A little investment money goes a long way in the mobile home market. It’s not sexy cocktail hour conversation but there is good money to be made in the mobile home market. There are several ways to make money at the low end of the homeowners market. Being able to seller finance mobile homes is among the most profitable.
Mobile homes (not the dirt) are a popular option when people want to own a home but can’t afford a traditional stick built home. When you seller finance, you can buy a decent mobile home for as little as $3,000 and sell it for $19,000 on a ten year contract. It’s not only the sales price where you make a profit but the interest comes in at about 9%. When you seller finance a mobile home, you invest as little as $3,000 but collect interest on $19,000.
Yes, People Will Pay $19,000 for a Used Mobile Home
When you offer seller financing, people will pay $19,000 for a home. It’s all about the rent factor. People would rather buy when the monthly house payment is less than half of the cost to rent. Rents are skyrocketing today. In major metropolitan areas, a decent apartment easily costs more than $2,000 a month. Lesser apartments go for more than $1,000 each month. Even in rural areas, rents are pushing $1,000.
Now consider being a buyer of a $19,000 mobile home at 9% on a 10-year contract. As a seller financer, you’re going to ask for at least a $1,000 down payment (drops you’re outstanding investment to $2,00) just to be sure the people you’re financing have some skin in the game and can demonstrate some financial responsibility. That means you’re financing $18,000. The buyer repays the loan for less than $230 per month. Of that, the interest you receive on your $2,000 investment starts at $135 per month. You collect more than $1,570 in interest the first year alone. By the end of the second year, you’ll have collected more than $3,000 in interest alone. You’re initial investment is more than fully recovered and the last eight years of the mortgage are pure profit to you.
It’s All About the Cost of Renting
The buyer switches out a $1,000 a month rent payment for a $230 mortgage payment. Almost certainly, he or she will rent the dirt the mobile home sits on. Probably for about $250 per month. That brings their monthly cost to own to $480. On top of that, they’ll need to pay about $60 per month for homeowners insurance. However, when they rent the dirt, they don’t pay property taxes (most places). Total cost to buy comes to about $540 per month compared to $1,000 to rent. That’s why people will pay $19,000 for a $3,000 mobile home!
Low Competition
Mobile home flipping with seller financing isn’t a sexy industry. One reason is that low income buyers can be difficult to deal with. They often have little or no money saved for a down payment and banks don’t like making loans on used mobile homes (making seller financing a good option). If you can’t work patiently with these people, this sector of the industry probably isn’t for you.
There is little competition trying to seller finance mobile homes because this is not a growing sector of the industry. Many communities have banned or heavily discouraged new trailer parks. The main reason being is that they are alleged to harbor criminal activity, drug use, and are a haven for the poor that consume taxpayer resources without contributing much back. Still, if you can deal with these issues, finding mobile homes for sale and flipping them with seller financing can be a great place to begin a real estate investing career for little out of pocket cost.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.
