One of my subscribers owned a small Mobile Home park that barely escaped the wrath of Hurricane Katrina. The onslaught of homeless and workers being rushed into the area made rental space command premium prices. Just prior to this time, his park had been about 70% full, so he’d begun renting overnight spaces to RV owners to augment his cash flow. He found he could double them up on a single Mobile Home lot without any complaints, and that gave him a break through insight.
In his area, he is able to buy a 14 X 35 foot one bed room; one bath “park unit” delivered to his lot for $16,000 cash. He also found that two of these parked back to back would fit on a single lot. With so much demand for housing, he had no problems with zoning or health officials at all, nor did he have any more cash flow problems.
Whereas he had been able to rent a lot for $175 per month, he was now able to fill all his lots with two rentals that paid $450 per month each. With this cash flow, he is able to buy two additional units each month. He has a waiting list for these units and can fill them just as soon as they can be delivered and jacked up.
When he placed these units on vacant lots, they returned enough to pay for themselves in about three years including an allocation for lot rent. Even when the Katrina rebuilding is over, he’ll still own fairly modern free and clear units for which there will be a lot of demand from singles looking for decent housing at a reasonable price.
In the same vane, in the town where I live there is a large University for which there is insufficient housing. One entrepreneur had 50 special 14 X 70 units built into one bedroom four-plex units. The bedroom and parking were on the end of the units and the central utility core was in the middle where all units could share it.
Each unit came furnished with a bed, couch, chair, lamp, and two stools nestled under the kitchen pass through. They were just the right size for two compatible students who would now be paying about $325 per month per unit. That boils down to $11,700 per unit per 9-month year X 50 units, or $585,000 per year gross income.
I recently sold a small waterfront park that I had bought with other investors to hold a potentially valuable parcel of land. Initially, it effectively operated as an informal Adult Congregate Living Facility (A.C.L.F.) because we only allowed elderly people to rent from us.
Renting strictly to oldsters provided a way to increase normal park net operating income since we had very little turnover, collection problems or social disorders. No kids. Little if any park traffic. No pets. Few management problems. We stayed full and generated enough surplus cash flow to add to the park-owned homes on a regular basis when one of our residents passed on to the big Mobile Home Park in the sky.
I owned this park for twenty years with four other parties. Our agreement was that if anyone died, his or her shares would be left to the others, and sure enough, one lady died; that left me owning one third of the park. During the period of ownership, rents completely paid off all the debt, so when a large marina developer wanted to buy the park, he paid $1.4 million for it.
