By now you've learned my beginning investor mantra: positive cash flow, positive cash flow, positive cash flow. That's what it's all about. And that's why I steer beginning investors toward duplexes, triplexes, and quads – and away from single family homes. It's the fastest way to build the positive cash flow that leads to financial independence.
But what if I told you there was one type of single unit property that could get you to your goals even faster? A type of property that rents all day long and generates about 10 times more cash flow than a standard multi-unit building?
Yup, you read that right – 10 times higher cash flow. Oh, and there's more – they sell for about a quarter of the price.
I'm talking about mobile homes. They're little tin boxes that spit money. And if you're smart, you'll include them in your investment portfolio.
I still stick by my no-single-family-homes-for-beginners rule. Most single family homes are not a good cash flow investment because they require a higher rent and every week of vacancy costs you money. It's the most common mistake beginning investors make – they buy two or three single family homes, deal with lots of tenant headaches and only put a couple of hundred dollars in their pocket each month. Then they figure that this real estate stuff just isn't worth the trouble.
The One Rule to Break And How It Can Bring You 10 Times More Cash Flow
But mobile homes are so cheap – and so easy to rent – that those rules don't apply. You can buy them for a fraction of the cost of a multi-unit property – but you can rent them for the same amount you'd charge for a duplex unit. And you'll have people lining up around the block for the chance.
Check out these numbers: as a general rule of thumb, multi-unit properties generate positive cash flow of about 3% of their value. So if a duplex is worth $100,000, it should generate about $3,000 in positive cash flow.
But mobile homes generate 25% to 30 % of their value. So if you pay $30,000 for a three bedroom, two bath mobile home, that means you can see as much as $9,000 a year in positive cash flow out of it. Just imagine the possibilities if you own multiple mobiles – or even a whole mobile home park.
Now that doesn't mean that you should buy only mobiles. Don't put all your eggs in one basket. It's a good idea to have a mix of cash flow properties in your portfolio – duplexes, triplexes, and mobiles. That's the best way to get to financial independence.
And once you're there, regular single family homes have a place, too. You don't want to depend on them for your monthly cash flow, but over time they'll help you build your net worth through appreciation.
Don't expect appreciation from mobile homes. But you can expect positive cash flow – and lots of it – for a minimal investment.