Anyone (almost) can buy a mobile home park but can you make it cash flow positive to the tune of $100,000 during the first year of ownership? Of course you can but it can’t be just any old park with any old financing deal. There are a few strict parameters that should be in place before you hit that exalted investment income level. Here they are.
Size: You’re going to need to be looking to buy a mobile home park that has at least 80 spaces. A park this size will cost about $800,000. Of that total you’ll need to put down 10% to 20% yourself and finance the rest. For you number freaks out there, that works out to $80,000 to $160,000 you’re going to have to come up.
Financing: You need to buy a mobile home park that can be seller financed, which simply means the seller holds the mortgage. A bank will require a larger down payment and only on recourse debt terms. A recourse note means that, in the event of a default, they can take the collateral (the mobile home park) and then come after your personal assets if the debt is not satisfied. Boo! Hiss!
Cash Flow: Now we’re down to the simple part of generating an extra $100 per space per month to reach the $100,000 a year goal. Your options are to raise rent or lower costs. See how simple business can be? And don’t forget that vacant sites kill your average. Get them occupied quickly. Immediately raising rent $50 monthly should not be at the price of tenants leaving. They may whine and threaten but won’t want to pony up the $3,000 cash it’s going to take to move their mobile home somewhere else. When it comes to lowering costs, look into possibly leaky water lines and sub-metering each home to find out who is wasting it. Might be time to consider making tenants pay for the service. Finally, do you really need to pay a manager $30,000 a year to run the joint?
Find more creative ways to lower costs. Remember, you’re shooting for that golden $100 per site per month increase.
There you go. A simple way to earn $100,000 yearly from your mobile home park investment.
The MHPListings Team
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