Studies have shown that only 60% of Americans have sufficient systems in place to derive enough income to retire – and even then, not very well. People spend decades scrimping and saving, and have very little to show for it. Let’s be honest, at 2% return levels — which is what safe investments are paying today – an enormous investment account of $500,000 is only going to pay out $10,000 per year. If you think you’re going to be getting 10% per year in stocks, an illusion that many people had until the market crash wiped them out, then you’re delusional. In a nutshell, the entire American dream of retirement appears to have been yet another bait and switch con.
Studies have shown that only 60% of Americans have sufficient systems in place to derive enough income to retire – and even then, not very well. People spend …
But there is another option. It’s simple, direct and honest. It involves buying a mobile home park on correct economics. And living off the income for the rest of your life. Skeptical? It’s a lot more legitimate than the other retirement concepts you’ve been working on.
The basics of mobile home park deals
Mobile home parks are one of the simplest forms of commercial real estate. They are so simple because, when done properly, they only involve land ownership – not buildings. By not owning buildings, you avoid the regular pitfalls of repair and maintenance and capital improvement and liability – all the things that make being a landlord such a hassle and scary business. You basically rent little plots of land to folks who have their mobile homes on them, kind of like a subdivision. These tenants ask nothing more of you than to leave them alone and have the water and sewer running and the roads solid.
It’s also important to note the impact of “affordable housing.” This type of housing – basically housing for poor people – has endless demand. As America continues to fall apart, this is one part of the market that increases every day. It is not at all unusual for a mobile home park to run 100% occupied for decades. And that’s even during recessions like the one we’re currently in. It’s a market that’s here to stay, and the supply of units is not even in the ballpark of demand.
The importance of scale
Mobile home parks have a supreme advantage over single family home investments, as well as duplex, four-plex and even smaller apartment complexes. And that advantage is called “scale” – the sheer number of units that you own. A typical mobile home park you will buy is 30 units to 100 units. That means 30 to 100 tenants. Having that many tenants in a property results in terrific “diversity” in income – you have so many tenants that if one or two can’t pay in a certain month, the impact on your income is minimal.
The other important feature of “scale” is the multiplier effect of raising rent and cutting cost. If you have a 50 space mobile home park and raise the rent only $20 per month, that’s an additional $1,000 per month in your pocket. If you can find a way to cut costs by only $40 per month per unit, that’s an additional $2,000 per month in your pocket. And if you can pull off both, that’s $3,000 per month in income to you.
The retirement plan
Here’s your mobile home park retirement plan in a nutshell. Find a 50 space park (it can be more or less) and buy it based on real economics at a 10% cap rate (which is standard) – and so that it covers its own debt payment every month (no great challenge). Then find an extra $100 per month in lot income through raising rents a little and cutting costs a little. The result: $60,000 per year of cash flow to you. Sound too simple? There are already thousands of people who have pulled that off.
Don’t forget an unfair advantage you have as a mobile home park landlord: it costs $3,000 to move a mobile home. As a result, your tenant can’t move out no matter how high you raise the rent or what costs you cut. Obviously, you want to be fair and reasonable. But it does give you carte blanche to make the changes you want to make.
To make that same $60,000 per year with your IRA, based on current return levels, you’d need $3,000,000. Think that’s going to happen?
How to fund your retirement plan
If you buy a 50 space mobile home park, it’ll cost you probably about $500,000. Of that purchase price, you’ll need around $100,000 (20% down). But in some cases, depending on the seller, you can do it with as little as 5% down ($25,000) and, in select cases, zero down.
So which do you think is more possible? $0 to $100,000 on the mobile home park program, or $3,000,000 in the IRA?
Mobile home parks offer you the best opportunity to retire on a decent income. And you can get into the business immediately. What’s holding you back from exploring it?