Corner of Berkshire & Fairfax Message Board

General Category => General Discussion => Topic started by: netnet on February 19, 2020, 03:16:40 PM

Title: Mobile Homes
Post by: netnet on February 19, 2020, 03:16:40 PM
A friend approached me about investing in mobile homes. 

I had never looked at that asset class and my initial ick reaction, made me think that it may be less picked over than other RE.  In a quick search on the internet it looks as if there is some inefficiency possibly due to the ick factor and less lending activity.

Title: Re: Mobile Homes
Post by: BTShine on February 19, 2020, 03:41:29 PM
In what way(s) are you considering to invest in mobile homes?
Title: Re: Mobile Homes
Post by: Gregmal on February 19, 2020, 03:48:49 PM
If done properly, mobile homes are a total gold mine. 20%+ type stuff. Brother in law does a bunch of this in central Florida.
Title: Re: Mobile Homes
Post by: netnet on February 19, 2020, 03:50:50 PM
In what way(s) are you considering to invest in mobile homes?

My friend wants to buy a park.  I am thinking I would rather buy some (one?) mobile home, rehab and rent or rent to sell just to see how it works.  I also wanted to try it before I suggested it to some enterprising younger relatives.
Title: Re: Mobile Homes
Post by: netnet on February 19, 2020, 03:52:35 PM
If done properly, mobile homes are a total gold mine. 20%+ type stuff. Brother in law does a bunch of this in central Florida.

Care to elaborate?
Title: Re: Mobile Homes
Post by: ERICOPOLY on February 19, 2020, 04:05:51 PM
If done properly, mobile homes are a total gold mine. 20%+ type stuff. Brother in law does a bunch of this in central Florida.

Is that strictly passive?  Or time intensive which equates to an imputed income?
Title: Re: Mobile Homes
Post by: Gregmal on February 19, 2020, 04:07:54 PM
Just passing along what Ive been told(no audit lol), his family has been running them for decades. They own the land. Cheap acreage. Like dirt cheap to acquire. You can buy the mobile homes for like $20-$30k a pop and these things are inherently simple. Fixing them is easy if theres problems. You get 30 years plus out of them. If you own multiple parks you can even move them around easily depending upon demand. Rents believe it or not can (area dependent obviously) be in the $800-$1000 range. Even the shit ones are like $500+ a month.
Title: Re: Mobile Homes
Post by: Gregmal on February 19, 2020, 04:09:26 PM
If done properly, mobile homes are a total gold mine. 20%+ type stuff. Brother in law does a bunch of this in central Florida.

Is that strictly passive?  Or time intensive which equates to an imputed income?

"very part time" was basically the gist of it. You're not dealing with shit everyday and often you can find a manager with handyman skills and cut a deal where he lives there rent free in exchange for managing the property.
Title: Re: Mobile Homes
Post by: stahleyp on February 19, 2020, 04:25:19 PM
If done properly, mobile homes are a total gold mine. 20%+ type stuff. Brother in law does a bunch of this in central Florida.

Is that strictly passive?  Or time intensive which equates to an imputed income?

"very part time" was basically the gist of it. You're not dealing with shit everyday and often you can find a manager with handyman skills and cut a deal where he lives there rent free in exchange for managing the property.

I think it depends on where it's located. The one I know about has had a lot of issues. They actually had it paid off in full and were barely breaking even. You might get $250-$300 per lot but there were quite a few people who weren't paying or on drugs. The maintenance guy(s) often wouldn't work while they were on the clock. I believe it's profitable now but not insanely so.
Title: Re: Mobile Homes
Post by: Gregmal on February 19, 2020, 04:47:52 PM
Yea its entirely possible. IDK Ive heard from a number of people if you do these right you can make outstanding money. I was invited to go out to view a few of them but haven't yet taken that up. I had someone pitch me two days ago on section 8 housing deals in Philly as well. But in regards to both, Im just not really interested in dealing with those types of people and situations.
Title: Re: Mobile Homes
Post by: Williams406 on February 19, 2020, 06:09:38 PM
cap rates have come down a lot on mobile home parks over the past 3-5 years like most other assets. Ick factor does keep people away, but high-enough cash on cash returns has attracted new owners. I like the asset class. It is typically the cheapest housing available to people in a given area, which means your tenants are living on life's economic margins in many cases. Will be interesting to see what happens to economics if we get a downturn.
Title: Re: Mobile Homes
Post by: Cardboard on February 19, 2020, 07:14:36 PM
You are totally correct Gregmal. As usual... You can make great money with these things in places like Florida where snowbirds like to spend the winter without having to pay for a full size home.

Money is often asked upfront and rent runs quite high vs size/cost of property. Often they pay for 12 months while they only stay for max 6 as they have to return or like in Canada in order not to lose their health insurance.




Title: Re: Mobile Homes
Post by: Packer16 on February 19, 2020, 09:12:24 PM
There are 3 publicly traded mobile home REITs (ELS, SUI & UMH).  These are all trading a pretty high AFFO multiples and their favorable economics is reflected in the AFFO multiples.

Packer
Title: Re: Mobile Homes
Post by: cherzeca on February 19, 2020, 09:16:53 PM
my 2 cents. had a relative who did quite well buying apartment complexes in areas and of a type where people were saving to buy their own homes.  coral gables Florida for example.  he seemed to understand the demographic/tenant pool, and this resulted in a creditworthy tenant population (and rents rising at least with inflation) I just dont know if mobile housing is a step to somewhere or a dead end, and if a dead end, then you have credit issues. I just think you have to know the tenant population very well in an asset class like this
Title: Re: Mobile Homes
Post by: Spekulatius on February 20, 2020, 04:10:40 AM
I listened to a podcast a while ago, but forgot the source. The risk is that if you buy into a dumpy Park, the tenants may just leave and leave dumpy trailers behind that may be costly to remove and discard.

Tenant selection is always critical when renting, but the further down in quality and creditworthiness you go, the more important it gets. A good friend of ours also rents lower end and section 8 housing in a town nearby at double digit cap rates. he has done this for a long time and tried lots of different things (pool halls etc) and has good results with south East Asian immigrants (Vietnamese, Cambodia)  which have sort of a local community there and while they often have no credit, they have cash.

He does put a lot of work into this, so it is really a second job for him and after doing this a long time, he is scaling back. I wanted to pick his brain a bit more, but I think a lot of his ‘excess’ returns just come from hard work and somewhat  painfully gained experience.
Title: Re: Mobile Homes
Post by: DeepSouth on February 20, 2020, 07:45:34 AM
Similar to macro cell towers, junkyards, and landfills, mobile home parks have very high barriers to entry from NIMBY zoning creating strong long term pricing power. As lower cost residencies, they offer some counter cyclical benefits. They are also very low opex and capex assets creating very high FCF conversion.
Title: Re: Mobile Homes
Post by: cherzeca on February 25, 2020, 12:54:22 PM
https://www.wsj.com/articles/this-stock-has-returned-4-100-since-the-housing-crash-11582632000