Most investors turn their noses up at the mere thought of “investing” in mobile homes. The problem is most investors consider mobile homes as if they were stick built houses. However a savvy few know that mobile homes can be obscenely profitable money pumps if invested correctly. How much? How about relatively safe returns of between 50%-150% on your money? To understand how this is possible, you need to understand the opportunity in mobile homes.
While mobile home buyers can buy new or relatively new homes with bank financing, once the units get to be 10-20 years old financing is almost impossible to be had. Most sellers can’t sell because they need cash and buyers for 15 year-old mobile homes normally don’t have the cash and can’t get financing. So the sellers can’t sell and the buyers can’t buy. In steps the investor.
You, the investor, looks for a cheap mobile home that is 10-20 years old, either one that is ready to move into, or needs a little work to be ready. Perhaps you finds one that is worth about $15,000 – if a buyer had $15,000 – but of course no one has the cash. The seller needs to sell after they have moved into a new home and can’t handle their mortgage and the lot rent on the mobile home at the same time. They are desperate to sell. Finally, they decide to sell to you for $7,000 cash.
Now you go out and put out an ad “Mobile Home for Sale – Owner will finance – no banks”. The phone will ring off the hook. Find a buyer with a good job and decent credit and sell them the mobile home on terms. They are happy to by the mobile home “as is” and do any fixup or repairs needed becausethe terms are so good. Perhaps the terms might look like this: Sale Price $15,000 – Down Payment $1,500 – Mortgage of $13,500 paid at 12% for 3 years and payments of $448.39/month.
So for your $7,000 investment, if the buyers take 3 years to pay off the loan you will have received $17,642.04 (mortgage payments plus down payment) for a total profit of $10,642 over five years – hmm – that is only a 50% retrun on your money.
Now wait, you say, what if they stop paying? Well if you have to take the mobile home back, it is much easier to take back than a house, because unless it is on a permanent foundation it is legally considered to be personal property – like a car. You don’t have to go through a long drawn out and expensive process to foreclose. In fact it is like giving a loan on a car without the risk of someone driving the car away so you’ll never find it. Tough to drive away a mobile home, after all.
In fact, the buyers defaulting may be the best thing that ever happened to you.
For instance, let’s say the buyers from our original scenario paid for nine months and then stopped and you have to take the mobile home back and kick them out. You have to spend $750 cleaning the place up and selling it again. Let’s look at that:
During the 9 months they made payments you received a $1,500 down payment plus $4,035.51 in payments, for a total of %5,535.51 from your original $7,000 investment. You are now out only $1,464.49 plus $750 fixup cost for a total of $2,214.49 invested. Sell it again with $1,500 down and payments of $448.30 a month and in two additional months your investment in the mobile home is completely paid for while you have 34 additional payments of $448.30 coming to you.
Now that is a good deal. Some investors I know have sold some mobile homes three, four or five times, turning the older mobile home into a money machine that lasts for over a decade. Not bad for a “bad” investment.