There are over 60,000,000 Americans with household incomes under $20,000 per year. To this giant market, a mobile home is the only form of detached housing that they will ever be able to afford. And, as a result, the demand for mobile homes has never been higher. But how can you take advantage of this opportunity?
The Basics of Affordable Housing
Before you can begin to investing, you must first understand your customer. For those families with household incomes under $20,000 per year - using the government's own ratio of housing cost to income of 33% - their housing budget is around $500 per month. At the same time, the average cost of an apartment in the U.S. in 2010 was around $1,030 per month. The point is that this market segment is extremely thankful to find something that they can afford, and is not very discriminating on the quality of the product. They are looking for basic shelter - literally a roof over their head, a solid floor, running water and sewer, and heat in the winter. These customers are not expecting fine carpets, hardwood floors, upscale cabinetry. As a result, a successful investor in mobile homes will not focus on providing more than the basics. That is not to say that the home should not be clean and attractive. But the American obsession with upscale bathrooms and kitchens has no place in affordable housing.
And before you think that this customer is different than you and I, look around you. If you earn $10 per hour or less, you are in this segment. And that is a giant pool of jobs in America today. Almost everyone who works at the grocery store, McDonald's - everywhere you go - earns in this range. And as America's economy continues to decline, this number grows.
Why Mobile Homes Are The Answer to Affordable Housing
Mobile homes are the lowest cost form of detached housing to build. It costs less than $30 per square foot to build a mobile home, as opposed to around $100 for a stick-built home. And used homes often sell in the area of $10 to $15 per square foot. HUD has controlled the construction standards of homes since the 1970s, with the goal of keeping costs at a minimum. If there's been a way to shave costs, it's been done.
The other key is the quality of life that a mobile home can provide the resident as compared to other inexpensive housing options. Unlike an apartment, the customer has nobody banging on their walls or ceiling. They have a yard. They can have a pet. Basically, mobile homes allow residents to have self-respect, and a "neighborhood" feel that supports a healthy lifestyle.
Why Mobile Homes Are Easy To Renovate
Mobile homes have some unusual attributes that other forms of housing do not share. One is that they have no permanent foundation. A mobile home's foundation is nothing more than a steel chassis, to which the wooden floor is attached. There are so slabs and no piers - nothing expensive to settle or crack. Leveling a mobile home costs in the hundreds compared to a stick-built home's thousands. All utilities run in a common "trough" as opposed to the myriad of wires and pipes in a stick-built home. This makes it easy to locate and repair the water, sewer and electric pipes and lines.
One of the most unusual components of a mobile home is the fact that none of the walls are load-bearing. A mobile home is structurally similar to a shoe box - the walls and roof are the only components needed to make it stand up. This gives you much more freedom in renovations, as virtually all internal walls are simply cosmetic.
Unbelievable Amount of Demand
If the U.S. is in a recession, you would never know it if you run an ad for a mobile home for sale or rent. Even in a small market, you should receive 30 to 50 calls a week in response to your ad. At a mobile home park in Pueblo, Colorado recently, the number of calls exceeded 150 in one week. Why all the calls? Because there is a huge, unsatisfied demand for affordable housing. But that's not the whole story. The other cause of the giant demand is the poor quality of traditional apartment offerings. Have you seen an affordable housing apartment complex recently? Anyone who thinks that mobile home parks are unattractive has not visited apartments. The true crime center of most cities today are the lower-income apartment developments, with drug dealers standing out in front and prostitutes, gangs and drug addicts living inside. This is a horrible environment for any family or individual to live in, and many buyers and renters of mobile homes are fleeing from these terrible situations. In fact, most cities now view aging apartment complexes as their #1 problem - not trailer parks.
Healthy Numbers
Mobile homes are an attractive investment due to very attractive numbers. Essentially, it is easy to sell a mobile home for much more than you paid for it. A mobile home that you buy and renovate for $8,000 can be sold for $15,000 and a home that costs $12,000 can be sold for $30,000. You can buy them relatively cheaply because most people do not want to invest in this asset type. At the same time, there is a huge supply/demand gap, so you can price them high without much competition. The important fundamental - and the one that needs to be your guide in every decision you make - is to stick with the business model of affordable housing. You have to construct the monthly payment, including mobile home park lot rent, to not exceed around $500 per month. This is what the customer can afford. If you place the consumer in a position of having a bigger monthly obligation than they can afford - as was just demonstrated in the sub-prime mortgage meltdown - you will end up in endless defaults. This serves no one, as you are constantly having to clean and re-sell the home and your customers are denied the affordable housing, and long term benefit, that they are searching for.
Gaining Knowledge In This Niche
There are two websites that contain a large amount of information on this investment sector. One is http://www.mobilehomeparkstore.com, the #1 website in the U.S. for mobile homes and mobile home parks.
It is also important to note that there are investment funds that cater to this investment niche, the most popular of which is the Affordable Housing Fund at http://www.affordablehousingfund.com. And these funds allow for investment via self-directed IRAs with small initial investments as low as $2,000.
Conclusion
Affordable housing is going to be one of the key investment sectors in real estate in the coming years. Get in now, on the ground floor. You can obtain spectacular returns and -- equally important -- provide nice housing to hard-working Americans who need it badly. This is a giant market, and one that you will be hearing a lot more about in the future.
Tuesday, March 29, 2011
Monday, March 21, 2011
For Billboards, Recessions are Buying and Building Opportunities
Is our nation in a recession? If so, that signals a great buying and building opportunity for billboards. Some of the greatest billboard buys and builds in history have come as a result of an economic downturn. Why? The reasons are numerous:
In tough times, prices are cheaper. Everything gets their prices slashed in a recession. And that includes billboards. Even though it may not appear so now, price can go down real far real fast – if the person really needs the money. And they don’t negotiate as hard either.
Banks are very eager to unload billboards they have taken over through foreclosure. No bank officer ever wanted to run a billboard, much less have to learn how to do so Banks are willing to practically give you the sign in the proper circumstances.
Landowners who would never take your call before are suddenly calling you to rack up some additional cash flow. It’s amazing how many new opportunities come up during a bust. Suddenly, $500 per month sounds pretty good to most every landowner.
Land changes hands frequently, and the new owners are new prospects for you to build a sign on. Just because the current owner told you “no”, don’t bet that the new one won’t say “yes”. Just stay on top of your proposed locations to see who has been replaced. Someone with a low basis in some “troubled” land may find your billboard income all the more significant and appealing.
Other, big sign companies are willing to unload their least profitable signs in bad times. Stay in contact regularly with the big companies, so you can be in the loop if they want to dump a “dog” sign.
So don’t let the economy get you down. You actually want a recession now and then to “cleanse” out the weak players, and open up more potential billboard locations and acquisitions. Even “gloom and doomers” can have fun in the outdoor billboard business!
About the Author:
Frank Rolfe started his billboard empire from his coffee table, as a fresh graduate from Stanford University. It began as a resume builder for graduate school applications, and ended with a sale to a public company 14 years later.
Using unique strategies he developed from desperate competition with much larger adversaries, Rolfe eventually owned more billboard units than any private individual in Dallas/Ft. Worth. Along the way, he fine-tuned the techniques to find billboard locations, rent advertising space, and sell signs and leases.
Rolfe is the author of the Billboard Home Study Course and has also put together the only bootcamp for those looking for a crash course on the billboard industry. The Billboard Bootcamp is held twice a year in St. Louis, MO. For more information visit Nicheinvestmentnetwork.com/Seminars.
In tough times, prices are cheaper. Everything gets their prices slashed in a recession. And that includes billboards. Even though it may not appear so now, price can go down real far real fast – if the person really needs the money. And they don’t negotiate as hard either.
Banks are very eager to unload billboards they have taken over through foreclosure. No bank officer ever wanted to run a billboard, much less have to learn how to do so Banks are willing to practically give you the sign in the proper circumstances.
Landowners who would never take your call before are suddenly calling you to rack up some additional cash flow. It’s amazing how many new opportunities come up during a bust. Suddenly, $500 per month sounds pretty good to most every landowner.
Land changes hands frequently, and the new owners are new prospects for you to build a sign on. Just because the current owner told you “no”, don’t bet that the new one won’t say “yes”. Just stay on top of your proposed locations to see who has been replaced. Someone with a low basis in some “troubled” land may find your billboard income all the more significant and appealing.
Other, big sign companies are willing to unload their least profitable signs in bad times. Stay in contact regularly with the big companies, so you can be in the loop if they want to dump a “dog” sign.
So don’t let the economy get you down. You actually want a recession now and then to “cleanse” out the weak players, and open up more potential billboard locations and acquisitions. Even “gloom and doomers” can have fun in the outdoor billboard business!
About the Author:
Frank Rolfe started his billboard empire from his coffee table, as a fresh graduate from Stanford University. It began as a resume builder for graduate school applications, and ended with a sale to a public company 14 years later.
Using unique strategies he developed from desperate competition with much larger adversaries, Rolfe eventually owned more billboard units than any private individual in Dallas/Ft. Worth. Along the way, he fine-tuned the techniques to find billboard locations, rent advertising space, and sell signs and leases.
Rolfe is the author of the Billboard Home Study Course and has also put together the only bootcamp for those looking for a crash course on the billboard industry. The Billboard Bootcamp is held twice a year in St. Louis, MO. For more information visit Nicheinvestmentnetwork.com/Seminars.
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