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How Much Do You Know About Investing In Mobile Homes?

by John Fedro on December 28, 2013 · 12 comments

  
Mobile Home Investing

Today’s lesson is designed to help you, the investor, get more comfortable interviewing sellers and understanding their mobile homes for sale. This exercise is aimed to help prepare you to:

  • know when a seller is full of B.S.
  • look for warning signs in any mobile home.
  • get comfortable being in control while interviewing sellers and properties.

There is an old real estate saying that says “Sellers are liars”. Personally I do not believe this statement. Likewise you could make the same argument about Buyers.

The list below represents only a fraction of the scenarios that may happen to you when you are personally speaking with a seller or over the phone with a seller. Keep in mind your goal is to always have clarity in what home you are buying. If you discover more repairs needed than what was originally disclosed the deal is not necessarily over however the price and terms will now be renegotiated in your favor. Does this make sense?

Disclaimer: The below role-playing exercise is based solely from of my personal experience and the experience of the clients I help.

KEY TO REVEAL ANSWERS: To reveal the answers below highlight the areas of the screen after the bold questions.

Friendly Place Road, Anywhere, USA

Scene: You are walking inside and around a nice looking single-wide mobile home with your friendly seller. This manufactured home was built in 1989 and has 3 bedrooms and 2 full bathrooms. The seller is needing to sell in the next 45 days due to a job transfer out of state. The sellers are happy to be starting a new life in another state and you are happy for them both.

The home is a smaller 12ft x 55ft mobile home with a split floor-plan, 2 bedrooms up front and the master bedroom in the back. The home backs up to a wooded preserve so it is peacefully quite. The mobile home has been on the market for 90 days with 2 buyers wanting the home but not getting approved at the park. You are very interested in the home and have already discussed purchasing the homes for a substantially reduced price and a fast sale.

Mobile Home Investing Quiz Time

1.) You are a trained mobile home investor so you know to walk around and step on every-square-foot of floor inside the home. You feel a 1ft x 4 ft “weird-spot” in the floor next to the children’s bed. The carpet is nice but you can’t help feeling that there is something wrong with this spot under the carpet. You ask the seller about this.

The seller tells you that this spot was always like that since they moved in and that it has never gotten any worse.

What do you do next?
Clarity is key. Is the mobile home splitting, is it a raised beam, or simply a repair-job gone bad? You need to know what you are dealing with before making any offers.

Ask to pull the carpet up gently and look at what the issue really is. Replace the carpet after you are done. If you really like the home and the seller hesitates at allowing you pulling up their carpet you may want to offer to pay a flat fee of $10-$40 for the inconvenience of temporarily pulling up their carpets. If/when you purchase the home this money will be deducted from the purchase price.

If after you explain your intentions with the seller and they disagree you must assume that this piece of subfloor will need replacing or there are structural issues. Contacting your handyman or handy-woman to walk through the home with you is the next step before purchasing. This will also give you more face to face time with the seller.

2.) The seller tells you that 2 other separate buyers wanted to buy the home but the park denied their applications.

What may this tell you? 
and This may tell you that you may run into this similar problem when trying to resell this home. Keep in mind you will have more buyers compared to the seller because you may be willing to sell for monthly payments. It is important to always verify what every mobile home park screens for in their background and credit checks. If the park is too strict with their application process you might consider passing on the deal.

Real Life Story: This has only happened to me once. It was in the start of my career and I purchased a nice mobile home inside a beautiful park. I did not have to get approved as the park manager knew I would not be living in the home. The park required every buyer living there to have a credit beacon score over 700. In case you did not know that is absurdly high for a mobile home community. Also the application was 4 pages long and $75 per applicant! Needless to say this home was hard to get anyone approved for. It took me 9 tries to finally get the home sold. Phew!

3.) You bring a flashlight with you on the appointment. While visually inspecting the home you notice that in the interior of the master bedroom closet there are some discolored areas on the ceiling. The spots only cover an area approximately 1ft by 1ft and are now completely dry. You believe the material of the ceiling is sheet-rock. No painting or cover up on the ceiling has be done.

You ask the seller about this and the seller tells you that this leak has been fixed weeks ago and the spot is now dry. He says a branch fell and caused a small hole in the roof. The seller says he fixed the roof by re-shingling the small hole in the roof weeks ago.

What do you do next?
Verify the leak is stopped and repaired. It is important to verify that the seller is correct and no more leak is present.

Without lifting up the ceiling you may not be able to tell if any water damage or mold exists in the ceiling area. If you are lucky enough to have a big rain storm before or after this appointment always try to re/visit the home then to double-check for active roof and window leaks. If after this rain storm the area is still dry you can assume the roof has been fixed and the ceiling is just stained. No further action is needed.

If there is no rain storm available you will want to bring a handyman or inspector with you to verify the repairs needed. The handyman will likely want to walk on the roof if a ladder is available. 

4.) The weather is cold, but not freezing. You arrive to see that all the kids are home from school and paying video games on the living room television. As you walk through the kitchen you notice the oven door is open, the oven is empty, and the oven is on.

What might this tell you?
This may tell you that the furnace is broken and the stove is substituting as a heat source. A mobile home that you resell should almost always have a heat source included. This can be a considerable cost so you will want to negotiate this cost into the cost of the mobile home. While it is not hard to sell a mobile home without heating it is always nice to have heat included for your buyer.

5.) The home has a split floor plan with one of the second bedrooms being reduced 3 feet in size due to the hallway.

What might this mean to you?
2 bedroom and 3 bedroom single-wide mobile homes built in the 1980s, and especially in the 1970s, typically have 1 notoriously small bedroom in regards to single-wide mobile homes. If any bedrooms seem small to you then the room will also seem small to your potential tenant-buyers. This will reduce the number of interested applicants making it harder to resell. If the room is very small, less than 6ft x 6ft you may want to advertise the home as a 2 bedroom and let the buyers be surprised to find an additional bedroom, as opposed to overselling the home and the prospective buyers being disappointed in a very small 3rd bedroom. Does this make sense?

6.) The seller has a central heat and air conditioning unit for the entire mobile home. The home is vinyl sided with great curb appeal. The seller also has window air conditioning units in all 3 bedrooms and 1 in the living room. The seller has agreed to include these with the home too. You ask the seller why they have window units and a central AC unit.

The seller casually tells you that the central heat and air conditioning unit works fine. The reason for the window units is to cut down on the electric bill.

Do you believe the seller?
Not yet. Do not buy this home without turning on power to the home and verifying the AC blows cold air. If the AC does not work then a handyman or qualified AC technician needs to inspect the unit to give you a reasonable price to fix or replace the unit. This repair cost, plus 30% for your time, should be deducted from the current purchase price.

If the seller will not turn on power due to financial constraints than you should asap.

7.) While inspecting the exterior of the mobile home you notice that the seller has taken care of the home beautifully. A clean pressure-washed exterior and manicured flower-bed show a great pride for the unit. You notice the main breaker box and decide to give it a check. You spot the main breaker is 150 amps to the entire home.

What this tells you about the home?
You always want to check how many amps are feeding the home. If a mobile home has only a 50 amp service it will be difficult to run many appliances or window a/c units at once. This will make it uncomfortable for your tenant-buyers to live. Most mobile homes these days have 150 amps or more. Look for 100 amp service or higher in all mobile homes you purchase for investment.

8.) While checking the Title you see that the seller is not the owner named on the Title. You ask him about this?
The seller tells you he purchased the home from an elderly woman that has moved away since. This was 2 years ago and the Title has never been put into his name. No Bill of Sale is available. The seller is unavailable. The owner’s signature is on the Title correctly as “seller”. The park manager took over 1 year ago and knows that he has always paid lot rent on time.

What should you do?
If the Title is already signed correctly by the seller than in many states the Title can be transferred into a “buyer’s” name easily. In other states the owner must sign a state-approved-form during the transfer process so transfer will be difficult. Ultimately the seller must put the home in their name OR you must help track down the owner to sign as seller. I suggest you take the first path if the Title is already signed by the owner of record as seller. Helping the seller transfer the Title is a great idea to go the extra mile.

What should you do if the seller does not have the Title and has the same story?
Unfortunately there is little help you can offer without the Title present in most states besides Texas, New Hampshire and Vermont. Even trying to obtain a duplicate Title will prove difficult without the owner of record. There is 1 advanced strategy for helping the seller and creating profit however it is advanced and I will not be talking about that method today.

Conclusion

The moral of the exercise is to verify everything the seller tells you with your own 2 eyes. The advice of an experienced handyman or handy-woman can be the best few dollars you ever spend. Many times your handymen and women will do these walk-throughs for free. The ultimate goal is to know exactly what you are buying and to not get fooled by a rash decision or inexperience. A good idea can be to make sure you always have a trained-eye looking over your shoulders while investing.

Love what you do daily,
John Fedro

Related: 5 Reasons Not to Invest In Mobile Homes

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{ 12 comments… read them below or add one }

Ang December 29, 2013 at 12:00 am

Would have been a lot nicer if you had just put the answers in! The ipad would not let me click or drag. In the future if you want to give your audience information kill the gimmicks and come with the info!

Reply

Joshua Dorkin December 29, 2013 at 8:46 am

Hey Ang – We went and fixed it so everyone can easily read the post. Sorry about that.

Reply

John Fedro December 29, 2013 at 1:31 pm

Thanks for bringing that up Ang. Thanks Josh and Brandon for making those changes.

Talk soon,
John Fedro

Reply

Adam December 29, 2013 at 5:45 am

John,
That was an outstanding roll-up=your-sleeves article, which I really appreciated. How do you do that nifty trick where the answers are only revealed when you scroll over them?

Reply

John Fedro December 29, 2013 at 1:37 pm

Hi Adam,

Thank you for the kind words. Very happy to add value to your business. The “highlighting” trick has been changed to now show the answers in italicized letters for easier reading.

Talk soon,
John Fedro

Reply

Ty December 29, 2013 at 6:05 am

The article looks great … I only wish I had a way to see the answers from my iPad/iPhone as well.

Cheers,
Ty

Reply

John Fedro December 29, 2013 at 1:39 pm

Hi Ty,

Thank you for the kind words. I underestimated how many folks use ipads these days. The answers have now been changed to italicized letters for easier reading.

Talk soon,
John Fedro

Reply

Lisa Phillips December 29, 2013 at 12:02 pm

Great article John! I have enough “cheap” houses to choose from when investing, but if I ever ran out of cash flowing inventory I always thought I would look into mobile home parks. Just like with my neighborhoods, not all parks are the same and you can vet them to find the good ones that are worth pouring money into. If you don’t mind, what kind of returns do you typically get, purchase prices, costs of renovations?

Reply

Lear December 29, 2013 at 1:12 pm

This was a great article, I tried my hand at investing in mobile homes, but I ran into one snafu. I move around a lot due to my job, and since I rarely have more than two years at any location its difficult to learn a market very fast.
With my SFH investments I had the expertise of RE agents zillow, and realtor.com along with rentometer.com to help me evaluate property values and rent rates.

With the Mobile homes market I found it very challenging to get values for the property outside of what a seller was telling me it was worth. I obviously was not comfortable with that, is their any sources for evaluating the value of mobile homes and rent rates?

Reply

John Fedro December 29, 2013 at 2:02 pm

Hi Lear, (Cool name)

Thanks for the kind words. How fun to have multiple properties around the country in different places you have lived. Also I commend you on turning a seemingly negative into a positive. I would like to add my 2 cents about your snafu. Good word, I haven’t used that word in some time.

From my experience investing around the country and helping others 2 years is more than enough time to understand your local market and become a dominate force in this area. In addition you should be able to safely get into your first MH deal with 3-6 weeks after coming to a new area. You’ll only grow from there.

This is easier said than done and also requires a specific action plan and daily effort. Do not hesitate to comment any follow up questions you may have. All the best and here to help.

Talk soon,
John Fedro

Reply

Alphonso December 29, 2013 at 6:19 pm

Thanks for the article I’m always looking for more information on mobile homes and try to check John’s post. I was wondering and I’ve been waiting on a podcast on mobile homes. I know all you guys are very busy but we the newbies, rookies, and seasoned investors are depending on you.

Reply

John Fedro December 30, 2013 at 10:29 am

Hi Alphonso,

Thanks for reaching out and for your kind words. It is important for newbies and seasoned investors to speak up when anyone has a question or hurdle. Through sites like this one and others no investor needs to be alone.

Best,
John Fedro

Reply

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