Selling Mobile Homes in Your Park
By Steve Gillman
If you happen to own a mobile home park, buying and selling
mobile homes in it can provide as much profit as the rental income
you get. If you don't own a park, you might want to consider
investing in one once you understand the strategy that follows.
We start with a question: How much is a mobile home worth?
Of course that depends on whether the home is newer or older,
how large it is, how nice it is, where it is located and so on.
Location is one of the biggies, naturally. For example, a mobile
on a rented lot that might sell for $8,000 in other areas can
get $40,000 in Durango, Colorado. This is a town people like,
and which has high rental rates and expensive houses. Add to
this the fact that they aren't building any more mobile home
parks, and you start to see why people will pay more for an old
used mobile than a new one - just because of location. Haul that
mobile elsewhere and it would lose 80% or more of its value.
Its something to keep in mind if you are looking to buy a
park, but you can't move a park you already own, so let's look
at what you can control right where you are. Specifically, let's
look at one of the most important elements of value after location:
The ease of buying. Make a home easier to buy and you increase
the value -- that's the essence of the strategy that follows.
Suppose a young couple wants a nice mobile home and the new
ones cost about $30,000 or so, with payments of about $420 per
month. Add to that the lot rent of $280 per month, and they are
looking at $700 per month for housing. Now let's suppose they
don't have the $3,000 needed for the down payment, nor the money
needed for moving the home to a park and various other expenses,
like the deposit for the rented space. They're also not sure
they can afford the $700 monthly costs along with utilities.
This is a common scenario.
Still, they want to own something rather than rent, so they
look in parks and see nice used mobile homes selling for less
than half the price of a new one. But nobody wants to finance
older mobiles, or if they do it is at very high interest rates
and with big down payments. When they come to your mobile home
park though, it is different. You are selling mobile homes they
can afford.
There is one they really like. After the previous owner had
a job transfer, and couldn't sell his mobile for the $8,000,
you offered him $5,000 and he thanked you for resolving his problem
- he was still paying lot rent after all, and he wanted to move
on. After you paid $100 for someone to clean up the home you
priced it at $12,000. You were able to do that because the price
isn't just about the mobile itself, as we shall see...
Our young couple loves the home. You won't budge on the price
you let them know, but you will take just a $500 down payment.
You also require the first month's lot rent of course. They can
afford the $780 up front, and they will pay the balance on the
home at $160 per month, with interest at 12% annually. In a little
over 10 years they will own the home free-and-clear. They buy
it.
Look at this from their perspective and it makes immediate
sense. Now they have a home that they own for less than renting
an apartment of a similar size, and their mobile will have some
value once they pay the balance in full. How much value doesn't
really matter since they are spending less than rent. In fact,
if they are paying $200 less per month than rent they will save
$24,000 on housing over ten years. Anything they sell the mobile
for will be a bonus. This also may be their only option since
they have so little cash in the bank.
Now consider it from your perspective. A profit of almost
$7,000 on the mobile is just the start. You also collect 12%
interest not just on your $5,000 investment, but on the whole
balance owed ($11,500 to start). This is a great return on your
investment, to say the least. Have a dozen of them going and
you'll have a nice extra income stream.
Opportunities like this arise regularly in a park. Owners
need to sell quickly for a variety of reasons. They may want
to avoid paying lot rent for months while also paying the expenses
in their new house they bought. Job transfers require quick moves.
Selling can be a lot of work, and they'll pay a commission if
they hire a sales agent. Honestly tell them that you buy mobiles
to make a profit and can't pay much, but you can pay cash immediately,
and many of these sellers will be happy that you resolved their
problem for them.
How Much Can You Make?
You should aim for thousands of dollars of profit on each
deal. Between the capital gain and the interest that you make
it is realistic to make returns of 20% annually on the money
you invest. That rate doubles you money in less than four years.
A while ago I read a true story about one owner of a park
who bought and resold the same mobile home in his park about
six times over the years. He figures he eventually made $35,000
off an initial investment of $4,000 -- that's an example to motivate
you.
Ways to Make More | Related Opportunities
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Since your primary market is buyers who have little cash,
there is the risk of non-payment. But as the owner of a mobile
home park, you have a good degree of control -- you get to say
who stays and who goes. This makes it relatively safe to use
this strategy. In the above example you only have $4,600 invested
after your $100 clean-up and receiving the $500 down payment
from the buyers, so it is likely that even if the new buyers
trashed the place and walked away a year later, you could resell
at a profit again.
Qualifications / Requirements
This strategy works best if you are the owner of a mobile
home park, since that gives you the inside scoop on homes coming
up for sale and gives you the control over the situation that
makes this kind of investing low-risk.
First Steps
Buy a mobile home park if you don't already own one. If you
do own one, start making offers on any mobiles that are for sale,
and then start buying and selling those mobile homes.
Resource
http://www.creonline.com/mobile-homes/
- A forum about mobile home investing, and some articles on selling
mobile homes and related topics.
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