The most common question I get is “is it possible to make $100,000 per year with a mobile home park, so I can quit my day job?” While the answer is “yes”, it is much more complicated than it looks. To make $100,000 per year from one mobile home park, there are some mathematical realities that you must be aware of.
Let’s start with the basic metrics
To earn $100,000 per year, you need $8,333 per month in cash flow. That’s after your note payment. Don’t be confused by the claim “this property makes $100,000 per year”. At a 10% cap rate, any $1 million property has an “income” of $100,000 per year. But that’s not cash in your pocket. All that money goes to your note payment for 30 years or so. That’s not going to let you quit your day job.
What the right deal would look like
To put $8,333 per month of cash in your pocket, you need a park that has the potential to significantly raise the rents and cut the costs over the budget. That’s the secret to making high cash flow on a mobile home park. So the first step is to find a mobile home park that can simply cover the total note payment. That’s all. But the second step is much more complicated. The park needs to have at least 83 occupied lots that you can raise rents and cut costs $100 per month per lot, or 42 lots that you can raise rents or cut costs $200 per month, or 166 lots that you can raise rents or cut costs $50 per month per lot.
What you’d have to do after purchase
The right park would have under-market rents, water and sewer costs that can by pushed back onto the tenant through sub-metering, vacant homes that can be easily fixed and rented, and any other strategy that can create immediate cash flow. Then all you have to do is enact your plan.
A happy ending no matter how you play it
If you can increase the cash flow of a mobile home park by $8,333 per month, then you have increased the value of the mobile home park by $1 million, based on a 10% cap rate. There’s really no way you can go wrong with a deal like that, whether you sell it or keep it. And, even if the park fails to fully hit your goal, it’s still a massive success.
Making $100,000 per year in cash flow from a mobile home park is not an impossible mission, But it completely depends on the type of park you are looking at and its potential. An average park is not going to do it. You need a park with lots of room to push rents, cut costs and spike the cash flow. But the important note is that $100,000 in cash flow is possible. Because it certainly is not in apartments, single-family, retail, or office properties. Mobile home parks are the kings of cash flow, and have been for decades. Have you looked at any recently?