Trailers or Mobile Homes? They’re Both Cash Cows

Topics: Mobile Homes

     By Jack Miller

     If you want to learn more about “Trailers”, all you have to do is to mention the word “Trailer” to a “Mobile Home” owner. You'll immediately be assaulted by a lecture on the difference between the Raggedy Ann tagalong image of “slope-shouldered” pre-war gypsy caravans and today's “Manufactured Mansions” that vie with stick-built housing to woo the discriminating buyer. Most of what you will be told will be true; particularly the cost per square foot of a new mobile home. New Mobile Homes are very profitable, but, an older used Trailer is where the money is for the little guy who is trying to get started. When it comes to making money, Trailers rank near the very top of high yield investment alternatives for everyone.

     Sometime next year I hope to put on a full bore seminar that will delve into all aspects of mobile home opportunities, but until then, (with apologies to Mobile Home owners) let me give you a peek at ten opportunities Trailers offer:

     You can buy and sell used Trailers already set up in Mobile Home parks.
You can buy and sell used Trailers in parks and fix them up for resale. 2. You can develop individual lots and rent them to Trailer owners. You can develop Mobile Home sub-divisions and sell lots, or,
You can become a dealer and sell Mobile Homes to be placed on your rental lots.
You can Master Lease vacant lots in mobile home parks, and sandwich-lease them.
You can Master Lease vacant Trailers in parks, and sandwich lease them.
You can Lease/Option individual lots and/or Trailers, separately or together.
You can finance all of the people who do anything in paragraphs 1 – 7 above.
You can buy and hold high-yield, discounted Mobile Home 'paper' in a Roth IRA.
You can buy and sell high-yield Mobile Home paper and profit from the “spread”.

     The advantages that older, used Trailers offer is that they're dirt cheap. As Trailers morphed into Manufactured Mansions, and as various financial companies that traditionally financed used Mobile Homes went out of business, the price of the older, smaller Trailers dropped precipitously. Of course prices can vary in different locations, but depending upon their condition, I have bought Trailers for as little as $800 to $4000. I`ve rented them for $395 to $550 per month, including lot-rent. Suppose an older Trailer cost $4000. Delivery, set-up, and fix-up costs might add $3000; making my total investment $7000. Out of the $495 rent, lot rent might be $200. I'd net $295 monthly cash flow, or about $3500 per year. If I paid $500 per year to have the park manager collect my rents, when all the smoke cleared, I'd net about $3000 on my $7000 investment.

Long before I bought my first calculator, I calculated yield a little differently: I figured that I didn't make a profit until I'd gotten all of my invested cash back. In the foregoing example, that would take 28 months. After this, every payment I collected would be pure gravy. An extra $295 a month may not seem like much money; so, if you want more income, simply buy more Trailers. For you yield buffs, the yield on the above transaction boils down to over 42% annual return on investment. At the cost of more management effort than renting Trailer lots, rental Trailers can generate much higher yield and income.

Buying Trailers to rent only works where park management allows rental Trailers, but where they don't, there are alternative approaches: You can try to buy Trailers on individual lots. You might lease the lot and buy the Trailer. Or buy the lot separately from the Trailer. Then, you can sell the Trailer and rent the lot to the buyer, or sell them together. In one variation of this, a double-wide Trailer in pristine condition on its own lot was bought for $22,000 cash from an estate. The Trailer was sold separately for $22,500 with $2500 down and with payments of $444.89 per month for 60 months. The land was sold for $18,000 with nothing down, and 12% interest to accrue and compound monthly until the Trailer was completely paid off. At that time, payments of $444.89 on the lot started and continued for the next 134 months. For a net investment of $19,500, two hundred and fifty four monthly payments of $444.89 would be received. That comes to $113,200.

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