Good deal for first mobile home purchase???

Question

Rachel H. · Answer

@Jared Lillard Yes, the materials are going to be different. It's best to line up contractors who are experienced fixing up and working on mobile homes. Check out the local mobile home supply stores in the area. Usually, there aren't many. They're also a good source of information if you need contractor referrals. Good luck!

Jared Lillard · Answer

@Blair Poelman To be honest, I don't really know.  However, this is a package deal that can be 4-7 units.

@Rachel H. Thank you for your help.  I have requested those, plus financials.  I have legal representationI know that the rent on some of them is collected weekly.  Good advice on the contractor.  I don't know yet if these homes have had any reno work done.  A couple of them look pretty old....but I could just not buy that listing.  It's a package of multiple properties/listings.

What I really don't know are the risks of mobile homes.  What am I on the lookout for that's different than other SFH and site-built homes?  Septic tanks?  Foundations?  Insulation?  Materials?  What else?

Blair Poelman · Answer

@Jared Lillard  Do some research to make sure your pricing is in the normal range.  I've bought janky old 1954 model crusty single-wides for $6500 and flipped for $12k, and then struck gold on a 1998 model double-wide for $2800 and flipped for $19k.  Pricing is for sure going to range depending on quality, location, and demographic of your occupants.

As expected, every deal is unique, so you really need to pick apart each one to determine if it does or doesn't makes sense.

In my experience, the most difficult part of the mobile home game is dealing with the park management. Around here the parks are all private, and it's getting harder and harder to get potential tenants through both my screening, and the park screening process.  Most parks around here don't allow rentals, so everything is either cash sale or is a "seller finance". I don't necessarily mind the old ones as long as it's dry and it's still livable.  Most of these older ones have been rehabbed countless times.

A few other things to watch out for:Seems like pipes freeze in these things all the time.  If you have a vacancy, winterize the thing right away - geez, even in the summertime, some of this stuff breaks...The HVAC units are different than residential - usually don't have central air, but many will have swamp coolers, and most of the time they will leak after a couple years.Mobile homes do not heat or cool efficiently at all - plan on substantially higher gas & electric bills.The roof on a mobile home is almost guaranteed to completely suck.  Plan on a 15 year roof, and that's if you're super lucky (but again - seller finance, so tenant deals with that in my situation).They usually don't have foundations unless they have been converted to real property.

!!! BUT !!!

Even with all this "stuff", mobile homes are steal freak'n cash cows, and I wish I could buy 20 more every year.

As an aside - If a mobile has been converted to real property, a buyer can use an FHA loan go acquire it - but it really does have to be converted to real property - kind of a pain in the butt to convert, and then even bigger pain to get it to meet FHA guidelines.

Rachel H. · Answer

@Jared Lillard You should probably look at the lease agreement with the tenants. Try to see their payment history. Also, try to get copies of all work done to the homes with invoices. If you can talk to the contractors who did the work, even better. Usually, they'll be able to give you a good idea of the shape of the home and if you'll need to put in any money for deferred maintenance in the future. Hope that helps!

Blair Poelman · Answer

is $40k / unit a normal market price for your area?    $80k in my neck of the woods would get me anywhere from 3 to 8 units.

Jared Lillard · Answer

My target purchase price for the package is around $80k.  Gross monthly rent is $2900.  If I'm to believe the seller, the monthly expenses are extremely low - well below 50% of gross rent.  Even at the 50% rule, the properties still cash flow $1400/mth, or 21% cash-on-cash return on an all cash deal.

Carol C. · Answer

@Jared Lillard - What are the numbers?  I always thought cap rate was more geared to comparing commercial RE deals, not SF's.

Good deal for first mobile home purchase???

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