MH on land - To RENT vs SELL?

Question

Hello group.  I'm trying to make a decision here and would like some feedback.  I just found out last week my tenant-buyers are moving out.  They are getting a divorce, and even after I offered ways to get at one of them to stay in the home, they opted out.  So, I will be looking to turn the property - either for re-rent VS sell.

Background:

4/2 DW on land purchased in 2019 on seller financing at $82k.  Put down $5,700.  Seller carried back $76k with PI payments of $450/mo.  Market rents are $1225-1300.  When we purchased, we renovated hone to a large degree, and since this was about 10 months ago - it remains in very good shape.  Shouldn't need much to get it market ready again.

Strategies:

Lease Option -> Initially, I figured I'd just get it market-ready and look for a tenant buyer again.  Aim would be $4,500 down and $1250/mo.

Sale ->  After considering the hot market here in the Charleston-Summerville area, I started thinking about selling.  Our numbers Y/Y are killing it.  Plus interest rates are at all-time lows (again!), even with some minor increase in rates over the last few days.  The property is worth $135-150,000.  (again, my mortgage is about $75k).  Equity position is strong.

My issues or dilemmas are as follows:

1) Will I have trouble selling a MH on land to a retail end-buyer? (I know banks can get goofy when it comes to MHs). Note: this MH is *not* on a perm foundation. Also, while this home is in an excellent area with great schools, its located on a very busy road. Could be a negative for someone looking to buy.

2) Holding time and all the stuff that comes with a sale.  Inspections, appraisals, repair requests and all that jazz.  Even though the property was renovated recently, it is not a brand new home.  I know for a fact the roof is nearing end of life (but no leaks now).  So, my question here is - deal with all these things related to trying to sell, including waiting 60-75 days close -OR- do I just do lease option where I can get someone in there within 10-15 days?

3) Another tenant occupant... so, I mentioned this property being rehabbed a mere 10 mos ago.  If I get another tenant in there, I run the risk of them trashing the place, resulting in me having to yet again renovate.

4) How do I find a good RE agent who specializes in land-home packages?  Nearly all the agents I know typically deal in traditional SFRs.

I can provide more information, if desired. Thanks, group!

Rachel H. · Answer

@Dave Rav A dealership may be able to refer you to potential buyers. They get a lot of calls from people looking to buy homes on land. You may need to work out a "reward" or "finders fee." They may be helpful in referring lenders who can lend on the deal and cash you out. This will depend on the buyer and their ability to repay. Hope that helps!

Dave Rav · Answer

@Patricia Taveras great point here.  The foundation is one thing that has been on my mind regarding trying to sell.  This one is only on concrete block with skirting; I am aware some banks like a more perm foundation

Patricia Taveras · Answer

@Dave Rav

Hi Dave. My husband and I bought a double wide off Craigslist and moved it to a lot and titled it as real property.  The mobile home mover suggested that we pour footers for the foundation in addition to doing the concrete block or brick skirting because more banks would be willing to finance like a regular home.  We were able to do this before placing the home, but it can be done with the home in place as well, though it's more difficult so will probably cost more.  However, it broadens your pool of buyers if you do decide to sell.  Just a thought.

Dave Rav · Answer

@Daniel Smithson

@Rachel H.

Thanks folks!  I appreciate your thoughts.  Daniel, its unfortunate you don't have a presence as a dealer in SC!  At any rate, I did enjoy your perspectives on MH sales.  Rachel, I am going to reach out to some local dealerships tomorrow.  Thus far, I've reached out to a few iBuyers

Daniel Smithson · Answer

@Dave Rav I am a MH dealer in TN, but my license does not allow me to represent or broker homes with land (real property). Your state may be different. Just be aware that you may not have the same protections as you would with a RE agent.

MH's with land sell together all the time. Over 6% of all homes in the US are manufactured homes. The process to sell them is very similar to a traditional home except that you will transfer separate title/deeds for the land and home. Any residential RE agent should be able to facilitate the sale.

By your numbers, with the margin you've got on this one, you should be able to sell it quickly and make a nice payday! Congrats!

Dave Rav · Answer

@Rachel H. thanks "Mobile Home Girl"!  I always appreciate your insight.

The points you listed are ones that I also have thoughts on here.  I am concerned a traditional sale of a land-home package may have a greater chance of complication, compared to sale of a stick built.  I too have considered approaching a MH dealer!  How does that work?  Would they buy it, or merely put me in their "inventory" and I'd pay them a sales fee?  As for real estate agents, any thoughts on how to find ones that work exclusively with MHs or land-home pkgs?  I was just going to call the various brokerages.

Rachel H. · Answer

@Dave Rav Your plan could be to sell and get cashed out. Though, if it doesen't sell using a lender and cashing you out be prepared to either owner finance or rent it out. Another option would be to list it under value for a quick sale to see if you have any bites. You may want to talk to a few mobile home dealerships and real estate agents in the area familiar with selling these homes to get some insight on the market and your timeframe to sell. Hope that helps!

Daniel Smithson · Answer

Russell Gray of the Real Estate Guys always says: “Do the math and the math will tell you what to do!"

It really just boils down to what your goal is - do you want to get a higher sales price and some cash flow along the way to the sale, potentially risking getting the MH back again in a default? Lease Option.  Do you want to cash out the asset and reinvest the difference after tax? Cash sale.

Most banks are okay with MHs so long as they are sold with the land. They are much more hesitant to lend on a home without land as part of the sales package. At that point, you would need to look into a chattel lender for your buyer but that's not the case here.

Agents shouldn't be hard to come by either. A MH isn't all that different from a SFH, they just tend to appraise for less. You may want to look into what it would take to place the home on a permanent foundation, giving up the title and selling it as real property. You may get a higher valuation that way, but talk to a local appraiser first.

If I was making the decision, I'd probably go for a cash sale based on your numbers. I'd base that decision on the general rule that an unattached MH will depreciate over time, weakening your position later if your lease option buyer didn't exercise the option to purchase (ie you get back a trashed MH that's worth less than when you originally leased it). If it were a SFH (or attached MH, see appraiser caveat) that would appreciate, it would make more sense to take that risk of a default on the LO as the home would maintain it's value, rehab costs being the same between scenarios.

Dave Rav · Answer

@Daniel Smithson thanks so much!  Your analysis and take on the situation was enlightening.  I am leaning in this direction (sell the property)

My major fear is that it doesn't sell and I am left with several months of holding costs as a result. Not to mention loss of rents of $1250/mo.   But, I keep telling myself this is a short sighted way to look at things, so I need to get over that!

To your point about the MH and titling, from what I can tell the county tax records reflect this property as a "Mobile with Land".  I am researching whether or not the MH has been detitled officially.

Thanks again!

MH on land - To RENT vs SELL?

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