know your market, but sounds like those who own MHPs are gonna make $$$. Maybe that is your niche, or perhaps land/home deals. I chose a MHP last year that had extra land, so I’ll be doing both. Lots of folks just do MHs in parks owned by others. Lonnie’s books w/whet your appetite, & you’ll learn a broader perspective @ Boot Camp. There’s a type of deal for everyone, & you’ll meet some great people doing all kinds of real deals.

Tip: don’t think that Lonnie’s methods are too simple. They are very refined, & they do work. One of the great things about what he teaches is that you can get in the “game” w/very little $$$. It isn’t for everyone, but you can do deals hands-on or not (I prefer hands-on).

The primary reason I like MH investment is that @ this point in my life I have a commitment to affordable housing. I have always felt that area was more profitable, but now I feel that providing families w/decent affordable housing is a social responsibility. It is a real bonus that I can also make $$$–

Tye

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Re: I Switched to Mobile Homes - Posted by Kevin - WA

Posted by Kevin - WA on May 29, 2006 at 24:33:23:

Tye,

I try to be more of a “generalist.” We do different kinds of deals based on the opportunities that present. Rather than look for a specific type of deal, I like to be able to turn motivated sellers or distressed properties into deals. So, I would like to learn about homes in parks, homes on land, and creating parks. I am very interested in the concept of creating a new park, as that is something that is needed in my area. But my concern is that land here is so expensive - so I am not sure how feasible it is to get land and do the development. I need to study the concept first to see how it looks on paper.

Thanks again,

K