By Jack Miller
Developing and managing mobile home communities can be extremely profitable, but based upon the return on investment, it's hard to beat mobile homes themselves. Homes can be new or used, single or double-wide, bought and fixed up for resale, rented and written off, or held as inventory for sale, located in existing parks, private parcels, or on sale lots, financed privately or through commercial lenders. Let me give you some examples of a few ways mobile homes have been used to make extraordinary profits:
1. A mobile home in excellent condition located in a park was purchased from an estate for $4000. After superficial cleaning, it was rented to a long term tenant for $425 per month. The lot rent was $125 per month. The park manager agreed to manage the unit for $25 per month, collecting rents, paying himself, and remitting the balance to the owner. First years net revenue was $3000; yield was 75%.
2. The owner of a run down half vacant 18 space mobile home park no longer had the energy to keep it up. An entrepreneur offered to master-lease the entire park for 80% of the last three years' average net operating income, if he could have an Option to buy the park at $4000 per space anytime within the next 5 years. The owner agreed because he'd lost interest in the park. Fixed up and filled up, the park's value tripled. The entrepreneur cleared over $75,000 cash in 14 months.
3. A park owner provided a “hauler” truck to a dealer in return for his buying new units and delivering them to the parks at dealer cost. These units were rented for net cash flow that permitted loans to be completely amortized in 5 years. At the end of that time, the owner will have over 50 five-year-old free and clear units generating gross rents of $15,000 per month with very little effort.
4. One dealer placed new units inside a corporation and sold them on Lease/Purchase contracts. He wanted to convert the rental income to cash. He issued corporate notes secured by the corporate stock for tax-free cash, and used it to buy more.
5. Used mobile homes were taken in as trade-ins and sold on contracts at above-market prices. The contracts were discounted with full recourse to yield 25% to a Roth IRA. The IRA received the income tax free. The dealer got the cash.
6. Swampy land bordering a navigable river couldn't be filled in for conventional home construction. This “worthless” land was bought for a few hundred dollars per acre by a buyer who built wooden platforms over the wetland areas, on which he sited mobile homes. In this unique “water top” mobile home community, his residents can fish off their wood decks and park their boats “at home”. He used mobiles to create value and to produce high cash flow on an unusable site.
7. A widow was left with 9 small land parcels ranging from 1 – 3 acres in a rural area where zoning permitted mobile homes. At a cost of approximately $4000 per lot, she installed wells, septic systems, electrical service, and cement patios. She rents the lots for $185 per month to owners of mobile homes. With virtually no turn-over or repairs, she receives $15,000 per year in very passive rental income.
8. An immigrant with limited English language skills and a little money, but an intense desire to succeed was able to buy an older dilapidated double-wide home on its own lot. He converted it into two duplex apartments. Next, he added on a third efficiency unit across the back. Triplex nets him $1100 per month to pay off debt.
9. Entrepreneur uses a MH lot he owns in an upscale community to showcase mobile homes displayed there. After sale, he relocates them to another park he owns. This way he sells new units and is gradually improving rentals in his own park.
10. One entrepreneur agrees to master lease every space in a rental park as it becomes vacant, paying by annual rents, but at a discount to market rents. He then puts used units in these spaces to rent to his own tenants at market rates.