Other investments besides mobile home parks..?

If mobile home park investing is your best investment, what would be your second best investment?

SFRs, multi family, condos, apartments, storage units, retail… etc etc

Thanks

There’s no #2 that’s worth a darn. We’ve owned apartments, office, self-storage, retail – everything but hotel/motel. The returns just aren’t there, and the management hassle is horrible. The shopping center that I owned a piece of never posted a positive cash flow in 10 years – think how lousy that is! Every time they got the center 100% occupied, another tenant would pull out and it could just barely cover the note, and that was at 50% LTV.

If we thought anything else was any good, we’d invest in it.

Some side notes to that statement are: 1) Stand-alone RV parks are OK if you are willing to live on-site, and all of our RV holdings are inside mobile home parks we own 2) Billboards are great but take a long time to build enough critical mass (that’s how I made the money to get into the mobile home park business). I got to 300 signs, but a single park is worth probably as much as 50 billboards in one whack 3) We own about 400 self-storage units, but they are inside parks we own and only serve park residents – so it doesn’t really count as a pure play investment.

I own mobile home parks and would really not be interested in buying any other commercial asset class. However, I live in a very strong market in southwest Colorado where opportunities exist to fix and flip single-family houses. I’m sometimes on the look out for homes to flip and make a profit that can be put towards more MHP’s. I guess that would be my “second best” type of investment. And even that’s pretty tough because I only know my local market and would not feel comfortable trying to flip houses further away from where I live.

I will say each investment class has its ups and downs. I have mobile home parks, single family homes and multi family buildings. We remain diverse because, in my opinion, there is a danger to being to heavy in one asset class. For instance- I have money in the stock market- but in lots of different stocks!

That said- the easiest assets I own are single family homes. My tenants stay over 5 years- some longer- and the properties just pay themselves off. I had a tenant move out of one home lately, he had been there 6 years- I had been there twice in that time. The homes have gone up in value and are a secure asset in have in my area- Denver.

My multi family units do just as well- they cash flow better BUT they appreciate at a slower rate then the single family homes… why you ask- CAP rates. The value only goes up with increased income or decreased expenses. They have very low turnover, and we do very well with them.

Do not get me wrong- I like my parks… but… just this week- Thursday morning a lightning strike took out the underground power lines to my sewer plant in one of my parks. We could make water-but not treat it. We had a backup generator, but at the main building- the power lines were under ground and the plant was a good 600+ feet away. So we had to rent a generator, rig up the plant to get it running, dig a new trench to a closer power source- only 150 foot… re wire the sewer plant- and now- we get to buy a second generator to put next to the sewer plant… cost- with the new generator will be about 5,000. I tend not to have those problems with my single family and multi units. If parks had a big issue- it is the hit you take when things go wrong. You MUST have a good idea on what Capital Improvement cost, and what could go wrong. So even though you might be putting cash in the bank to buy that new car- you never know what might bite you.

There is some gold in every asset class- parks are good but they are not for everyone.

I have some duplexes, a 4-plex, and 1 mobile home park.

My experience has been that 1 duplex is an equal or greater amount of work as 1 entire mobile home park. With that being said, I believe that in general, more $ is needed to buy a mobile home park than say a duplex. A mobile home park is the proverbial hotel in the game of Monopoly. No one gets to build a hotel until they get 4 houses built. What I liked about the duplexes and 4 plexes were they gave me confidence and knowledge on how to properly manage people, debt, taxes, and property. It taught me to walk before I ran so to speak. I bought the multi-fams in '09, 10, and '11 when the foreclosure market was ripe. The numbers worked in my area at the prices and terms that I was able to buy the multi-fams at. However, the secret somehow was leaked and the numbers on those types of properties haven’t worked since early 2012 for the available “plex” market. In other words, the opportunity for that asset class has passed in my area of MN. There might be a diamond in the rough every now and then, but it is not an easy find. I still have realtors send me MLS listings, but I’m going to sit on the sidelines until the numbers work again.

I have several single family homes and 3 duplexes. The duplex’s are great from a cash flow perspective mostly because I bought them so cheaply. However they take a lot of time and I can’t really scale this system much farther so I am trying to get into the park business.

Frank - I would be curious to hear your downsides of self storage. I know barrier to entry can be low (ie overaturated markets), but I am tempted by the fewer number of moving parts as compared to MHPs. (No SAFE act , no homes to move and title, lower liability when a rental home burns down, etc).

thanks

Bret

Every real estate niche has its own unique good and bad qualities. In self-storage, you have already identified the good quality: nobody lives in them (or at least you hope so). The bad are tenant turnover (national average is 10% of your customer base per month), intensive reliance on the manager (they can literally destroy your business in a year, and you can’t survive a day without them there), the fact that you can build them almost anywhere without restriction, which leads to supply/demand problems, and the general cap rates they are sold under (normally around 7% to 8%).

The mobile home park problems you have identified can be remedied through buying parks with few to none park-owned homes. That kills off the SAFE Act, titles, etc. You can get insurance on them, so burning down is not a big deal (they don’t burn well anyway, mostly just melt). But I can’t buy my way – in self-storage – around the issues shown above.

To me, a self-storage is like owning a restaurant. You have to manage it constantly, and you run the risk of losing all your customers if they open a better restaurant – or cheaper menu – down the street. I know America was built on competition, but personally I hate it. That’s why I prefer parks.

Competition is a sin.

 - John D. Rockefeller

What do you guys think of farms as a cash flow investment?

Buy the farm and have someone run it for you and give you a percentage of the crop or just have a set rent for them…

Haven’t really researched on it just throwing it out there and wanted to see what others think.

Thanks

narf Wrote:


What do you guys think of farms as a cash flow

investment?

Buy the farm and have someone run it for you and

give you a percentage of the crop or just have a

set rent for them…

Haven’t really researched on it just throwing it

out there and wanted to see what others think.

Thanks

I have enjoyed the discussion so far, but now it gets really interesting.

I also have owned SFR for rentals. They were mostly National Homes in the same neighborhood. They were on slabs with asbestos tile on the floors and all 860 square feet. My experience was more like Frank’s than Jim’s. They are gone now and I am not the least bit unhappy about that.

I have owned apartment buildings. Some were small 4 unit buildings and some were 14 unit buildings. A couple were a business down and apartments up. From my perspective the only thing worse was the office building I owned. Never, ever again.

Manufactured housing land-lease communities are cash cows if the owner really understands how to operate them. It is the one real estate investment I really like. If you don’t really understand what you are doing they can be nightmares, but there are a number of expert consultants to help like some that post here.

I grew up on a farm. I own farm land now. I like it fine but just like manufactured housing, it is not an investment for someone who doesn’t have a whole lot of understanding and knowledge about farming even if (and maybe especially) if they are just an investor. There are so many pitfalls it is crazy. Remember someone renting land or someone making a living from share cropping may not respect the value of the land itself. There are many ways to goose up the profits that can leave the land worn out in a few short years. What happens if the tenant allows hunting on the land and someone gets hurt or killed? Guess where the deep pockets are? What happens if they pollute the land or the water? Who fixes the septic tanks? Who makes sure the wells are taken care of? Are the wells sand points, or artesian? What if the livestock are disease carriers and they contaminate the land? For that matter, who is going to do the due diligence before you buy a farm to make sure none of those problems are not already affecting the land?

Like I said, farms can be good investments, but usually not for people who don’t grow up on a farm.