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5 Ways to Make Money Investing in Mobile Homes

by John Fedro on April 30, 2010 · 24 comments

  

I had the great fortune to talk with some great real estate investors this week at a local REIA meeting.  After the meeting concluded I hung around and began mingling with the locals, no one amazingly had ever invested in manufactured housing.  I spent the next three hours regaling a group of doe eyed newbie investors about the past successes and failures while mobile home investing.

While describing the mobile home business I realized that there are so many ways to make money with mobile homes.  Even within this small niche of mobile home investing there can still be multiple ways to profit.

Fast Turn: This one goes by many names.  Anytime you purchase a property with the intention of fixing and re-selling it for substantial profit you are fast turning the home.  Mobile homes with their easy-to-fix design and simple framework can significantly less costly to repair than traditional site built homes.  Undervalued and underrated used mobile homes can be purchased for a fraction of their retail price.  This may mean that you are able to purchase a newer model mobile home for only a few dollars per square foot, leaving thousands of dollars in equity for you.

“You can’t eat equity.” Mobile homes can be notoriously difficult to arrange conventional financing for. (See my past article: Mobile Home Financing) It is for this reason typically only newer aged mobiles “attached to real property” qualify for conventional financing.  Selling your invest mobile home for all cash is possible, this is particularly popular in tourist destinations.

Wholesale: Mobile home wholesaling is the process of selling contracts.  You are able to get Seller Jane’s mobile home under contract to buy for a steal.  Since you do not buy mobile homes yourself, you call a friend who does.  “Mobile Home Mitch” who loves cash-flowing used mobiles offers to pay $3,000 over the contract price for the home.   You assign your contract to Mitch and profit $3,000 at closing.

There are wholesalers for everything; traditional real estate, cars, fish, flowers, REOs, and yes… even mobile homes.  When “unwanted” mobile home sellers call in response to your “We Buy Houses” marketing, hold onto these leads that may not meet your criteria.  They may just make you money after you give them to a seasoned mobile home investor.

Ants: Also known as “bird dogs“, becoming an ant provides a great needed service to mobile home investors.  Typically mobile homes can populate a certain location or area of town.  Negotiate a deal with an “active” mobile home investor, perhaps he/she pays you per qualified lead. Your job is to drive these mobile home areas, snap pictures, take notes, get addresses and jot down “FSBO” phone numbers.

(Rent) Buy & Hold:  Is your dream to become a landlord?  To own countless properties?  To know that your tenants will be paying for your upcoming cruises and children’s schooling?  Renting property has brought many real estate investors countless fortunes.  The problems with rentals is that they come with their renters, and renters bring  their “renter’s mentality”.   Anyone who has ever dealt with children can relate to handling renters on a day to day basis.  Properly screened and a thorough background check can eliminate most rental problems before they start.  Also an experience property management can be worth their weight in gold.

(Owner financing) Buy & Hold: Whether you sell your investment mobile homes with a lease to option, land contract, rent-to-own, or simply create a promissory note, you are intending to sell your mobile home for payments overtime.  Instead of collecting a one-lump sum when you sell your newest mobile home acquisition, you can choose to accept the purchase price in monthly payments plus interest.  A size-able non-refundable down payment is usually paid to you as consideration for the tenant/buyer’s opportunity to purchase the home one day.

So remember, if you drive down the street and notice a mobile home community, take a drive through.  The next time you get a half day free from work, take the kids and check out the mobile home area of town.  Start looking for deals and maybe you’ll be the next mobile home superstar.

Happy Investing,

John Fedro

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{ 24 comments… read them below or add one }

Caroline Moore May 2, 2010 at 6:25 am

The older, inexpensive mobile homes and mobile home parks are still one of the best income-producing businesses I know of. It doesn’t matter what shape the economy is in, people still need affordable housing.

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John May 6, 2010 at 6:09 pm

Hi Caroline,
Shhhhhhh, don’t let the secret out! Lol. It is getting more and more difficult for the average family to find affordable housing. There will always be a market for “homes for sale” in the tens of thousands, rather than the hundreds of thousands dollars. Thanks for commenting.
- John

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Rhonda O, June 18, 2012 at 5:16 pm

Thanks John very helpful!

I receieved a email from a motivated seller who wants to sale her mobile home. I thought this would be hard until I read your article. I am a wholesaler that is unfamiliar with mobile home investing! If you don’t mind answering a few question I was wondering how do I determine the value, and what should I base my offer off of? Is it the norm based of the comps in the area?
Is there a type of mobile home that I should stay away from?

Thanks Rhonda O,

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John Fedro June 19, 2012 at 2:45 pm

Hi Rhonda O,

The price and terms you offer to any seller of a mobile home will be determined by your exit strategy. You mentioned that you are a wholesaler so I am imagining that you are planning to quickly line up a buyer for this home. As a rule of thumb aim for 50% ARV minus repairs minus your wholesaling fee. Use “real” local MH comps nearby.

However if you are looking to put together a good owner-financing or subject-to the mortgage type deal (and then wholesale this type of deal) you may be able to offer 80% for the home and still make it attractive to a landlord type investor.

Hope this helps. Either way you will likely be one of the only investors making a viable offer to purchase this home.

Best,
John

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Douglas W. September 11, 2012 at 8:33 pm

Recently found a motivated seller that is moving out of state and wants to sell their mobile home but it is in a park. Is there anything I should consider if I want to resell the home? My fear is that a mobile home in a park may be worth less than one on its own land. I need help determining if it is even worth purchasing from the owners.

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John Fedro September 12, 2012 at 10:02 am

Hi Douglas,

Great you are pursuing mobiles in parks. Sellers moving out of state can be highly motivated if they need to move in the next 90 days or less. If the seller must move in 30 days or less then act fast as this seller will likely sell to the first buyer with cash or terms.

With that said your idea about the mobile home being worth less then a home with land, you are correct. This is why you’ll likely purchase this complete “home” without land for less than $4,000. Ideally this first deal is a 3 bedroom.

Don’t let the low appraised value of the home keep you away from doing the deal if the rest of the numbers work out. Numbers such as; other homes for sale nearby, park condition, home condition, seller motivation, fall season, resale value, cash-flow potential, holding costs, price, terms, etc.

With regards to your question about offering a purchase price to secure the deal and also purchase at the lowest possible price, this is a subject I have written and recorded much about in my course. However here is some advice to keep you safe, control the title, and make a profit… 1. Find the seller’s needs, not his/her wants but his/her needs (such as; need $2,780 to move and pay off bills). 2. Give him/her those needs if possible 3. Compromise until there is a win-win-win deal. Aim for a purchase price under $4,000 (unless you plan a quick wholesale and live in a beach-resort town of south Ca then aim to purchase at 40% ARV of real and local park sale comps).

Hope this helps. Email me directly if you need further help on the deal.

Best,
John Fedro

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Travis Derod September 26, 2012 at 2:52 pm

Hey thanks for posting this John. I was wondering if you have a copy of the mobile home purchase agreement and mobile home assignment of contract that I can download and use for a no-money-down deal?

I do have Lonnie Scruggs “Deals On Wheels” book with agreements. Will I be able to use the Mobile Home Purchase Agreement that came with that?

Also, can I use the same Assignment of Contract that’s used on a regular home?

Thanks in advance for your advice. I really hope you can help because I really need to make this happen.

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John Fedro September 26, 2012 at 4:29 pm

Hi Travis,

I can provide you with a PSA and assignment of contract if you email me personally so I can include them in the reply. However if your plans are to find a mobile home (inside or outside a park) and assign the Purchase and Sales contract (PSA) to your buyer/investor then you likely already have the forms you will need.

Keep in mind in most states a mobile home in a park will not need to close at a title office so you will either have to collect your assignment fee upfront when assignment is signed OR be present at the point of closing to make sure you do get paid OR completely trust the buyer to give you the assignment fee post closing. If the home is attached to private land disregard my last sentence as this home will close with a HUD-1.

Hope you’re working on a great deal!

Talk soon,
John Fedro

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Brittney February 13, 2014 at 2:58 pm

Would love a cop of the agreements you use as well.

Purchase and assignment.

Also is there a dealers license necessary to do this, I think in florida it’s so

Reply

Travis Derod September 26, 2012 at 4:44 pm

Thank you. I just sent an e-mail to one of your e-mails from your website. Let me know if it came through.

Thanks
Travis

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kyle January 10, 2013 at 10:06 pm

Hi, John

So im a college student and im trying to think of a few ways to get a head start. I was thinking about starting off by buying a trailer in a park for cheap and renting them out. Im thinking on the terms of guaranteed money every month ontop of a paycheck which is huge. Then as it goes on keep buying and buying then sooner or later it all adds up. Is this a good idea or is it just a waste of money. I live in Vermont and everyone now of days is looking for a cheap place to live without taking out loans to own.

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John Fedro January 11, 2013 at 11:51 am

Hi Kyle,

Let me first say that it is excellent that you are building cash-flow while still in school!

With that said it sounds to me like your goal is to build passive income without using too much money or any credit. If you ask me if mobile home investing is a waste of time I would certainly disagree as this has been my income for the last 11 years. It is not a waste of time but it does take effort and education, and starting from scratch is tough – yet very rewarding.

If you have mobile homes near and around you then overtime you can certainly purchase and resell a number as you described with payments [most parks don't allow renting]. However there are hurdles and you should be properly educated. Read up on the subject and go to my blog for more free info.

Hope this has helped. If you have further questions along your journey I am here to help.

Talk soon,
John Fedro

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Lin August 7, 2013 at 8:00 am

Hi John,

I to am looking to start buying mobile homes and renting them out. I have never done this and want to know if it’s smar to do? Also where can I find your blog? I don’t know the ends and outs of this business and want to find out. Is there also a good lease agreement you could send me way? Any advice would be great!

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John Fedro August 7, 2013 at 9:37 am

Hi Lin,

Thanks for commenting and reaching out. I am glad to hear about your excitement with regards to mobile home investments. There are many things to consider and know before getting started. I am curious if you are interested in mobile homes in parks or on private land or both?

Yes, I can provide you with a lease agreement, however many parks will not allow rentals.

Either way there is a lot of free info at my blog at http://www.mobilehomeinevsting.net

Let me know any more specific questions you may have.

Talk soon,
John Fedro

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Lin August 7, 2013 at 10:05 am

Thanks!!! I am interested in renting out mobile homes with land, not in a park.

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Bill THompson September 30, 2013 at 8:42 am

Hi,
I have a newbie question concerning buying mobile homes in a park that has monthly land rental fees. Say I buy one and it does not sell for several months. I am I correct in assuming that the land fee will still have to be paid even though the home is not occupied?
Thanks,
Bill

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John Fedro January 16, 2014 at 3:18 pm

Hi Bill,

Thanks for reaching out to me on this issue. I apologize for the delay in my response as I am just now seeing your question/comment. In the future if I do not respond in a few hours or day it means I did not see the email or question. Please email me for quickest reply time as well.

You likely have already discovered your answer however I will answer it anyway for the benefit of others. Yes, the monthly land fee is still due whether the home is filled or not. With that said you can negotiate with the park manager for free or discounted lot rent for the first few months or anytime the home is vacant depending on the park manager, who you are purchasing the home from, and other factors. However most of the time this lot rent will always be due monthly.

On a side note if the home doesn’t sell for months than the price or terms are not right. Homes should sell quickly or the price/terms need to change. Hope this all makes sense.

Talk soon,
John Fedro

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Chris October 19, 2013 at 12:49 pm

I live in NJ and I was interested in buying and renting out mobile homes, I am trying to research info on it but from what I am reading that’s prohibited. Does anyone know if this is true?

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John Fedro January 16, 2014 at 3:23 pm

Hi Chris,

I am curious what makes you say that. Can you add the link to what you are reading to this page or my email? I have successful and active members investing in the NJ. What aspect of purchasing, reselling, or renting a mobile home is prohibited? Why would buying, selling, or renting real estate or mobile homes be prohibited? This makes me chuckle. Is NJ Nazi Germany?

Talk soon,
John Fedro

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John Fedro January 16, 2014 at 3:24 pm

Additionally I apologize about the delay. Anytime I don’t answer in less than a day it means I have not been alerted to the comment. You can always email me directly for fastest reply time.

Talk soon,
John Fedro

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Kimberly January 15, 2014 at 8:10 pm

John,

I am helping a friend build his business in real estate investing and he has started with four mobile homes. The challege is the park only will let him have his name on one, it is an owner occupied park. He has been renting out the four moble homes and I am trying to do his taxes and none of the homes are in the business name. He has put about $12,000 out of pocket investment to rehab the properties and I am trying to recoop some of the loss but I just don’t know enough. His company is an S-corp, can you send me in some direction. I need to send him to your site.

Kimbelry

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John Fedro January 16, 2014 at 3:27 pm

Hi Kimberly,

Thank you for reaching out to me on this issue. While I can not give out legal or business advice I can let you know what I would do and have done in this same situation. I would advise your friend to purchase and hold every property in a separate Personal Property Trust. This will keep his name off of all the Titles while making the park manger happy and keeping him and his S-corp safe.

I am always available for more assistance as I am sure you will have some followup questions. Happy to help and thanks for recommending my site.

Talk soon,
John Fedro

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Ted February 1, 2014 at 1:49 pm

John I have a question to run by you. I recently purchased a small piece of land (about 1.4 acres) to use to open a business. I have decided not to pursue that use, however, and recently decided that it would be a great rental site for about 4 mobile homes, and may provide a useful supplementary income. I have decided to go with one of theses 3 options: 1) Purchase the mobile homes, set them up, and rent them out. 2) Purchase the home and set it up, finance the home, and rent the lots. 3) Puchase and set up homes, and finance the home and land. Of these options, which do you recommend?

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John Fedro February 3, 2014 at 3:03 pm

Hi Ted,

Congratulations on creating your own little mobile home park. I regret to hear that your other business will not go through but hopefully it is for the best. Simply answering your question I would would say 2 for sure. You get to put long lasting people in the home, charge a down payment, receive higher monthly payments than rent, and you will still own the land for years to come.

This is only my opinion and there may be other factors to consider such as local rent in your area and if you like maintaining mobile homes, etc.

Hope this helps,
John Fedro

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