$650,000 in Debt On A Mobile Home Park

Summary

Summary of "The Ramsey Show Highlights" Episode: "$650,000 in Debt On A Mobile Home Park"

Release Date: April 9, 2025
Host: Ramsey Network

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Introduction

In the April 9, 2025 episode of The Ramsey Show Highlights, the discussion centers around a caller's financial dilemma involving substantial debt tied to a mobile home park and multiple Airbnb businesses. Hosted by the Ramsey Network, the episode offers expert financial advice aimed at helping listeners navigate complex money matters efficiently within a concise, under-ten-minute format.

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Caller’s Financial Situation

The episode begins with a caller presenting a multifaceted business scenario:

• Businesses Owned:

  • Mobile Home Park: Holding a loan of $650,000.
  • Airbnb Ventures: Possessing three Airbnb properties generating a combined monthly profit of $150.

• Additional Debts:

  • Truck
  • Side-by-Side Vehicle

The caller seeks guidance on whether it's advisable to utilize profits from the Airbnb business to pay down the debt associated with the mobile home park, especially considering the impending two-year readjustment of the loan.

Notable Quote:

Caller [00:06]: "Is it okay to use money from one business to pay down debt in another business?... our mobile home park, the loan on it in two years readjust."

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Dave Ramsey’s Analysis and Advice

Dave Ramsey addresses the caller's concerns by first dissecting the tax implications and the structure of the businesses:

• Tax Considerations:

  • Both businesses are structured as LLCs, which means they do not pay taxes independently. Instead, profits are reported on the owner’s personal tax return.

  Notable Quote:

  Dave Ramsey [01:12]: "LLCs don't pay taxes... the profit then lands on your personal return, and that's where the tax is paid."

• Financial Evaluation:

  • The mobile home park generates approximately $5,000 monthly (totaling $60,000 annually) after expenses, which Ramsey deems insufficient against a $650,000 mortgage.

  Notable Quote:

  Dave Ramsey [03:02]: "You're making nothing on this... you have a $650,000 mortgage on something that's only making 60 grand. That does not make sense."

• Strategic Recommendations:

  • Immediate Debt Reduction: Prioritize paying off the remaining $40,000 on one of the Airbnbs to eliminate high-interest debt.

  Notable Quote:

  Dave Ramsey [02:24]: "Pay the 40,000 off immediately. Be done with it."

  • Reassessing the Mobile Home Park Investment: Ramsey challenges the profitability of the mobile home park, suggesting that the returns are abysmally low for the amount of debt incurred. He advises either renegotiating terms to improve cash flow or considering selling the property to avert financial strain.

  Notable Quotes:

  Dave Ramsey [04:09]: "If you did not own this mobile home park, I want you to back up and ask yourself this... Would you buy it again?"

  Dave Ramsey [04:20]: "If you're making 300 instead of 60, you could do that before it resets in two years by plowing it all into the mortgage."

• Long-Term Financial Health:

  • Ramsey emphasizes the importance of having investments that appreciate over time, unlike mobile homes which typically depreciate. He urges focusing on assets that enhance personal wealth rather than erode it.

  Notable Quote:

  Dave Ramsey [04:40]: "Mobile home parks generally aren't that bad. They generally are cash money... But that’s not your situation."

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Insights on Mobile Home Park Investments

Ramsey delves deeper into the viability of mobile home parks as investment vehicles, contrasting the caller’s experience with other successful examples:

• Successful Models:

  • Refers to another caller, Ken, who manages a large mobile home park with 750 tenants, generating significant profits by strategically pricing and managing properties.

  Notable Quote:

  Dave Ramsey [04:10]: "Ken... she was making bank. She was printing money off of that."

• Common Pitfalls:

  • Over-improvement: Excessive reinvestment into property upgrades can cripple cash flow and diminish returns.

  Notable Quote:

  Dave Ramsey [04:30]: "Something got to change... too many improvements here."

• Investment Philosophy:

  • Advocates for investments that flow positive cash without requiring constant capital infusion. Encourages listeners to evaluate the true return on investment (ROI) and sustainability of their business models.

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Conclusion

Dave Ramsey provides a comprehensive critique of the caller’s financial strategy, highlighting significant red flags in the mobile home park investment. He underscores the necessity of aligning investments with cash flow and long-term financial goals, cautioning against strategies that may lead to substantial debt without commensurate returns.

Key Takeaways:

1. Evaluate ROI Carefully: Ensure that the returns on investments justify the debts incurred.
2. Prioritize Debt Reduction: Eliminate high-interest debts promptly to improve financial stability.
3. Choose Appreciating Assets: Invest in properties and businesses that are likely to appreciate over time rather than depreciate.
4. Strategic Cash Flow Management: Use profits wisely to enhance business sustainability and personal financial health.

Notable Closing Quote:

Dave Ramsey [04:50]: "Create your free everydollar budget today. The simplest way to budget for your life."

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This episode serves as a critical reminder of the importance of prudent financial planning and the careful evaluation of investment opportunities to ensure they contribute positively to one's financial well-being.

Transcript

[Dave Ramsey]

Brought to you by the EveryDollar app. Start budgeting for free today.

[Caller]

Quick question. Well, two quick questions. First, I own two businesses. One is a mobile home park. And I also am in the Airbnb business. I own three Airbnbs. I do have some debts, obviously, on the mobile home park. A truck and a side by side. Is it okay to use money from one business to pay down debt in another business? So we make about 150 through our three Airbnbs. And that's kind of slush money. We use that for big projects around our house and whatnot. But our mobile home park, the loan on it in two years readjust. So we also want to pay down that balance as quickly as possible before it readjusts. So is that a big no? No, tax wise.

[Dave Ramsey]

And no, there's no tax difference. All of it is taxed at your rate. I assume these are all held in LLCs.

[Caller]

Yeah, they're two separate LLCs.

[Dave Ramsey]

Yeah. So you know what happens. You know LLCs don't pay taxes, right?

[Caller]

Yes.

[Dave Ramsey]

Whatever. Whatever the profit is in the LLC lands on your personal return. That's where the taxes are paid. Llc, you file a tax return. You file a tax return on the llc, you show the profit, but there's no tax paid. Then the profit then lands on your personal return, and that's where the tax is paid. So the point is, it's all your money.

[Caller]

Sure. So I can.

[Dave Ramsey]

You can move it around without any consequences whatsoever. You do whatever you want to do.

[Caller]

Okay.

[Dave Ramsey]

It's your money.

[Caller]

Perfect.

[Dave Ramsey]

Now, how much do you owe on the mobile homes park?

[Caller]

The mobile home park? I owe about 650.

[Dave Ramsey]

Okay. And you made 150 clear on the Airbnbs. Are those mortgaged as well?

[Caller]

No. 1.

[Dave Ramsey]

Those houses that are Airbnb are paid for.

[Caller]

Well, one is a guest house on our property. So, I mean, it just kind of is absorbed into what we own. Our house.

[Dave Ramsey]

Gotcha.

[Caller]

One is paid for. We just finished paying it off last year. And one has 40,000 left on it.

[Dave Ramsey]

Okay. All right. Pay the 40,000 off immediately. You probably got. You probably got that in checking.

[Caller]

We will in a few months.

[Dave Ramsey]

Yeah, be done. Be done with it. All right. Now then, you're making 150 on Airbnbs. What's the profit on the mobile home park after bills are paid?

[Caller]

After bills are paid? About five grand. Now, that includes we're reinvesting into the park and upgrading it. So sometimes we've got a slush of 5,000, sometimes we use it all.

[Dave Ramsey]

Five grand a month or $60,000 a year. You're making nothing on this. Why, why in the world you have a $650,000 mortgage on something that's only making 60 grand? That's horrible.

[Caller]

It's. Again, it's because we're putting.

[Dave Ramsey]

How much are you putting back into it? Well, 200, 300,000.

[Caller]

It has.

[Dave Ramsey]

No, the thing ought to be cash flowing like a bandit. Yes, mobile home parks print money.

[Caller]

True. Now it's, it's not a big one. There's only 13 mobile homes and it also has a four bedroom house on it. Somebody left that in absolute.

[Dave Ramsey]

Okay, you're something screwed up about your numbers, honey. I don't care. Still something screwed up about your numbers. You don't have a $650,000 mortgage on a mobile home park. That makes 60 grand. That does not make sense. It should. It literally should be making 300 grand. Okay, something's wrong. Are your rents off or you know what?

[Caller]

Well, as a mobile home park, some. Yes, some of our rents are pretty low. I mean, it's low income housing.

[Dave Ramsey]

I know that. I said, are they not? But you're not charging. It's a, it's a trailer. Of course. It's lower income housing.

[Caller]

You know what? Half of them, half of them we have redone and the rents are keeping up with the local economy. The other half.

[Dave Ramsey]

Okay, here's what I want you to do, because I can't figure it out on the radio here, okay? But I, I own several hundred million dollars worth of real estate and I've looked at, I've owned mobile homes, I've owned parks in the past, not in. I don't own anything like that right now, but I know the numbers on these things. So here's what I want you to do. If you did not own this mobile home park, I want you to back up and ask yourself this tonight and run the numbers and you and your husband look at the numbers and you said, I've got the opportunity to buy this and go $650,000 in debt to buy this, and I'm going to make $60,000 a year after doing that. Would you buy it again? The answer should be no to that question, by the way. But if there's other things that you and I aren't connecting on where this money's going inside this thing, which you seem to be alluding to, and there's a lot of money, I think missing in this conversation. You need to look at this and say, you know, do I need to not be doing a bunch of this stuff and instead paying down this mortgage because the stinking thing's gonna reset and I want you to pay it off. That's what I was working towards. I don't want you to pay it down. I want you to pay it off. And if you're making 300 instead of 60, you could do that before it resets in two years by plowing it all into the mortgage instead of into improvements in the mobile home park. And that's what I think should be happening. But I'm, but I'm missing some money here because you can't find it in our conversation and it might not be there, but I think it should be. You should not have 650 invested in mobile homes that are going down in value and then only be cash flowing 60k. That sucks. If that's what's happening, you should sell that. If you can get someone else to buy it, you should sell it and get rid of it because that's a horrible ROI in that situation. Horrendously bad investment. But if you're making three or 400 on the thing somewhere in there, there's something I'm missing in these numbers then. And you can get this, get rid of this mortgage before it resets with the Airbnb money piled on there too. And I think you might be able to do that. Instead of fixing up the sidewalks or some kind of crap in the mobile home park, let's get rid of the mortgage and then we'll go back and do our improvements on the property, our capital improvements once we're debt free and we've got real cash flow that I think you might have this stuff out older. That's what I think is happening. But if you really our $650,000 in debt on depreciating losing value mobile homes and your only cash flowing 60, you got a really bad deal and you need to get out of it if you can. It sucks as an investment. Mobile home parks generally aren't that bad. They generally are cash money. Because I talked Georgia and I talked to a lady earlier this week, Ken, the Investing Essentials event. She had no on the air here. She had 750 tenants. And of those, I think 60 of them or 70 of them were in mobile homes that she paid 20 grand apiece for. And she was making bank. Yeah, yeah. I mean she was printing money off of that. And so that, that's what normally occurs. And so I think there's too many improvements here. She's alluded to that. She couldn't give a specific sound. Too many redwood decks. Yeah. Or something. I don't know what you're doing putting. Giving them all a hot tub. I don't know what we're doing, but it's like, I don't know what's happening, but something's got to change. Anyway, that. That's the thing. So mobile homes, for those of you that are looking for something to live in, never do that because they go down in value. It's a car you sleep in financially. That's what it amounts to. And if your parade of homes is going down the highway, you might be a redneck. I'm just saying so seriously. And I love it. I'm not picking on you if you live in a mobile home, I'm telling you, don't buy one to live in. They go down in value. Houses up in value. The place where you sleep should be going up in value. That's what you ought to purchase. If you're going to do an investment like she does, however or the lady we talked to, she got 20 grand a piece in them and the things are cash flowing. She's breaking even every 20 seconds on those things and she can buy another. And if they in five years are worth zero, she buys another 20,000 and throws it on the pile. And you know, that's a different thing. You're cash flowing on a depreciating asset there. But that makes. And that actually can make business sense. It's a pain in the butt to operate them, but it can actually make ROI business sense. So. Wow. It's an interesting discussion, Andrea. Thank you for involving us in it. I'm sorry I wasn't more thorough, but that gives you some things to chew on and for y'all to think about. Create your free everydollar budget today. The simplest way to budget for your life.