Mobile Home Investing: $10k a Month in Positive Cash Flow
Rachel cash-flows $10k a month from her portfolio of mobile homes.
When most people think of real estate investing, mobile homes probably don’t come to mind. In fact, technically speaking, mobile homes are personal property–not real estate.
Still, this is a sub-niche in real estate that comes with the familiar cash-flowing opportunity of buying a building and renting it out for a profit.
Rachel Hernandez has been investing in mobile homes for over 10 years. She made her first mobile home purchase for $3,600, re-sold it for $10,000 on a lease-to-own contract, and hasn’t looked back since.
Rachel is the author of Adventures in Mobile Homes and she blogs and podcasts about her work at AdventuresInMobileHomes.com.
Tune in to hear:
- why mobile homes make an attractive investment
- how to find potential deals near you
- how Rachel markets for tenants
Want more unconventional rental ideas?
Click here to download a list of 25 other things you could make money renting out.
Mobile Home Investing vs. Investing in Single Family Homes
“I will tell you, there’s not much competition,” Rachel began.
But not just anyone can walk in and buy a mobile home in a mobile home park or community though. You need to get approval from the park manager to do business in their park.
This is the part that can take time as networking and getting to know the park owners is how you find the best deals.
Another reason why Rachel likes investing in mobile homes over other forms of real estate is that mobile homes are, well, mobile.
You have a lot more flexibility over where you’re investing, and you can even move the home if you really wanted to.
Cash Flow Strategy for Mobile Homes
The cash flow strategy with mobile homes is similar to investing in single-family homes, duplex, etc. You’re looking to buy a mobile home, get a tenant in, and operate on a positive cash flow.
The main difference from an investing standpoint is that mobile homes typically cost a lot less than traditional family homes.
“The first deal that I did on a mobile home was a two bedroom, one bath, and I only paid $3,600 for the home in cash,” Rachel told me.
Rachel had a family move into the home within two weeks. They paid her $1,000 as a moving-in fee and $250/mo for the next 4 ½ years.
Rachel also ended up selling that mobile home for a nice profit of $10,000.
How Much Do Mobile Homes Cost?
If you’re looking at mobile homes for sale near you, there are a couple of things to keep in mind if you’re going to compare prices to what Rachel is paying:
- The first is that the price of a mobile home varies a lot across the country.
- The second is that Rachel has been doing this for a while and has built up a network of contacts that tip her off when there is a good deal on a mobile home.
Rachel explained that she typically only deals in newer, larger mobile homes now as she likes working with larger families.
“I’m paying about $10,000-15,000 cash on the properties that I’m buying now,” Rachel told me.
Rachel said it’s also important to be aware that when you buy a mobile home you’re buying personal property. You’re not buying the land beneath the home, as you do when you buy real estate like a family home.
This means you have to pay a monthly fee to the park manager known as a “lot fee” where the home is situated.
This becomes the responsibility of the tenants once they’re in the home and paying rent though.
How Much Do Mobile Homes Rent For?
The types of mobile homes Rachel is buying in the $10,000-15,000 range bring in around $500-600 per month in rent.
She has a few tenants on electronic payments and also accepts money orders or cashier checks. Her tenants write a separate payment to the park managers for their lot rent which is usually around $400/mo.
What Kinds of Leases Are You Using?
Rachel likes to secure tenants on 15-year leases with the option to purchase. This means they can pay off the home and purchase it outright at any time should they choose to.
Not everyone will end up getting to the end of their lease or buying the home though. Rachel does have to take back homes sometimes, and there have also been incidents where she’s taken tenants to court.
There are various reasons why people fall behind or default on their payments. Rachel said the number one reason she’s experienced tenants defaulting is due to divorce and the tenants going their separate ways.
Rachel said defaulting and other problems with payments fit the “80/20 rule” in her experience. Only 20% of her tenants give her any problems, and they make up 80% of all the problems.
Building Relationships with Mobile Home Park Managers
As Rachel explained, all of her best deals have come from building relationships with park managers, networking within mobile home communities, and general word of mouth as a result.
If you’re starting out today, she had offered some tips to help you start to ingratiate yourself into the mobile home community:
Visit All the Parks in Your Area
Rachel visited more than 200 parks in her area when she started out. She always recommends people start close to home and drive around looking at every mobile home park in their area.
See what kind of feel you get for the parks. If you don’t like the look of it, move on. If you get a good feeling about the park and could see yourself buying a mobile home there, introduce yourself to the park owner, manager, or whoever is running the park.
Don’t Go in as an Investor
Rachel said it’s important when approaching park managers that you don’t introduce yourself as an investor. You want to build up trust and not have them thinking you’re just there to make money.
Building up a relationship with park managers is somewhat of an “art”, Rachel told me.
You want to be first on their list of people they call when a home comes up for sale. Rachel explained it’s a personable industry, get to know all of the people working on the parks and it’ll pay off in the long run.
Do You Ever Move Your Mobile Homes?
One of the advantages of having a mobile home is that you have the ability to literally pick it up and move it to another park.
Rachel has moved one of her homes several times. If she sees a home she really likes but it’s in a park she’s not so happy working with, she’ll move the home to a different park.
It does take some experience and knowledge to move a mobile home though. Utilities need to be hooked up, there are some logistics involved, and it costs money.
“I don’t recommend someone do this if they’re just starting out,” Rachel told me.
Financing Options When Buying Mobile Homes
Mobile homes are classified as personal property, so it’s not the same as going out and getting a mortgage as you would with real estate.
Rachael pays cash for her homes but said if you need finance you’ll probably have to look for an unsecured personal loan.
Finding Tenants
Rachel shared the things she does to find tenants after she’s purchased a mobile home, she;
- Puts a sign in the window of the home so passers-by can see it
- Tells the park manager and puts a flyer on their bulletin board if they have one
- Puts signs up outside the front of the park
- Hands out flyers inside the park
Rachel said she prefers to do all of this herself rather than hiring help. This is a personal business, part of building relationships with park owners/managers is being seen on the park in person.
She also said that by canvassing in and around the park you’ll get fewer, but much better leads than advertising online.
How Much Time Is Required to Manage a Mobile Home Business?
Rachel remembers putting in a lot more time when she was first getting started in this business.
“I was basically working 80 hours a week,” Rachel told me.
Networking is important in the beginning. Getting to know all the parks in her area, meeting the managers, and getting involved in the community took some time.
Nowadays she spends a lot less time on the day-to-day running of the business. Rachel is mostly called into action when tenants are moving in or out, or maintenance teams need to be called in.
Any Nightmare Stories?
Landlords always have a few nightmare (or funny) stories if they’ve been leasing properties out for any length of time.
One incident that sticks out for Rachel is finding a possum in a bathtub. She had to scoop it out in a bucket and release it in the local park.
What’s Next?
Rachel said she has a few homes she’s in the process of fixing up right now that she had to take back.
After that, the next step she’s going to take is buying land for mobile homes. She’s already had some conversations with mobile home dealerships about providing land for their customers.
Rachel said she’s excited to get into land purchasing as it’s less stressful than dealing with homes and just as much in demand.
Want more unconventional rental ideas?
Click here to download a list of 25 other things you could make money renting out.
Other “Alternative” Real Estate Investments
Land Flipping
Rachel’s mobile home lease-with-option-to-purchase business is similar to the land flipping side hustle we’ve covered previously. Billed as “the best passive income model,” it actually takes a ton of upfront work in sourcing deals — usually through direct mail, rather than building in-person relationships with mobile home park managers.
After that though, you could collect checks relatively hassle-free for years.
Rental Arbitrage
This real estate strategy doesn’t actually require you to own any property. In fact, it can be a lower cost way to get started.
How it works is you sign a 12-month lease on a property, and (with the landlord’s consent) turn around and list it as a short-term rental on Airbnb or other platforms. You profit on the spread between whatever you can collect in short-term rental fees and your fixed monthly rent.
There’s an art and a science to rental arbitrage, and it’s highly controversial in tight rental markets. Still, some enterprising Airbnb hosts report bringing in 6-figures in profit — all while traveling the world.
Online REITs
Online real estate “crowdfunding” sites like Fundrise make for very passive investments and have low minimums. In exchange for stronger returns, you sacrifice some of the liquidity you’d see with traditional Real Estate Investment Trusts.
Short-Term Real Estate Loans
Investors can set up automated real estate loans through Groundfloor or PeerStreet. According to my PeerStreet dashboard, my account has earned 6.9%.
Traditional REITs
These are perhaps the most passive real estate investment, and you can buy shares through any brokerage. If you’re just starting out, consider a modern broker like M1 Finance.
Rachel’s #1 Tip for Side Hustle Nation
“Success is a journey, not a destination.”
Links and Resources from this Episode
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