Mrs. 1500 and I are in the process of closing on one of the biggest investments of our lives. We’re partnering with a couple of others to join the mobile home park investing boom. Our share will set us back $170,000.
And I know almost nothing about the investment. Buying a trailer park wasn’t on our radar. What could possibly go wrong?
Mobile Home Park Investing: How & Why
While we did wind up making the investment in a mobile home park, it wasn’t without very specific reasons. We analyzed our existing investments, considered how the mobile home park could fit in, and looked for how it could boost our portfolio.
I love real estate and it has always been the goal of Mrs. 1500 and I to own rental properties. Since we moved to Boulder County in 2013, we’ve made offers on several, only to be outbid by cash buyers willing to pay ridiculous prices. I knew we would never own investment real estate in our town last year when a 4-plex sold. It came on the market for about $800,000:
- Me: $800,000 is just crazy. They’ll never get it.
- Mrs. 1500: Yep.
A bidding war broke out and the 4-plex sold for $960,000. We gave up on owning rental property.
But, there are other ways to invest in real estate. We’ve been doling out private loans ($290,000) and investing with syndicators ($200,000).
We love these deals. We make a healthy return with zero hassle beyond depositing the paper checks with a phone app. However, we weren’t done.
Our ideal portfolio balance is 50-50 split between the stock market and real estate. With our personal loans and syndication deals, we were at 66%/33% in the stock market and real estate respectively. Then came the opportunity to invest in a mobile home park…
Trailer Park Puzzlement
A very wise friend asked us last month if we’d be interested in a mobile home park investment with him and another partner. Similar to our other real estate investments, our role would be a passive one. The other two partners would manage the property. I like that a lot. I have enough things going on and don’t need something else to add to my busy days. However, there was a major problem:
I know nothing about trailer parks or investing in them.
I hit up the Google, but was quickly overwhelmed.
Too. Much. Information.
I dismissed the investment. I’m not going to throw money at something I know nothing about and don’t have the time to research. But then, I had another thought.
The other two partners are successful real estate investors. They both have years of experience and have executed many successful deals. Perhaps I was looking at the situation all wrong?
Instead of considering it an investment in a trailer park, maybe I should look at it as an investment in the other partners. Since I trust them, I can invest with confidence knowing they’ve done the research. So, Mrs. 1500 and I pulled the trigger on the deal.
The trailer park was under-managed for years and needs work. It will take at least a year to stabilize. This will take work, but I won’t be doing any of it.
Once all of the issues have been resolved, this investment has the potential to return around 14% or $24,000 per year. This will cover about two-thirds of our primary expenses. I’ll be thrilled if a $170,000 investment covers most of our spending. If we didn’t have a mortgage, it would cover all of it.
Another fun fact is that we invested in the mobile home park through our self-directed solo 401(k), so we’re not going to take a tax hit from it, at least not until we draw from the account in a couple of decades.
After I reframed how I thought about mobile home park investing, I was comfortable with it. And this isn’t much different than how I think about some of stocks that I own. I invested in Tesla because of Elon Musk, Facebook because of Mark Zuckerberg and Berkshire Hathaway because of Warren Buffett/Charlie Munger.
I admit that it still feels weird throwing $170,000 at an investment that I’ve never seen and know nothing about. However, I don’t lose sleep over it. Time will tell if this was a crazy brilliant move or just crazy stupid.
And there is a lot more to tell. I haven’t gone into any of the numbers or details about the park, but I plan to in future posts.
Would you do join the mobile home park investing boom?
One more thing: After realizing just how cheap it is to live in a trailer park, I had this conversation with Mrs. 1500:
- Me: We have $400,000 in equity in our home!
- Mrs. 1500 (with deep suspicion): Umm, yes?
- Me: We could sell it and move into a trailer!
- Mrs. 1500 (very firm): No.
- Me: But we could then invest the $400,000 and live for dirt cheap!!
- Mrs. 1500 (even firmer): No.
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