In our last issue I explained the advantages of investing in Multi-family properties.  Today I'd like to explain why Manufactured Housing Communities (MHCs) can be very attractive investments.

Yes MHCs are more often referred to as Mobile Home Parks or sometimes wrongly as Trailer Parks. 

First, let me address the inaccurate term Trailer Parks.  Trailers can be pulled behind your car or truck whereas Manufactured Houses are often 80 feet long, up to 16 feet wide, and come in as many as four sections.  It takes special equipment and skills to move and set up these homes.  Since the 70's, manufactured houses have been built to tough government guidelines and offer families comfortable and efficient homes anywhere from 800 to 2400+ square feet of living space.  And finally to get rid of the notion that these homes are not solid structures, let me just ask you, can your stick built home travel down the interstate at 60 mph?

So with that explained here are our top 5 reasons for investing in MHCs:

1. Lower tenant turnover:  The number one expense with multi-family property investing is turnover.  If you raise the rent in an apartment, say $20 a month tenants will see if there is a better deal somewhere else.  These homes cost a minimum of $2,000 to move and setup again therefore manufactured home tenant turnover is much lower.
2. Lower maintenance cost:  In most MHCs the tenants own the home.  This means our maintenance costs are limited to the community infrastructure.
3. Drive property value higher:  Many MHCs are poorly managed and offer significant upside potential. 
   • For instance, last year we purchase a 138 unit MHC with 80 filled spaces.  Our due diligence process revealed that the MHC hadn't increase lot rent since 1999 and was now $80 per month below market and $50 below the lowest competitor.  This is the property I mentioned in last months newsletter but let me recap it here for the new readers.  In the first 90 days we increased the lot rent $40 per month.  To see what that did to the value of the MHC you take the 80 filled lots, multiply that by $40 to get $3,200 per month, and multiply that by 12 months to get $38,400 per year additional revenue.  Using a 10 cap rate the MHC value increase by $384,000 ($38,400/.10).  Pretty nice right?
   • This same MHC had 58 empty spaces so we set to filling those spaces with good used manufactured houses and offering them for rent or sale using owner financing.  We can buy good used homes and get them set up for approximately $15,000 each.  We can then either rent them for ~ $450 -$500 per month or sell them using owner financing for $18,000 or more.  Either method increases the value of the MHC, provides people with a nice place to live, and provides our investor partners with a nice Return on their Investment (ROI).
4. Better ROI: When the MHC owns the home you can recoup your investment much quicker.  In the areas of the country we invest, decent 2 bedroom "C" class (blue collar) apartment will cost between $20,000 and $30,000 each.  A good used 3 bedroom 2 bath manufactured home can be secured and set up for $15,000.  Because the manufactured home can then be rented for about the same amount as comparable apartments it produces a better ROI.  In addition, if the home is sold using owner financing the ROI can be even better.
5. Renting dirt:  What could be better than renting dirt?  When we purchased the 138 unit MHC all the homes were tenant owned.  Therefore for those home we are literally renting the land the home sits on!  Nothing is lower maintenance than that.

We also have one altruistic reason that we like investing in MHCs.  When we offer one of these homes for sale with owner financing it may be the only way some people will ever be able to own their own home because their income is just too low for a stick built house.  It is rewarding to experience their excitement over owning their own home.  In addition to being a great opportunity for the buyer, home ownership is good for the MHC, neighborhood, and the larger community. 

These are the key reasons we include MHCs in our investment strategies!  If you have any questions please contact us.  Or if you know anyone who might be interested in this information please forward the newsletter to them.

So how is your bank treating you?  Are you happy with the returns on your savings account, CDs, IRA or other retirement account? 

We have opportunities available for both equity and debt partners who would like to earn above average returns on your investments.  If you are interested please contact us for more information.

Did you know that you can invest in real estate from your IRA or other retirement account?  This investment secret isn't well known but it is perfectly legal. Contact us and/or click on this Investment Secret link learn more.