Are you a burned out landlord like I am? Someone who is just plain sick and tired of dealing with tenants and rental properties? If so, let me share with you how we've been able to eliminate tenants, management, and maintenance, yet still get a check (actually two checks) each month. You might want to give it a try, too.
We've been doing this for years with mobile homes and mobile home lots. As a result, we've eliminated 99% of the usual problems we had with tenants and rental properties.
Buying “The Dirt”
There are two “condominium” mobile home parks in my area. The lots are individually deeded and can be bought and sold separately, the same as a residential lot. It's not very often one comes up for sale, but we've now been able to buy twenty-four of these lots. This story is about one of our recent lot/mobile home combination package deals. (If you don't have any condominium parks in your area, consider buying a small park.)
The owners of this lot had just evicted their non-paying tenant. When the tenant moved, he took his home with him. So the owner now had a vacant lot with no income. We had a real “don't-wanter” on our hands who wanted a quick cash sale for that lot. These lots normally sell for $18,000-$20,000, if and when one comes up for sale, which isn't very often. Since we had a very motivated seller who wanted cash only, and wanted to close yesterday, we were able to buy this lot for $14,000. That's somewhere between 20% to 30% below market value. So we had a nice equity profit as soon as we closed.
Create Two Sources of Income
Contrary to how many park owners operate, we don't rent the lot to the home owner and let them move their home on the lot. Instead, we place our own mobile home on the lot and sell it by financing the sale. This way, we make a nice profit on the mobile home and a rent payment for the dirt. I've never understood why many park owners let a dealer make a profit on the home that goes on their lot, and then also let some bank make a profit on the financing of the home? The profit on both should go in the pocket of the park owner.
The “El Cheapo” Mobile Home
Before we even closed on this lot, we had a mobile home setup and sold. (My contract gave us 30 days to close, enough time to generate a cash flow before we had to pay for the lot.) We bought a 14 x 60, 1985 home in good condition for $2,000. The move, setup and some other expenses totaled $2,185, making our total cost in the home $4,185. The home was sold in less than two weeks for $8,900. Our buyers paid $1,200 down and signed a note for $7,700, 12.75%, $228.23 per month for 42 months. Our yield on the mobile home is 86%. A reasonable profit and “good nuff.”
Safe, Long-Term Income
Now, how did we do on the lot? Our tenant/buyer pays us $228 each month on the home, and also $235 each month for lot rent. And while it's true that our mobile home payments will end (maybe) after 42 months, the lot rent will never stop. But you can bet it won't stay $235 for more than a year either.
Also, if and when these folks move, most likely we will wind up with the mobile home to sell again. Or, if they move and take their mobile home with them, we will have a vacant lot to place another home. We'll simply just start this program all over again. Either way, we have “positioned” ourselves (the current phrase that's going around) to be in the winners circle regardless of what happens. After deducting taxes and park dues, we net $200 on the lot, which is about a 17% return on our $14,000 purchase price. So we're making 86% on the mobile home and 17% on the lot. But that's not all the benefits to this little plan. Besides the financial benefits, here are some other very nice benefits.
Since we don't own the mobile home, the couple living in that home doesn't call us when something goes wrong. We no longer get calls about busted water lines, leaking roofs, stopped up sewer lines, furnaces that died, and all the other problems that tenants love to call you about at supper time. Our buyer not only gets to fix the problem, but also gets to send us a check each month to pay for the home. So we get two checks every month with no tenants, no maintenance, and no management problems. And so far, we haven't found a tenant that knows how to destroy dirt.
Here are a couple of interesting facts. If we have no lot rent increases (fat chance of that happening) and net $200 for the next 42 months, we have received $8,400 (net) in lot rent. The mobile home payments, plus the down payment, total $10,785. Total rent and mobile home payments after 42 months amount to $19,185.
The cost for the lot $(14,000) and the mobile home ($4,185) amount to $18,185. After just 42 months, we have our entire investment back for both the mobile home and the lot, plus a small profit. And we still own the lot, which will provide us with income forever. If we ever get tired of owning these lots, we could simply sell them with a small down payment, carry the note and still get a check for many, many years. It's better than any retirement plan I know of. That's another example of how you can do a little work one time and get paid for a long time. Your money will work much harder, and produce better income than you can. So learn how to put your money to work so you can go fishing.
A Simple Two-Phase Investment Plan
Let me share our simple “two-phase” investment plan that's worked well for us over the years, and hopefully, will give you some ideas on doing the same.
Phase One. Develop an investment plan that will provide maximum cash build up in the shortest possible time with the least amount of risk. We do it with “el cheapo” mobile homes. But the same concept can be used on anything you're willing to loan money on and accept as collateral. Financing is where the real money is. Learn all you can about it.
Phase Two. Once you have more cash than you need for phase one investments, start investing in something that will provide safe, long-term dependable income. And which will require very little of your time and effort. We do it with mobile home lots and well secured notes.
We've also paid off all of our debt. Payments that used to go to banks now stay in our pocket. So have a plan where your mail carrier is bringing other people's checks to you, not taking your checks to other people.