Admitted newbie here, so bare with me. In looking at a few of the MHP in my area and doing the math, most will have a better than average positive cash flow. Is it smarter to pay down the note faster (bank loan) and own the parks, or hold the excess in my account and build for future investment properties? (I don’t plan on using the cash flow as my only means of income) Thanks to all.
That is a question we all wrestle with. I’d say you first want to definitely have a cash reserve just sitting in the bank equivalent to 4% of the purchase price of your property (unless you can get your bank to agree to a revolver loan for this amount). Then you want to be sure to invest in rehabbing any existing homes in your community; this provides a large 'bang for your buck.'Once you’ve done those two things, if it is your goal to acquire other properties, then save up for that. You might still pay down the loan and then borrow it back later when you find the next right property (you’ll probably need to pay for another appraisal, so weigh that cost against what you might save in interest by pre-paying for a year or so until you find the next right property).I had a bank lend me ‘too much, too long’ on some older mobile homes, so I am pre-paying just that loan against the homes (not their loan against the land). Ultimately this is a gray area and you’ll need to make decisions right for you (and your bank) to keep some liquidity, or be able to tap it for ‘the next big thing’ that comes along for you (good or bad!)Good luck,-jl-