Ready to buy a MHP and though I have experience investing in real estate, I don’t have MHP Park experience therefore I’ll need to go to bootcamp.
Am just coming out of a long period of financial stress from my real estate investments and still have a few properties.
I have a sacred 100 - 130k to work with.
My goal is to have an income stream of 6k per month net net in 2 years.
I’m ruminating over the following:
I know how to buy a SFH and fix up to sell. And now is the time to do it.
I get the overall picture and specifics of purchasing a MHP that are different from buying a SFH but am wise enough to know I need more info found in the reading materials and bootcamp.
To get to my goal of 6k net per month income stream, I’m going to need more cash to put in a deal(s).
How to get that cash?
There is definitely money to be made in buying and selling SFH’s right now. And I know how to do this.
Or
Go to bootcamp, purchase a MHP, fix up and sell. Because I have not done this yet I am a bit gun shy especially on the heals of getting back on my feet.
Either way, there is risk but I’m more familiar with the SFH risk.
You’re ahead of me, because I have never done the SFH flipping thing. I only know mobile home parks – my SFH knowledge comes only from my own residence, and a few houses I have owned that were inside of mobile home parks. So my comparison is based strictly on what I know of SFH but have never experienced.
MH and SFH would be two entirely different business models. SFH is transactional in nature – you only make money buying and selling, while MH offers cash flow (and the potential for re-sale). The biggest difference is that, plus the fact that SFH is fairly cyclical in nature, and the ability to actually flip them probably dries up for periods of time, as well as the ability to find SFH to buy that have “flip” potential. In contrast, you would only need one good mobile home park deal, if it was exactly right for you.
Here’s the only way that a MH deal would be able to hit your numbers. You’d have to find a park for $500,000 that is in great shape and needs no capital expenditures (city water/sewer, good pipes, etc.). Let’s say you bought it at a 10% cap rate with 20% down (which takes out your $100,000). If you finance it at 7%, then you have a cash-on-cash return (after the FULL principal and interest payment) of around $12,000 per year. But let’s assume that this is about a 50 space park with the rent $40 under market and you increase it by $40 per month. Now you’re at $36,000 per year. And let’s assume that the park had a manager earning $50,000 per year that you can replace with a manager earning $20,000 per year – now the cash flow is up to $66,000. And let’s also assume that you have the potential to fill a few lots over time, and you have hit your target of $72,000 per year.
Now let’s look at the probability of getting this done. I would think you have a much better shot at finding a mobile home park that can accomplish this than enough SFH sellers and buyers to make that happen continuously for 30 straight years (I’m assuming you make maybe $18,000 per flip net, so you’d have to flip one home every 90 days).
But again, I don’t know aything about SFH flipping.
The MHP scenario you outlined above is the Perfect scenario! Now I just have to find it!!!
You were kind enough to take my calls just last week and yesterday.
I told you I had about 100k to work with. Our phone call confirmed that bootcamp would be a huge benefit prior to purchasing a MHP.
I did not mention that I have my RE license, good for SFH’s, not good for MHP’s (but I will figure that out).
There are definitely flips out there right now in my area of the Midwest where 30 - 50k net is do-able. Of course, whether it’s a MHP or SFH, buying right is what it’s all about.
This is why it’s such a conundrum. MHP’s are a good investment and SFH’s are a good investment now too. In my area. For me. Also having the ability to search on the MLS for SFH’s is a plus.
You stated above “SFH is transactional in nature – you only make money buying and selling, while MH offers cash flow (and the potential for re-sale).”
I’ve looked at several SFH’s for many months, that can offer similar cash flow and potential for quick re-sale as well.
The difference btw purchasing a MHP vs SFH seems to be MHP has debt service yet offers opportunities to increase monthly cash flow and a SFH, though having no mortgage offers a finite rental amount.
I want both! I have some homework to do and again your senario above looks delectable! Thanks again for your good and thoughtful response. ps. My goal is 6k NET per month and I know it’s possible!
I own SFR’s, apartment buildings and MHPS. After owning MHPS I would never buy another SFR or apartment building again for cash flow purposes. I spent 6 years trying to get a healthy cash flow from SFRs and apartments and whenever I thought I had made it, there would be some huge repair expense that would kill my cash flow. Not saying the deals arent out there and Im sure you can make some good cash flows, there is just a lot of unknowns even if you got a steal of a deal. AC goes out on a home, there goes your cash flow for the year. Tenant moves out and you need to rehab, there goes your cash flow for that year and possibly more. It also takes much less work to manage MHPS than it does SFRs and especially apartments. In my perfect world, I would buy SFR’s flip them make a nice profit and then invest in MHPS for the long term and enjoy the stable cash flows.
I’ve done SFR flips and rentals and now own a MHP. I would totally agree with Steven. Flip houses for the sole purpose of gaining capital to invest into a MHP.
If you have the skills and knowlege to fix and flip houses, you should take advantage of that. But at the same time, educate yourself on the mobile home park business and invest there for the long term. Not doubt, mobile home parks are the superior real estate class for cash flow and appreciation in my opinion.
It’s really true about possible or real hugh repair expenses. I’ve had my share of them!! That is a variable that I have not factored in. Usually when I do a rehab, it reduces the chance of huge unexpected repairs.
The only comparison re: possibility that I can see with unexpected expensive repairs in a MHP would be underground lines/pipes that can’t be seen when purchasing. Your last sentence " I would buy SFR’s flip them make a nice profit and then invest in MHPS for the long term and enjoy the stable cash flows" makes a lot of sense. Thanks for the input.
Thank you for the positive feedback. I’m not going to purchase a MHP w/out going to the bootcamp.I plan on going in Jan or Mar 2013. I would appreciate a MHP talk over coffee beforehand. Let me know. Thanks much.
I definitely recommend the boot camp before purchasing a park. I’ve gone and it was the best money spent. From the instruction, to walking through the parks to Frank and Dave taking the time during the entire weekend to answer any question.
I’d be happy to have coffee with you before you go. Call me at 630-485-8668.
I currently own a couple duplexes and a 4-plex. A mobile home park is in the making as we speak. To me, a higher priced sfh is the riskiest of all. Even if there is significant cashflow from the home (which is still easy to get if you find the right market), the risk factor is high because if they move out one night, you lose 100% of your revenue from the property. Then you are stuck paying the mortgage, repairs, utilities, etc… It’s very possible to lose your entire year’s worth of cashflow in a single month of vacancy. This isn’t the cruise control most real estate investors are seeking. In comparison, a you won’t even feel the sting when 1 resident runs off from your 50 lot mobile home park. With all that being said, the old saying rings true: Education is cheap, Experience is expensive! If we are all playing monopoly: single family homes are the little green houses, mobile home parks are the big red hotels. Get some training, start small, hang out with experienced investors even if it isn’t Frank and Dave.
Like some of you I bought & still own some of all the above+. MHP has changed my entire outlook on real estate investments. The return in the MHP business is exceptionally high however I don’t believe in putting all my eggs in one basket. I’ve found that the park business is high maintainence once you own/finance/rent houses of your on. My parks are all 30 units are smaller. Not big enough to hire a park mgr so myself & my partner coordinate repairs & rentals. All that to say this. MHP require more maintainence & time than houses, apartments, strip centers or commercial buildings.