“I went from mobile phones to mobile homes,” Lilly says. “I never thought I’d be Slaughterville’s largest landlord. If you’d told me that while I was at Wharton getting my fancy MBA, I would have said you were nuts.”
Lilly bought a second, 20-pad park in Tuttle, Oklahoma, this time off Craigslist. It’s on a hillside with a dirt road and a smattering of trees. Visiting it one frigid night in February, Lilly discovers water leaking from one of the homes. His manager and two residents struggle to get it stopped. As they work, an oil well in the next field vents sulfurous gas that drifts over the park. Yet residents stay, in part because they can send their kids to Tuttle’s schools, which are among the best in the region, Lilly says.
Felons OK
Lilly will take tenants who’ve been through bankruptcy as well as felons. Just no violent ones or child molesters.
“I’m the Wal-Mart of housing,” Lilly says. “Nobody can undercut me.”
The key measure in mobile homes, as in all rental real estate, is the capitalization, or cap, rate. It’s the amount of income a property throws off from pad rents, minus mortgage payments and other costs, divided by the price of the property. Nationwide, rents average about $390 per pad per month, according to real estate researcher JLT & Associates.
So if a mobile home park is worth $1 million and nets $70,000 from rent annually, it has a cap rate of 7 percent. Rolfe and Reynolds aim for a cap rate of 9 to 10 percent when they buy.
The way to instant profits is to find a distressed park -- a place where rent checks are late, water meters don’t exist and trailers date from the 1980s or 1990s -- buy it cheaply and turn it around.
Water Bill
At the Tuttle property, which cost Lilly $280,000 to buy in 2013, the previous owners had paid the water bill. Lilly installed meters on each trailer so the renters could pay for their own water usage, saving him about $13,000 a year.