Would you rather have one rental stream from a single $200,000 home or 40 rental streams from forty, $5,000 mobile homes?
Clearly, forty rental streams is better than one rental stream. If you own these mobile homes in an area like mine, the going rate to rent a 2-bedroom, single-wide mobile home is $500 a month. This amounts to $20,000 in monthly rents vs. the $1,000 a month you’d get renting that single-family home.
How to Acquire 40 Mobile Homes…
One way to do it is to string together forty separate “Lonnie Deals” where you buy the mobile home in a mobile home park and gain the park owner’s permission to rent or sell the mobile home to others.
This is certainly possible in areas with high population and many parks, but isn’t as feasible in smaller towns with fewer parks. Some park owners just say “no” to off-site owners renting or selling to others.
The best way to make your $200,000 yield 10 to 20 times more is to buy a mobile home park yourself. You can still find 8 to 15-unit parks for under $200,000. They often come with park-owned trailers.
If you decide to go this route, you’ll want to run the park yourself for a while because it will likely need work and won’t generate enough income to pay a manager. But add a second park of similar size (or buy a first park of 30 units or more), and you’ll earn the income needed to make repairs and pay someone else to manage the park(s).
Low Vacancy Rate = Reduced Risk
I agree that stick-built, single-family homes are certainly more physically attractive than single-wide mobile homes. But if you own one stick-built home and lose your tenant, your vacancy rate is 100%. If you own 40 mobile homes and lose a tenant, your vacancy rate is only 2.5%.
But what about resale? Won’t a single-family house bring more capital gain than reselling a mobile home? Maybe in dollar terms if you were lucky enough to buy low in an area where prices have bottomed out. There aren’t many places like that anymore. Home prices are still falling in most areas. In fact, The Washington Post reports there are 13 million homes worth less than their mortgages right now and nearly 4 million more in some stage of arrears or foreclosure. That’s a lot of downward pressure on prices that still needs to play out.
A used mobile home, on the other hand, can easily be sold on payments for double or triple your original cost because you offer financing. But why sell at all? If the market allows $500 a month rent on a $5,000 mobile home, that’s the equivalent of getting $20,000 a month rent for that $200,000 home. Who wouldn’t want that deal month after month for the rest of their life?
People are Downsizing
In today’s worsening economy, people will be trading down in housing far more than trading up. Mobile homes are the most affordable “single-family homes” available. In a bad economy, I sure prefer offering the most affordable product to a market that is growing larger every day.
I believe mobile home investing trumps investing in stick-built homes because mobile homes generate far more income at a fraction of the cost and appeal to a far greater number of people. That makes your investment far more secure. Your comments are welcomed…