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4 More Reasons NOT to Invest in Mobile Homes Inside Parks

by John Fedro on January 8, 2014 · 11 comments

  
Not to Invest in Mobile Homes

Personally speaking I believe that clarity is immensely underrated in today’s world.

Without clarity we find ourselves drifting through life, love, and business unclear about our next moves.

Even worse we move forward with false ideas or misunderstood directions that may cause us to fall and stumble in confusion and costly errors. Clarity in any new business venture can likely be discussed for hours and hours concerning the ins-and-outs of every particular step of the business in which you begin.

This article comprises another quick list of 4 more reasons why some real estate investors may wish to steer clear of investing in mobile homes for profit. As a mobile home investor for the past 11 years I have come to understand both the positives and negatives of the manufactured home investing business. Below are some negatives.

1. Your Reputation Will Change

In my experience it is best to commit to one or two niches and be very well known for these properties. Becoming an expert in everything leads to a watered-down image people have in their minds of you. When you let investors, Realtors, bird-dogs, and others know you invest in mobile homes you will be labeled as a “mobile home investor”. If you do not feel comfortable having others knowing you are associated with mobile homes this business is likely not the best fit for you.

2. You Will be Spending Time Directly with People

Mobile homes require that you speak directly with sellers and buyers. More than a real estate business mobile home investing is a people business. If you would rather work deals with a Realtor and/or simply stay behinds the scenes this business is likely not the best fit for you. With this statement said this is only from the experience I have had, perhaps you are able to generate significant profits not interacting with mobile home owners, however in my deals the best profits are the ones made directly with mobile home sellers and buyers.

3. Your Friends will Laugh at You in the Beginning

When the money starts coming in you will be the one laughing. Until then however many of your friends and even family members will question and even laugh at you for starting down this business path. Mobile homes obviously have a reputation of being less valuable than traditional site built homes, and in many respects they are. To many folks this translates as mobile homes being less profitable and therefore less worthy of respect. In reality however mobile homes, mobile home buyers, and mobile home sellers are just a worthy of our time and respect as anyone else needing help.

4. You May Need a Co-signer

While purchasing a mobile home attached to land may not require a credit and background check many mobile home parks will ask to verify your credit and background history prior to you investing and owning within their park. This makes common sense as you are renting land within their park and the owners would like to know your past history.

If you have less than fair credit you may be asked to have a co-signer with you on the lease agreement until you resell the home. If your credit or background is shaky a few hundred extra dollars extra as a deposit may help to mitigate the park risk to lease to you. These requirements and criteria will vary from community to community. Over the years I have found that “honesty” speaks just as loudly as your history. Be honest and up front with park managers as to what they will find and why. Lying about your history will almost always make things much worse than the honest truth.

While I do not wish to deter anyone from their personal income goals and/or getting started with mobile home investing I would rather be frank and upfront with everyone rather than painting a rosy picture that mobile home investing is all smooth sailing. Over the past 11 years I have loved mobile home investing and it has been worth every moment of ups and downs.

Love what you do daily,

John Fedro
Photo Credit: Seán Venn

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{ 11 comments… read them below or add one }

Curt January 8, 2014 at 10:54 am

Hi John, I agree that the opportunities in mobile homes on rented land are slim to difficult (Lonnie Deals). We studied Lonnie’s info went to a few seminars then drove the outer Atlanta parks and talked to the park managers…. They hated investors and would not let me deal in their parks. The few independant owners had such old inventory that those parks didn’t look like places we wanted to work.
But we currently do 40% of our business in double wides titled on land, on permanent foundations. We are buying this inventory from the GSE’s like HUD for $20k to $25k for a 2000 or newer property. We won’t buy older than 2000.
We rent to own for a year and owner finance if they need to. Dodd Frank compliance is an issue now with owner financing.
Most local investors hate mobile homes which makes for the opportunity. We are finding that folks in small town America have few rent / rent to own opportunities so it’s an undiscovered strategy.

$25k to buy, a few $1k to fix up, some times just lightbulbs and appliances, sometimes a new roof and HVAC. $650-$750/mo, Owner finance in the $40k range on a 10 yr 9.5% note makes for the same $650/mo cash flow and no maintenance.

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John Fedro January 8, 2014 at 12:30 pm

Great feedback Curt! Thanks for commenting. I hear some ups and downs in your business however it sounds like you have a working formula that is winning. Well done and don’t quit.

My business is 50% mobiles inside parks and 50% mobiles on private land. I rarely purchase from HUD but know others that do successfully and happily. Well done again.

Talk soon,
John Fedro

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Gerald Harris January 8, 2014 at 12:06 pm

I remember an investor in San Diego California that was doing incredible doing the Lonnie Type deals. Since the are would be considered “expensive” getting people to buy his mobile home deals was pretty easy. That was 10 years ago. New Park Managers understand what investors are doing. I do believe many of these deals exist today, but not in abundance like they use to. Curt is correct, buying mobile homes on land by itself would be a great deal. I have seen deals here in Charlotte NC for as low as 10k for doublewides with home and land. This mobile would have rented for about $500 per mo. Needed about 2k in fix up. It was about 25 to 30 years old but still in good rentable condition. Sell the mobile home and keep the land. Sell the mobile home on payments and rent the land. Love the article!

Reply

John Fedro January 8, 2014 at 12:36 pm

Great advice and comments Gerald. Also thank you for your kind words. From working with folks around the country there are still opportunities in almost every area of the country in parks. There are certainly pros and cons about investing in mobile homes on private land and inside pre-existing parks. Be aware that the original Lonnie-type of deal is now non-compliant with the Dodd Frank act and you must follow specific steps to remain compliant. With that said do the type of transactions you like and that will make you most happy. The $10,000 for home and land package sounds like a winner to me. Even older homes can be keepers if they have been well maintained.

Thanks again for commenting.

Talk soon,
John Fedro

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Adam January 8, 2014 at 1:38 pm

John,
I loved that article because of the human and social element you introduced to the “glamor” of the nice. I used to be in the car rental industry, so it hit home!

Reply

John Fedro January 8, 2014 at 5:31 pm

Right on Adam! :) Thanks for commenting.

Talk soon,
John Fedro

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Lisa Phillips January 8, 2014 at 2:56 pm

I understand where you’re coming from! I invest in lower priced housing, and the perception is riddled with sometimes fair, but many times exaggerated and extreme views of what those neighborhoods just “have to” look like. I can take slightly condescending attitudes, especially since they are so profitable and cash flow well, but its good to hear that counterpoint. This did not discourage me from thinking of investing in mobile homes, just that there are valid obstacles that someone needs to consider when investing here. I thought it was balanced, so thanks for the great article!

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John Fedro January 8, 2014 at 5:33 pm

Wonderful comment Lisa. I love that other people’s negative and short-sighted thinking did not discourage your from beginning in the affordable housing business niche. Thanks for commenting here and supporting the site.

All the best,
John Fedro

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Wrenn Lee Green Sr. January 10, 2014 at 7:33 am

I have invested in my neighborhood over the past years and it helped me to pay the owner financed mortgages. My neighborhood is special. We are in a residential preservation mobile and modular designated neighborhood in the city of Tallahassee, Florida. I happen to be at the area closest to the corner of a major intersection and I want to redevelop the area into a RV Park. My neighbors that remain are willing to sell me their places to make it possible. I have used every available money in my life to buy what is around my home. My 401K from my work and my savings, plus an equity loan on my place for $120K to help. The issue now is the homes are 1966 to early 1970′s. They are in the area and are not rent able. They have declined in quality with the abuse and neglect. So, I now have vacant properties around me. The only logical business idea I can come up with is to take the old homes down and turn the lots into RV Parking Pads. This would be the best environmental use of the land. I just can’t find the needed financing.

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Curt January 10, 2014 at 7:44 am

Wrenn, You’d find all the financing you could ask for if you changed from a MH park to self storage. Look into self storage business model. It’s MUCH better than MH parks which are good but have ALOT of zoning, sewer, water issues to get over. Banks/Commercial lenders love self storage because they know it spits out cash in bad and good markets and no sewer/water issues and easier to zone.

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Wrenn Lee Green Sr. January 10, 2014 at 8:20 am

Curt, I am not in a trailer park. This is designated as a neighborhood. It ranks as a neighborhood and not a trailer park in the city of Tallahassee plats. Everybody has a problem understanding what I am trying to do to get out of the very old mobile homes. The utility provider is the city of Tallahassee. Google 1319 Capital Circle South East and look at the location of 1402,1406,1410,1414 and 1418 Vogue Drive. This is in the zip code of 32311. The area was looked at by an out of town broker in 2004 for a buy out. I had 9 of 42 parcels and got a lawyer to write my contract. The zone request change was worked all the way to the State of Florida and approved. Then they tried to flip us. It did not work. I don’t have to worry about the utility, road or sidewalk issues. They are in place and taken care of by the city.

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