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Are Mobile Homes & Parks Still Good Investments

by Lonnie Scruggs   

I was asked two questions recently:

  • Are used mobile homes and mobile home parks still a good business to consider in the present economy?

  • What would you do different if you were starting out today?

Very good questions, so let me address them.

Mobile homes and mobile home parks?

The older, inexpensive mobile homes and mobile home parks are still one of the best income-producing businesses I know of. It doesn't matter what shape the economy is in, people still need affordable housing.

And regardless what the evening news or the bureaucrats would have us believe about the economy (good or bad), there has always been--and always will be--a huge number of people who will live in a self-imposed state of recession, depression, meltdown, slowdown, or whatever the present "buzz" word happens to be.

Yet, these people still need affordable housing. And what's more affordable than a used mobile home with affordable lot rent? So the real issue isn't the economy; it's affordability. And that's true in any market.

Some of you have heard me say for years that mobile home parks are the nearest thing to a gold mine I know of. In my opinion, that's even more true today! Since the bureaucrats and local governments make it almost impossible for anyone to develop a new park, existing parks are even more valuable.

Think about it. If you buy an existing park, you won't have to worry about any competition from new parks because our brilliant elected officials will do everything in their power to prevent that from happening. Affordable housing is one of this country's biggest problem, yet it's next to impossible to develop new parks that will help solve the housing problem.

Mobile homes or stock market?

The older mobile homes and mobile home parks have proven to be a business that's not affected by the stock market or world events. The people who buy/rent your $5,000 to $10,000 mobile homes (and/or pay lot rent) don't invest in stocks. They wouldn't know the difference between a bull market and a bear market.

Guess what, I don't either. And thank goodness I've never been a stock player, especially now. I've always thought the stock market was the world's biggest gambling casino, and it looks like the recent events have proven me right.

Why do people invest their money with someone they don't know, in something they know nothing about, and give up all control--other than when to buy and when to sell? But enough about gambling, let's talk about something I do know something about, and how you can make money without gambling.

The people who buy or rent your used mobile home can afford $200 or $300 payments. But they will never be able to pay cash or qualify for a bank loan. These are people who learned how to work for money, but never learned how to make money work for them--the same people who never developed or practiced financial discipline.

Oh, they'll blame the economy (and everything else) for their financial problems, but the state of the economy has nothing to do with their financial problems. They had the same financial problems when the economy was booming.

Big profits from small parks

Some of you know about the little 29-space park my daughter, Janet, bought 15 years ago. (If not, read about it in Making Money with Mobile Homes). Janet made her final payment on that little gold mine several months ago. Now, do the math and see if you would like to be in her position. And you can--just do what she did.

Gross rents at full occupancy (round numbers) $112,500
Total expenses are less than 20% ($22,500)
Annual NET income (before taxes) $90,000
(Vacancies have been less than 2% and are not included.)

Janet invested $20,000 of her money when she bought this park. Fifteen years later her $20,000 has resulted in a "free and clear" park with a net income (before taxes) of $90,000. Plus, excellent cash flow during that 15 years. And I'm not including any income from the numerous homes she bought and sold in her park. Now, show me a better retirement plan than her little park.

What would I do different?

I bought my first rental property in 1971. In hindsight, if I had known then what I know now, I would have bought every park I could. If I had, I'm willing to bet that I would have done much less work, yet have a bigger net-worth today. But like many of you, back then I didn't know what I didn't know. That's what I would do different if I were starting today.

Who's "fixing" your income?

Tune in to any news media, and you will hear gloom and doom and how bad the economy is. And for many people, it is. But what if you could create your own economy, the kind of economy you want, and stop allowing the politicians to force you to play by their rules. Well, you can.

If you will learn how money works and learn how to adapt to the current markets, you can create your own economy. So stop following the herd (the losers) and stop believing all the negative news you keep hearing. The economy is what you make it.

For example, suppose your cost of living should increase $200 monthly, what would you do? Would you blame it on the economy and be forced to decrease your spending by $200? Or, would you be able to increase your income by $200? These are the only two options you have, so you would have to do one or the other.

But if you understand how money works and how to make it work for you, then you could increase your income in order to offset your $200 monthly cost-of-living increase. And how could you do that?

Let's use Janet's park to illustrate how you could solve cost-of-living increases and/or inflation. Janet increases her lot rents at least $10 per month every year. That works out to $290 monthly, or $3,480 yearly. So the increase in lot rents will produce the income to offset her cost-of-living increase.

Another way would be for her to do a "Lonnie Deal" with $200 monthly payments. And if she did both, she has not only solved the cost of living increase, she has improved her monthly cash flow, also. This is a good example of money at work and a good example of how to create your own economy.

But what about the person who's working a job? Or a person who is retired, or will retire, on a "fixed income"? What do they do? Well, if they don't have the ability to increase their income, that means they must cut something out of their budget to cover their cost of living increase.

So having said that, I think this is a good time to ask yourself this question: Who do you want to be in control of your financial future--you, or someone else? Do you want your money coming from an income-producing asset controlled by you? Or, do you want your money coming from a JOB controlled by someone else? It's your choice.

When will you pay for your education?

I recently had a call from a 74-year-old man asking for financial advice. This man is living on a social security check and working a part-time job to survive. He's been a renter for 54 years--doesn't even own his own home. How sad.

He spent all those years working for a paycheck but never took time to learn anything about money. And during that time he bought a couple of houses--for someone else.

Now, at the age of 74, he's asking for financial advice. Why didn't he ask someone 50 years ago? Then again, maybe he did but refused to use the advice he received. I see that all the time. Folks, look around. Do you know anyone like this man? Is there a possibility that YOU may be walking in this man's footsteps?

If so, I hope you will consider this a wake-up call.

Education--the right education--is the key to financial security. And it's not an expense; it's an investment, an investment in yourself. And you have two choices when you pay for your education: Now or later. You can even wait until you're 74. But again--you get to choose when. Choose wisely.

To your wealth, Lonnie

PS. If you do the same thing this year as you did last year, where will you be next year?

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About the Author:

lonnie scruggsLonnie Scruggs owned, rented, and managed his own rental properties for 24 years. He became a burned-out landlord, sold all his rental properties and started investing in discounted notes. He soon developed his own specialty in used mobile home notes, with little competition and earning high yields. Lonnie tells all and shares his inside secrets in his books and home study course:

 
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