Hi guys! I’m SOOO excited to share this piece by a long time internet friend of mine – Rachel Hernandez, aka Mobile Home Gurl – who I’ve been fascinated with for years. She’s made a great income off of investing in overlooked properties – specifically mobile home investing! – and today stops by the blog to share the ins and outs of the industry, as well as some financials. Hope it inspires some of you to research it further and see if it’s a good fit! I’ll admit I kinda want to too now!!
When most people think about getting into real estate investing, they think about single-family homes or apartment buildings. I did the same thing.
Never did I think in a million years I’d be a mobile home investor. But here I am. Mobile homes found me after all my experience in single-family homes.
I started my journey finding deals for other investors as a “bird dog” and wholesaler*. Then, I started buying and holding single-family homes as a landlord. But something was missing. I just wasn’t satisfied. The cash flow numbers weren’t there and I wasn’t living the life I wanted.
So I decided to sell my entire real estate portfolio and go into mobile home investing.
Now I’ll admit: it took me awhile to find my niche. But I’m glad I did, and completely seized the little known money opportunity in mobile home investing.
How Mobile Homes Are Different than Regular Real Estate
There are many differences between mobile homes and investing in regular real estate such as single-family homes and apartment buildings. The main difference is that mobile homes give you options. Simply put, they’re exactly what they say they are: mobile.
You can keep a mobile home where it is and buy it. Or, you can move it somewhere else. Perhaps to another piece of land or mobile home park. You can’t really do that with a single-family home or apartment building. Mobile homes are meant to be transported.
What I do is buy the mobile home itself (as personal property) while someone else owns the land attached to the home (usually a mobile home park). I then fill the home with residents who pay me to live in the home, who are in turn responsible for paying the lot rent (land rent) to the park.
My First Mobile Home Deal
To give you an example, I’ll tell you about my most important deal: The first mobile home deal I ever did.
It was a 2 bedroom, 1 bath mobile home. The family living in it had owned the home and lived there for 10 years. It was located in a nice mobile home park. They were ready to move out of the community and live somewhere else.
After a lot of negotiating back and forth, we settled on a price. I bought the home for $3,600. It had some cosmetic issues but I did pretty much all the work myself. After the family moved out, I filled the home with another family. They paid me $1,000 to move in and $250 per month for the next 4.5 years. (That’s a total of $14,500 to save you on the math)
It took me almost a year to do my first mobile home deal. But I’m glad I stuck with it. And the rest is history!
Less Competition with Mobile Homes
Most real estate investors look down on mobile homes as an asset class. Unfortunately, there’s always been a negative stigma attached to a manufactured home park, or any affordable housing. (Think the movie 8 Mile trailer park.)
But mobile homes are no different. Just like single-family homes, there are different types of neighborhoods when it comes to mobile homes. There are low-end, middle-of-the-road, and high-end mobile home parks. Each community attracts a certain type of clientele.
I tend to focus more on the high-end mobile home communities. I learned early on the importance of working in areas that fit better with my personality and attract the types of people who I feel comfortable with after a previous $2,000 nightmare.
Though I bought the home cheap, it cost me a lot of time and money. It was an expensive lesson, but one I took to heart and follow to this day with all my investing activities.
Due to the negative stigma of mobile homes, however, there is much less competition. In fact, I honestly don’t know many other investors who buy mobile homes. They are pretty few and far between, which means even more opportunity for those of us who are interested in it.
The Pros and Cons of Mobile Home Investing
As in any type of business venture, there are pros and cons when it comes to investing in mobile homes. But honestly, there will always be risk when it comes to investing in anything. It’s how you manage your risk and your risk tolerance you need to account for.
The Pros of a Mobile Homes:
The main pro of a mobile home investment is the amount of capital needed. In general, you can invest a small amount of money into a mobile home deal than your traditional single family home property.
Like the example of my first deal, you can buy a mobile home for as little as $2,000-$3,000, with an average one in my experience hovering more around the $5,000 range. Which all means less money in the deal compared to more traditional rental property.
And since you typically don’t have a mortgage on a home that low (I pick up all my properties in cash), you eliminate any payments to the bank. Your home is fully paid off and you receive instant cash flow.
Imagine having 5, 10, 15 or even 20 mobile home properties… all paid off, all paying monthly rental income. Massive cash flow!
This is a very hard thing to do as a single family home investor, but not as much when dealing in mobile homes with enough work and persistence over time. Nowadays I cash flow at least $500/mo per deal. That’s some serious dough and adds up quickly!
The other pro (which is also a con as you’ll see below) is the “less competition” thing mentioned earlier. Unlike single-family homes, there is a barrier to entry if you want to buy mobile homes since it’s in someone else’s community (the mobile home park owner).
Before you buy any home in a park, you have to have approval from the park manager or owner of the community to do business there. This can take a lot of time and courage to build up these relationships. But once you do it pays off in the end. As a result, you may become the only investor, or part of a small handful of investors/owners allowed to work in the park. This gives you an ultimate advantage and an endless stream of leads over the years!
The Cons of Investing In Mobile Homes:
Getting into a park and being allowed to do business there takes time. This can be a major obstacle for people, especially newer investors.
In order to build relationships, you have to physically meet with the park managers and owners. All the time. This can be challenging if you have a full-time job as you’ll have to work around the park’s office hours to pull it off. (Like owning any real estate investment, this isn’t quite “passive income”. There is time and effort involved.)
Another con with mobile home investing is that you may have to take a mobile home back at some point in your journey. Circumstances change, and sometimes people just can’t continue making payments anymore.
(Though, this is true with any type of real estate whether it be mobile homes, single-family homes, apartment buildings, or even commercial real estate. It happens. All the time.)
I’ve had to take many homes back from renters as a mobile home investor. It can be a major inconvenience and takes time and money to fix them back up again to be re-rented. You also occasionally have to evict people and take them to court if needed too. But it’s all a part of any real estate business.
Lastly, plumbing is a constant issue with mobile homes. The older homes have “the grey pipe” which is just not good material. I talk more about it here. Flooring can also be a big deal. Many of the older homes have particle board for flooring which is not good. Once it gets wet, it soaks up like a sponge. Usually it’s just a matter of cutting the bad stuff and putting in good stuff (plywood). But it’s a constant issue.
Everything else that breaks down is similar to a single family home such as air conditioning, heating, roof (shingle roofs), and hot water heaters. These are all common issues with mobile homes and single-family homes. Stuff just gets old and needs to be replaced.
Hidden Investment Opportunities!
As you can see, there are hidden opportunities to make money in mobile home investing. I make close to 6 figures a year doing it and really enjoy it. Lack of awareness and less competition only means more business to beginners and investors like you and me. Over time, this can equate to more cash flow and a supply of mobile home deals to last a lifetime!
For further reading, check out “Deals on wheels: How to buy, sell & finance used mobile homes for big profits and cash flow” by Lonnie Scruggs, or my personal book on the subject: “10 Dos and Don’ts to Get Started in Mobile Home Investing”
UPDATE: Rachel just launched her new course on mobile home investing! Here’s more if anyone’s interested in it –> What You Need to Do to Get Started in Mobile Home Investing:
Join Rachel Hernandez, real estate investor turned mobile home investor with over a decade of experience and best-selling author, for this bonus mobile home investing training. Here she will teach you what you need to do to get started in mobile home investing including:
- important action steps to take to get your mobile home investing business started
- what defines your success as a mobile home investor
- what most real estate investors fail to do and why they give up
- key things to do in building a successful mobile home investment strategy
- what makes successful mobile home investors and what sets them apart from the rest
- what’s really important when just starting out as a mobile home investor
At the end of the course, you’ll have a defined roadmap and plan on what you need to do to get started as a mobile home investor including the support you need to get there.
Rachel Hernandez is the author of Adventures in Mobile Homes: How I Got Started in Mobile Home Investing and How You Can Too and the Real Estate Investing Sucks series of books. Find her at: AdventuresinMobileHomes.com.
*A bird dog is someone who looks for deals for other investors. They just find the leads and don’t take the risk in terms of signing the dotted line and doing contracts. The investor they work with will take the lead on, put it together, and sign the dotted line. Then pay the bird dog a fee for finding the deal. Another way to do it is doing the deal together and splitting the profits. As a wholesaler, you take it a step further than a bird dog. You actually sign the contract as a wholesaler between you and the seller. Then you wholesale the deal to another investor for a fee. The other way to do this is through a double closing. Here you purchase the property from the seller and close on it. Then you take title to it and resell to the investor. As a wholesaler, you don’t take title to the investment property. You just assign your interest for a fee. The end buyer (investor) takes title.
[Links to books are Amazon affiliate links… Photo up top by Gabriel Sanchez]