For many people the idea of investing in a mobile home is a bit repulsive. They conjure up pictures of “trailer trash” people, rednecks from the South, tin boxes, or other misconceptions that will keep them from making a profit in a market that is as Realtor’s like to put it a “cash cow” or a “little gold mine”. To go back in history, the mobile homes started out as trailers towed behind the rich people’s cars so they would have a place to sleep instead of sleeping in a tent like the average traveler’s did. At one time the people living in mobile homes controlled more of the wealth in the country than those living in “stick-built” homes.
The first benefit is that there is limited competition. With everyone looking down their noses at mobile homes, it is a golden opportunity for you to make money. Perhaps, this will be changing since someone as well known as Warren Buffet is buying up the mobile home manufacturing plants. He can see there is profit to be made and now owns at least 15 different mobile home companies. Mobile homes are the only affordable housing left for the average buyers now. Banks will finance homes that are not over five years old. Older homes do not have financing available from traditional banks. You now step in and become the bank by buying low and selling high. Others put it buy at wholesale and sell at retail. To the banks and mortgage companies foreclosed mobile homes are considered “non-performing assets” to get off of their books as quickly as possible. You buy these from the mortgage companies for cash and then do cosmetic repairs on them and sell them on terms ranging from 3-15 years with an interest rate of 10-15%. Without you there to be the banker many people would never be able to experience the benefits of owning their own home. This makes a win for you as well as a win for the buyer of the home.
The second benefit is that you can deduct depreciation for mobile homes. You might have put money in the bank for the year, but with the tax write-off or “paper-loss” of depreciation, your taxes are minimized. This keeps more of your money in your own pocket instead of being paid out for taxes. By keeping more money in your pocket, this allows you to buy more homes to repeat the sales process over and over.
The third benefit is that Lender’s do not like mobile homes. Perhaps if there is land attached with the mobile home, they will look at financing the property. If it is just the mobile home in a mobile home park, the Lender’s will not finance these properties. Mobile Home Park Owners often refer to their parks as jails as the cost to move a home out is just too expensive for the average person to pay for. Once a home is set up in a mobile home park (MHP)then it usually stays there. If someone wants to sell, they want to get their cash and go on to purchase or rent their next home. Buyers looking to buy do not have the cash available that the seller is looking for. Without you as the middle man there would not be a transaction taking place. You buy the home low, do some cosmetic repairs and then sell it for a higher price. Your price includes a small down payment and financing for as many years as is needed to keep the payment in the buyer’s budget.
A fourth benefit is that Seller’s want and need all cash out of their existing home so they can move on to their next home. This creates what is known as the wholesale market for Buyers with cash. You can buy the homes for much less than what they are worth and often can turn around and sell them for a profit without putting a penny into them for repairs.
A fifth benefit to you is in finding Buyers that want to buy the mobile home you bought at the wholesale price. You mark it up to the retail level by adding in owner handling charges and fees to the original purchase price and then sell it for a profit. The Buyer’s do not have all cash so you then become the bank and finance the home for them for a nice interest rate of about 12%. Many Lender’s will make the loans from 14-34% if there is no land with the mobile home. You not only make a profit from the retail sale, but you get interest over the period of time you financed the property for the Buyer!
A final benefit is that you do not have to spend a lot of money on those expensive newspaper ads. Each of the neighbors have friends and family or co-workers who are looking for a place to live. They have the opportunity of helping to choose their new neighbor by referring you to someone. Offer them a small referral fee in exchange for their assistance in bringing you a buyer for your mobile home investment! The best advertising I have seen is a sign in the window and the word-of-mouth advertising of neighbors.
All of the above creates a market for you to invest money in mobile homes for a profit! There will be “Negative Nellies” that will tell you that it will not work or that you will lose all your money. Remember, Warren Buffet has been buying manufactured home manufacturing companies as well as buying the bank foreclosures and taking them back to the factory and repairing them so they look like new. If someone like Warren Buffet can see the benefits of investing in a mobile home shouldn’t you also enjoy some of the same benefits?