As recommended by several seasoned MH investors on here, I have started the market research process to understand the mobile home investing economics in my area. I had a few questions to better understand the dynamics of this market. I am looking to purchase a MH and then sell it, and I would carry the note.
- What are the criteria you usually look for when investing into a MH?
- In relation to the last question, what would you consider the most important or top three criteria?
- Is there additional risk by investing in MH near the ocean?
- What is the difference between investing in a rural or urban area?
Thanks in advance,
This evening is the general membership meeting of CFRI (Central Florida Realty Investors) at Edgewater High School. You can Google their website and find a coupon for free admission. It is typically attended by 200 people that are involved with real estate and a few that target the mobile home market. I would recommend attending and asking your questions in person.
One of the guys who has a course and mentors MH investors says that often you can get about the same amount of money for a 3 bedroom MH as the local 2 bedroom apartments are renting for. That might give you a starting number to work from.
Here are my personal criteria for buying mobile homes:
- All mobile homes have to be in move condition or require minor work. Minor work means, that 1 handyman can do all repairs in 2 days and up to $1000 labor+material cost.
- Easy park approval process. I had one mobile home that I could not sell because the park manager denied almost everybody.
- lot rent up to $450
- year 1980 and newer unless older home is in move in condition
- No one bedroom mobile homes. I will buy one bedroom mobile home only on private land.
@Andriy Boychuk - thanks for the post. Do you shy away from 55+ communities? They are quite a few in the area that I live in.
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Leslie A. - ok, that is helpful. I will definitely keep in mind.
@Kent R. - I was there tonight. I didn't see you, but I was impressed by the amount of people there. Thanks for the recommendation.
Sorry I missed you @Ian Tudor. I was standing at the back of the auditorium most of the evening. Regarding 55+ communities, be careful because this limits your buyer pool.
Everyone's advice here is spot on in my experience. Great job putting one foot in front of the other with regards to your due diligence. Be careful with your comment about selling the home and creating your note. New laws have went into place earlier this year that limit and restrict seller financing when reselling to end-users living in the home.
Since everyone's advice was great I am only going to add to what was already said. Please see my thoughts below to your questions.
1. - What are the criteria you usually look for when investing into a MH?
Answer: 3 bedrooms are "better" than 2 bedrooms, and 2 bedrooms are better than 1 bedrooms. For your first deal aim for a 1.) 3 [good sized] bedrooms 2.) clean home in a 3.) family park with 4.) average lot-rent for the area. Also make sure the 5.) park application process is normal and not too strict. While reselling make sure you will make all your invested money 6.) back in 12 months max. Here is a past post that might help I made on the subject http://www.biggerpockets.com/renewsblog/2014/07/25/makes-good-mobile-home-investment-deal-inside-park/
2. - In relation to the last question, what would you consider the most important or top three criteria?
Answer: All 6 listed above.
3. - Is there additional risk by investing in MH near the ocean?
Answer: This will depend on the park and there is no blanket answer. Many parks may be more costly near the ocean concerning lot rent however when selling the sales price, buyer's desire, Move-in amount, and monthly payments will all typically be higher as well. Does this make sense?
4. - What is the difference between investing in a rural or urban area?
Answer: Zoning, prices, buyer demand, seller demand, distance, types of buyers, etc. Lot rent can be lower in rural areas. In addition sales prices may be lower as well due to lack of buyers and location. While buying and reselling you should know what buyers will pay for homes in these areas and how many folks are actively looking to own in this rural or very rural areas. An article that may help with this question is here. http://www.biggerpockets.com/renewsblog/2014/07/18/mobile-home-perimeter-zone/
Please keep in mind that the comments above are for mobile homes inside parks and not on private property you will also own.
If you have any follow up questions or I missed something don't hesitate to ask and I'm sure we'll all be happy to help.
Hope this helps,
@John Fedro - Thank you for your detailed response. Since you are a Florida native, would you say 55+ parks operate differently here than other states, given the large retirement population? I see a lot of them in my preliminary research.
Happy to help you with clarity. The only way I know of in which senior parks vary in FL versus other states is that many 55+ aged vacationers flock to FL during the winter months to avoid the cold up north. While this does happen in other areas of the country it is unique to specifically FL and the south west. Besides that I assume each park does vary in some small ways from park to park.
With that said I think your question was more to do with "are mhs good for investment opportunity in senior parks?". I advise that you start with the path of least resistance. If you start to build a buyers list and figure out there are so so so many active senior buyers looking to purchase in senior parks then investing in a senior park to starts seems viable as the resale should be a quick and valuable. In some areas of the state and country this is very possible and likely year round, in FL it is seasonal at best. It is for this reason I advise sticking to family parks for your first few deals at least.
There are other small challenges to consider such as the fact you yourself are not likely over 55, there may be a group committee approval process, etc.
Like others already mentioned senior buyers are not the majority of the buying market so you will be limiting your resale demand. Additionally senior buyers want cleaner homes that are ready to be moved into versus handyman-types homes, in my experience only. Obviously some seniors live on guaranteed income. This would make it seem that these buyers will be paying you on-time monthly. Be aware that some senior buyers are just as flaky as their 20 year old counterparts and background checks are advised.
Hope this helps and makes sense,
@John Fedro - you make some really good points regarding the older population. Well I'm going to drive around some parks and see for myself.
Talk to you soon.
Just a side note, while yes 3 bedrooms are "better" than 2 or 1 bedrooms. That is true and false at the same time. Like everything, there are pros and cons.
A lot of people are looking for a 3 bedroom so you will get a lot of calls- Followed by 2 than 1 bedrooms logically. But you will rent your 1, 2, or 3 bedroom easily enough.
However, you best ROI is a one bedroom. They cost you less money and this will equate to you will make more back monthly on your money for your initial investment.
Originally posted by @Ian Tudor:
Andriy Boychuk - thanks for the post. Do you shy away from 55+ communities? They are quite a few in the area that I live in.
I always buy mobile homes in family parks. There are few 55+ communities in my area as well but I stay away from them.
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