Let's talk yield on individual lots/homes: While existing individual Mobile Home lots in some cities can cost $75,000 and more, an individual bare-bones 1 acre lot in a rural setting without any amenities can be developed for about $10,000 – $15,000 depending upon whether or not there is existing road access.
Such a lot will command a rental of $275 – $350 per month in many areas. That's with a basic power pole, patio, septic tank and well – NOTHING ELSE. There's little for the investor to manage or maintain; and under many State laws, liens for uncollected space rent attach to the home.
Mobile Home owners who rent these spaces pay for their own utilities. There are virtually no vacancies or any turnover due to the costs of moving the larger units. Rent controls and restrictions that apply to larger parks don't usually apply to individual lots. In such a situation, gross rental return on the space alone averages about 30%. Few other investments can match this with comparable risk and management effort.
Placing a rental unit on such a lot can really catapult the yield, but at the cost of much more management effort. For example, you can buy an older single-wide Mobile Home in good condition for anywhere between $1000 and $4000 depending on size, location, whether it has to be relocated and set up, etc.
In a worst case scenario with a $4000 home, on a $275 rental space, you can get about $500 per month rent, net. You'll have more turnover, but the unit will still gross $2650 per year ($6000 less $3350 fair lot rental). From this let’s say you net $2000 because of vacancy, taxes, liability insurance, and management. The yield would still be a tax-sheltered 50% cash on cash. Not bad.
On a strictly cost recovery basis, your entire investment in a unit can be recovered in years, and it’s all gravy from there on in. If you select your tenants carefully, this can be a very good way to spend your time and money.
If you're muddling along with low investment yields trying to beat a depressed real estate or stock market; then you owe it to yourself to take a closer look at this outstanding investment vehicle and/or business opportunity.
