One fellow I know has decided to see if he can’t emulate my Arizona entrepreneur in a slightly different way. He owns a small family farm on which he has run a cow/calf operation for several years while he raised his kids. Now that they have grown up, he has cut up his land into two-acre plots and turned his farm into a re-manufacturing facility.
In his rural area, it’s a simple matter to carve and grade a gravel road off the paved road his farm fronts on by installing a culvert wide enough to permit the movement of Mobile Homes from the road onto his land. When his personal residence, space for roads, and inaccessible portions of the land are taken into account, he’ll have about 50 sites left for Mobile Homes.
The main portion has been paved so that units can be hauled in one end, rehabbed, and hauled out the other end onto nearby plots. The sides of the barn where stock might normally be were turned into storage areas for materials and small work areas where work could be done outside the home, but inside out of the weather.
Let’s do some math. If four re-manufactured units on their own 2-acre plots could be completed and sold each year for $69,950, with a profit of $25,000 per home and plot, his farm plus his work will produce $100,000 per year in income for the next 13 years or so, not counting any price inflation or increases in mobile space lot value that might ensue. That’s a pretty good way to go out of the farming business.
Another person in a rural area bought 40 acres free and clear for $1000 per acre not far out of a small town. The parcel was bounded on all four sides by serviceable roads. In the sparsely settled community, he had no trouble cutting up the land to create a 100 lot subdivision. His plot plan allocated 20 four-lot parcels, one for each mobile home unit with the remainder for access roads and a triple wide mobile home site for himself to be used as a home and office.
Following this, he arranged with his local banker to agree to lend $14,000 per 4-lot parcel for 20 parcels. The loan was to be repaid over ten years to anyone who moved their mobile home on to it as their principal residence. Each loan was secured by the personal guarantees of any owner of a mobile home that was situated on it as well as by a lien on his Mobile Home.
This loan was contingent upon all the money being used to improve the lot with a 6” well, an 1800 gallon septic tank, and a cement parking pad large enough for two cars and a small patio which the land owner would have installed in the center of each 4-lot parcel.
The owner’s cost for the local move from a park to his land was $3.00 per mile. Set-up of the Mobile Homes was done by an employee of a local Mobile Home dealer on an hourly basis. Payments to fully amortize the $14,000 loan over ten years came to less than $80 per month, including all loan closing costs. Payments for both lot rent and the loan were to be made directly to the bank. The beauty of this was that when a tenant moved, he not only left behind all his improvements, but he still owed the bank for the loan.
After pinning down the costs of making the improvements, relocating and setting up 20 units, he mailed out hundreds of letters to residents in surrounding Mobile Home parks who typically lived on high density sites with lots about twice the size of their units. His letter pointed out the obvious advantages of raising kids and having pets, extra vehicles, RV, boats without all the restrictions of the park they lived in. He also pointed out that he only had room for 20 homes.
He offered to lease them a full acre for up to ten years at a half that of their current rent; and to pay for the cost of moving and resetting their units. The only catch was that they had to put in their own parking pad, patio, well, and septic system under his supervision on just one of the platted lots within his parcel, and pay for it with the rent they saved. In short order he found 20 people willing to lease them their own plots for ten years at a fixed low rent.
For ten years he collected about $75 per month rent on 20 units while they paid off all the improvements to their lots and made others on their own. At the end of ten years when the leases ran out, he no longer rented a full acre to anyone. Instead, he ran plumbing and sewer lines to four locations on each acre from his centrally located well and septic tank.
Remember, all the homes had originally be set on only one of the lots within the 4-lot parcel. This left 3 lots in each parcel for rent to additional tenants. He quickly filled these up with new units that he bought from the factory and sold on Rent-to-Own contracts. He rented all eighty 1/4th acre at rents just below those in other parks which had risen to about $160 per month.
By being very patient, he had managed to have tenants pay for $280,000 in improvements for the initial lots while collecting about $1500 per month. After ten years he was collecting not only $12,800 per month, but was also collecting interest and profit on the homes that he had sold. Not bad for a country boy.
