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Building equity with depreciating mobile homes would be a challenge.
Owning a mobile home park might be worth the trouble as the land could appreciate, particularly in that area.
However, appreciating land presents another problem to mobile home landlords. It is not unheard of for mh parks to be sold to developers. There goes your investment as you will be stuck with an old trailer and nowhere to put it.
^^^^^^^^THIS TOO!!!!
I didn't have to worry about depreciation as the homes I bought were old enough to be "fully depreciated"... but figure that that meant they were worth less than half of what they'd been bought for, brand new, 27 years before I got them. Adjusting for inflation, they lost at least 80% of their value in real dollars, in 27 years. Ain't a stick-built or modular house on the market that will lose THAT much value in 27 years. So if you buy newer trailer homes, you will have to deal with depreciation that follows a vehicle-like curve... though perhaps over a slightly longer period of time. If you buy older trailer homes, they're maintenance headaches and you won't get good tenants.
I did have to contend with the possibility that the park owner was going to sell out to the city so that a road could be built through the property. It was hypothesized that he bought a lot of land in that area of town back in the day so he could sit on it and sell it later on when the town grew substantially. Had he sold, I would have had six months to come up with at least $17,000 to move the trailers out of the park, into another park... or else I'd have lost my investment (but not the note that I had signed to finance the trailers). That would have been swell, wouldn't it... paying that monthly note for trailers I no longer had because I couldn't afford to get them moved when the park owner sold the park. And good luck finding another trailer park that will allow you to move in dilapidated old trailers! Many parks refuse to allow trailers below a certain year, and those that'll let any trailer move in will also probably let any trailer trash person move in... meaning it's not likely to be a nice park for people.
It is true that many parks won't allow you to rent out a trailer... even if they do, often they require that they approve your tenant. So if YOU like someone but THEY don't, you don't get to rent to that person. The parks that will let you rent your trailer to tenants they don't know about - you can figure that those parks don't care enough about keeping the park looking nice either. They just want to collect the lot rent money and be done with it. Maintenance will be a constant hassle because they'll do only the minimum required. Those park owners LOVE trailer landlords, because they know that you'll pay the lot rent! You're in it to make money, so you're not the common ordinary trailer trash tenant! YOU will pay your rent! So they'll let you do it, no matter what it means for the type of people that come in! (But would YOU want to LIVE there? I tell you, there is a huge amount of wisdom in the phrase "don't invest in an area where you wouldn't want to live". If you wouldn't want to live in the trailer home you'd buy as an investment, even if you were okay with living in a place that size, don't buy it. LOCATION, LOCATION, LOCATION.)
Oregonwoodsmoke seems to have a good amount of experience with trailers. The particleboard subfloor is a real issue. Many a time did I tear up one of those and replace it with plywood so that it'd be stronger. Insulation is an issue, as is finding parts to fit older mobile homes. (You know how hard it was to find doors for mobiles that were manufactured in the early 1980's? No store sold such doors in the dimensions I needed! I'd have had to CUSTOM ORDER the doors!) He may have been able to show his trailer to 450 people and give out 150 applications so that he could get one good tenant... I had no such luxury. My trailers NEEDED to be generating income, as I didn't generate enough myself to cover down on vacancies. I had 17 trailers and I needed 11 to be full just to break even... and that was in a month where I had no air conditioners go out, no furnaces blow, no plumbing leaks, no holes in the floors, etc. To cover down on that stuff too, I needed more than a 2/3 occupancy rate. And with the constantly revolving door of tenants that I had, it was tough to stay above that level.
55 and over trailer parks are entirely different than those that allow younger renters. Much better type of renter with 55+. Often they rent because they are older and no longer want to take care of a home. Often they are on fixed incomes (pension + SS + 401k) so you don't have to worry about them losing their job.
If you can qualify for purchasing in a 55+ park, it's worth investigating further. Do the math on what it costs for initial investment plus monthly expenses plus expected maintenance. Then look at market rates for rent and expected depreciation/appreciation.
A trailer in a 55+ court might be a better deal. I suspect most folks own their trailers and the reason they live in a trailer court is that they don't have enough income to support a house. So they sell they house they've been paying on for years and use the equity to buy a mobile home.
So the folks who would be renting would be those who haven't put together enough over the years to make a down payment on a mobile home or those who are living there temporarily until they purchase something.
Renting to the elderly has its own challenges. Just because they have a steady retirement income and are not junkies, does not mean you will get your rent paid consistently. Years ago, an acquaintance managed an apartment building of subsidized apartments with elderly tenants. One of their kids or grandkids would "borrow" money and they'd be unable to pay the rent. They got dementia and quit paying. They had pets they didn't clean up after. Several were hoarders. The list goes on and these were people who were paying a third of their income for rent and utilities. Imagine the nightmare of trying to evict a little old lady who spent all her money on sweepstakes entries and stuff she bought on TV.
Renting to the 55+ crowd is no piece of cake either.
Quote:
Originally Posted by RomaniGypsy
I'll give you advice. I "owned" 17 trailers which I rented out, for two years. ...
Take it from one who once had stars in his eyes about mobile home investments, as you do now... and then got two years of education at the school of hard knocks for pursuing that brilliant idea.
Sound exactly like the stories my friend who was the trailer landlord told me. He was constantly fixing stuff, rarely had a tenant move out in a regular manner. Usually it was either after a lengthy eviction procedure or they just took off in the middle of the night.
His grim joke was that he never needed to worry about returning a damage deposit.
Building equity with depreciating mobile homes would be a challenge.
Owning a mobile home park might be worth the trouble as the land could appreciate, particularly in that area.
However, appreciating land presents another problem to mobile home landlords. It is not unheard of for mh parks to be sold to developers. There goes your investment as you will be stuck with an old trailer and nowhere to put it.
Absolutely. If Liliflower meant to buy a whole trailer park then yeah that would mean steady income from the lot rent. There are some nice trailer parks. But like everyone said the bad outweigh the good. I couldn't rep you guys on my iPhone for the advice but RomaniGyosy OWS and all the others have great advice. A friend of mine had to move out of a park because the owner was selling the land. Basically either did not renew the lease or bought the leases out. It wasn't even worth moving the trailer. He simply went to another park found one for sale and bought it.
Liliflower if you really really gotta do it try to get in a park where you own the land with the trailer. That at least will help and it may be a better investment because people own it not just rent a space
Quote:
Originally Posted by choff5
Interesting. Apparently some people think mobile home parks are a good investment. From today Washingtion Post:
Wait until the crappy tenants, repairs and ongoing overhead combined with a still crappy economy hands them their head on a platter. There is nothing work with chasing a dollar for profit. But chase smart.
All hedge funds are doing is chasing yield. They will do the same with the trailer park market. How much risk do you think those guys are in? Unless they bought cash and have the money for the long run simply the fact the investments are states away not streets away is a detriment in itself.
Last edited by Electrician4you; 05-12-2014 at 06:31 AM..
Imagine the nightmare of trying to evict a little old lady who spent all her money on sweepstakes entries and stuff she bought on TV.
And since rental trailers are essentially a "home of last resort", when you evict someone, there's a strong chance that they will be homeless. If you have a heart, you're going to be in trouble when your deadbeat tenant comes crying to you saying "I don't want to be homeless". That happened to me.
Quote:
Originally Posted by GotHereQuickAsICould
Sound exactly like the stories my friend who was the trailer landlord told me. He was constantly fixing stuff, rarely had a tenant move out in a regular manner. Usually it was either after a lengthy eviction procedure or they just took off in the middle of the night.
His grim joke was that he never needed to worry about returning a damage deposit.
Tell me about it. For all of the tenants I put into those places, I think I only returned the entire damage deposit twice. (Leave the place a mess? No deposit return. Don't give the required 30 days' notice before move-out? No deposit return. I come to find out that you violated your lease somehow? No deposit return.) So, even with new tenants giving me a damage deposit that I almost never had to return, I still lost money.
Background: I am from southern California area and I am slowly building up my real estate portfolio.
I cannot afford regular houses and condos as rental properties at this moment. I came from an area where average 3 bedroom houses is 1.5 million dollars. (Orange county)
I want to buy couple of rental properties and it looks like the only properties i can afford right now are mobile homes.
Is trailer park / mobile home investment worth it? Thank you.
I am buying these mobile homes for rental properties only.
edit: I already have my own house (paid off), I also have two rental properties in Riverside county. I want to build my real estate investment portfolio and I have never had experiences with Mobile home investment.
Any advice will be greatly appreciated.
I heard those trailer parks are constantly raising the rent once you get in there and they know it's not easy for you to leave. They may be called mobile homes but they are not very mobile.
Tell me about it. For all of the tenants I put into those places, I think I only returned the entire damage deposit twice. (Leave the place a mess? No deposit return. Don't give the required 30 days' notice before move-out? No deposit return. I come to find out that you violated your lease somehow? No deposit return.) So, even with new tenants giving me a damage deposit that I almost never had to return, I still lost money.
My understanding is that many of those who rent in trailer parks are not counting on using their landlords for references in the future.. When they realize they are leaving, they stop paying rent. I think the reasoning goes along the lines of, "I paid last month's rent when I moved in, so I'm good."
So mobile home is a bad investment in your opinion.
I think the Newport Beach real estate market is such an outlier in terms of what is typical in the rest of the nation, the experience of other people in this regard really isn't going to be all that useful to you. You need to to do a lot of original research to find out about the experience of others in your specific areas. If you're an investor, I assume you know some experienced Realtors. You should talk to them.
Like many here are saying, unless if you own the plot the trailer is on too, definitely not a good investment at all. Weeding thru potential renters aside, the trailer itself (without the land, utility hook ups) is a depreciating asset (and is not considered real estate--its treated more as a motor vehicle is in most jurisdictions). Not only are they a depreciating asset, they most often are a cheaply made one too and regular maintenance and expenses will just keep rising over the years as it gets older...they tend to not 'age' as well as houses do.
One of my old neighbors owned a good amount of land up the road and had two trailers on it which they rented out for some time...these were about 20 years old at the time and the repairs which kept being required got to be quite high: much of the sub-flooring, which was a particle board of a kind, had rotted to the point that about 75% of it had to be replaced after 20 years...not a cheap proposition. Ceilings had to be patched and portions replaced around that time too due to settling (cracks in drywall) and water damage in a few areas--the list goes on and eventually (last year, so 26 years old) it became un-rentable due to mounting problems and it was taken down and a new one put in its place--but they owned the land it sat on. Trailers just do not age very well when compared to regular houses.
Buy some land with utilities and if you do get a trailer to put on it to rent, try to get a brand new one. If you must buy a used one, I'd say stay away from anything more than about 3-5 years old.
Last edited by Austin023; 05-13-2014 at 05:54 AM..
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