Good deal? Please weigh in, I need your input!

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Good deal? Please weigh in, I need your input!

Ashley Wolfe
Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes

This may be my first deal so I'm going to give you some of the details.  I'd love to know what you think.

I called about a mobile home I saw for sale on Zillow.  In talking to the mobile home community manager, she told me that the home I was calling about had sold just today but there were some other ones that she new the owners were wanting to sell.

One home is a double-wide 3/2 for $17,500 and is not on the market.

The other home is a single-wide 2/1 for $4,000 with ~$600 owed in back taxes with no lien, needing a new AC (and I'm in Texas so that's a big deal), plus other updates.  Its basically the ugliest home on the block.

The updated double-wide I called about that sold for $35,000 is caddy corner to this $4,000 home.

The manager told me that comps in the same community rent out for ~$750-$850/month with a $405/month lot rent included in that estimate.

The community looked very nice, its in a nice part of town and the manager spoke very highly of her residents.

Here are my current options, as I see them:

1) Wholesale to an investor

2) Buy, rehab, sell (we're open to seller financing)

3) Buy, rehab, rent (our least favorite option)

I think that the wholesaling option would be the easiest for me because this is my first deal.  I really do want to see this home rehabbed though.  I hesitate because I don't know how excited an investor/rehabber would be about a mobile home, but I don't know until I ask.

In my negotiations, my MAO would be $3,400 to start because of the $600 in taxes due. I know this home needs lots of work and I haven't been inside. So I don't really know how to even begin to estimate the repairs needed. However, if the rent is projected to be $750/month minus $405/month lot rent that would equal $345. This would give me a projected ARV of anywhere from $20,000 to $25,000. So, the profit margin seems to be pretty good. However, we would still owe $405 each month, regardless of owning the home outright. That's a lot of overhead for my family but we could pull it off.

I have my script ready for when I call the seller (who speaks only Spanish by the way, but I have a friend who is ready and willing to make the call and take notes for me).

What are your thoughts?  Am I going about this deal the right way?  Is there anything I'm missing or not privy to?

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Bill Neves
Flipper/Rehabber · Vancouver, WA · Member since 2013 · 328 posts · 252 votes
10y

@Ashley Wolfe

Hi

If I read right, you are talking about the $4k unit?

That is their asking price. Not written in stone.

We like to look at a place, explain that we are not going to live in it. So $4k would be great for a family to buy and move in. We will be fixing anything needed and paying rent and utilities so may have 6 months holding costs before we sell. Is it 6 months? No but it could be so that's the contingency plan. Then if it needs the work you say, it might be a $1000 offer... maybe! Sometimes $1000 is too much if it's in bad shape.

Plus with $600 back taxes, what maintenance has been deferred? Like floors, plumbing, roof, etc.

Also, a single wide 2/1 is harder to sell than a double wide 3/2. You might be better off talking to the 3/2 seller and see where they are and what you could do with that.

Any of your 3 scenarios to acquire are sound.

Just my 2 cents.

Have fun!

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  • Bill Neves
    Flipper/Rehabber · Vancouver, WA · Member since 2013 · 328 posts · 252 votes
    10y

    @Ashley Wolfe

    Hi

    If I read right, you are talking about the $4k unit?

    That is their asking price. Not written in stone.

    We like to look at a place, explain that we are not going to live in it. So $4k would be great for a family to buy and move in. We will be fixing anything needed and paying rent and utilities so may have 6 months holding costs before we sell. Is it 6 months? No but it could be so that's the contingency plan. Then if it needs the work you say, it might be a $1000 offer... maybe! Sometimes $1000 is too much if it's in bad shape.

    Plus with $600 back taxes, what maintenance has been deferred? Like floors, plumbing, roof, etc.

    Also, a single wide 2/1 is harder to sell than a double wide 3/2. You might be better off talking to the 3/2 seller and see where they are and what you could do with that.

    Any of your 3 scenarios to acquire are sound.

    Just my 2 cents.

    Have fun!

    1Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Bill Neves:

    @Ashley Wolfe

    Hi

    If I read right, you are talking about the $4k unit?

    That is their asking price. Not written in stone.

    Correct, this is just what the park manager told me the seller had mentioned.

    Plus with $600 back taxes, what maintenance has been deferred? Like floors, plumbing, roof, etc.

    Yes, that's important and I'll ask these questions.

    Also, a single wide 2/1 is harder to sell than a double wide 3/2. You might be better off talking to the 3/2 seller and see where they are and what you could do with that.

    That was also in my plan I just didn't type it out in this post.  I'll be talking to that seller as well (via my friend who will translate) and taking notes about the state of her home.

    Any of your 3 scenarios to acquire are sound.

    Just my 2 cents.

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  • David Dey
    Investor · Lakeland, FL · Member since 2015 · 344 posts · 606 votes
    10y

    Did I read right that the park fee is 405 per month?  That will eliminate the deal for a lot of investors unless they are already in the park.  Also, was this home on the open market?  If not then marketing to an investor in the park will be easy.  

    Get the property under contract, then pull up the park either by street name or if it is one address with individual lots, it will be even easier, in the property assessor's site.

    You will then have a list of all the owners in the park.  Look for multiple homes owned by the same person or of course look for corporate names as owners.

    Then reach out to them and offer them the deal.  

    1Reply
  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @David Dey:

    Get the property under contract

    I'm going to be talking to the owner of this and a 3/2 home in the same area, neither of which are on the market yet.  If I'm not operating with an agent, how do I get the property under contract?  Is this when I need a real estate atty to draw up contracts and paperwork?  Do the seller and I agree to the price, then I get it under contract at that price?

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y

    Also, I did find an investment firm operating out of LA that owns some of the homes in the same park.  I'm thinking this is who I would contact in order to wholesale them the properties. 

    I'm chomping at the bit to do a flip and feel like starting small in a mobile home park would be a great place to start.  However, I know that it could turn into a headache that costs us more money. 

    I know that, logically, wholesaling this $4000 property is probably my wisest choice.  I also want to look into the $17,500 property that is a 3/2, not on the market yet.

    Also, let's say that I talk the seller down to $1500 and I get the home under contract. I know that it could potentially need $5000-$7000 worth of work but the ARV can be as much as $25,000 based on the neighboring homes. What would be an appropriate wholesaler's fee if I got it under contract for $1500?

    There's a little voice inside my head saying, "Do the rehab work and sell it for so much more than a wholesale fee!"  This is really what I want to do but I don't know if I'm ready.  However, I keep hearing on all these podcasts and reading in all these books to just get your first deal done because, if you don't, you never will! 

    What should I do?

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  • Account Closed
    Investor · Oldsmar, FL · Member since 2014 · 140 posts · 152 votes
    10y
    Originally posted by @Ashley Wolfe:
    Originally posted by @David Dey:

    Get the property under contract

    I'm going to be talking to the owner of this and a 3/2 home in the same area, neither of which are on the market yet.  If I'm not operating with an agent, how do I get the property under contract?  Is this when I need a real estate atty to draw up contracts and paperwork?  Do the seller and I agree to the price, then I get it under contract at that price?

      This is a mobile home not real estate. You need to get a copy of a document called a bill of sale. It's basically 1 to 2 pages long and it's pretty simple to fill out. You also need to confirm that the seller has the title. You don't need an agent or attorney for this.

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Account Closed:

      This is a mobile home not real estate. You need to get a copy of a document called a bill of sale. It's basically 1 to 2 pages long and it's pretty simple to fill out. You also need to confirm that the seller has the title. You don't need an agent or attorney for this.

     Ok, that makes sense.  I will inquire about the title, I didn't even think of that.  So, after the bill of sale is complete and money is exchanged, that is that?

    How do I go about paying the ~$600 in taxes that is owed on the property?  Would that be my county's appraisal district or county tax assessor?

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  • Matt R.
    Blue Springs, MO · Member since 2015 · 481 posts · 313 votes
    10y

    Disclaimer: I am very new to investing.  I haven't bought (or lived in) a mobile home before.

    I *have* helped fix things in mobile homes for friends and family, and the thing I took away from that was that the mechanical systems in mobile homes are Different from regular houses.  I would be standing in the plumbing aisle at the hardware store, not finding anything that matched the pipe I had in my hand.  When I asked the clerk, they looked at it for a while, and then said, "Oh, is this for a mobile home?  You need the one from the mobile home aisle, over *there*..."

    You might be interested in this thread in the "deal diaries" forum... a guy rehabbed a triple-wide mobile home in California that sits on a big lot (not in a park).  The numbers on that deal were a lot bigger than what you are looking at, but he did comment in one of his posts "The construction was very different from a conventional home, and it took about an extra 3 weeks to complete."

    I'm not saying to not do the deal... I'm just saying to be aware that the rehab work will be a little different than that for a conventional house.

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  • Account Closed
    Investor · Oldsmar, FL · Member since 2014 · 140 posts · 152 votes
    10y
    Originally posted by @Ashley Wolfe:
    Originally posted by @Account Closed:

      This is a mobile home not real estate. You need to get a copy of a document called a bill of sale. It's basically 1 to 2 pages long and it's pretty simple to fill out. You also need to confirm that the seller has the title. You don't need an agent or attorney for this.

     Ok, that makes sense.  I will inquire about the title, I didn't even think of that.  So, after the bill of sale is complete and money is exchanged, that is that?

    How do I go about paying the ~$600 in taxes that is owed on the property?  Would that be my county's appraisal district or county tax assessor?

     You'll take the title to the dmv just like you would when buying a car. The county assessor would be your stop on the taxes. These are super easy transactions.

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y

    I talked to another motivated seller who owns a 3/2 mobile home in near me. They did much of the renovations themselves over the last four years of ownership. Its been on the market since June. They had to drop the price in August to $20K. They already moved away and are willing to come down on the price. I need to go see it first, but we are thinking of offering $10K and if they counter with $12K, we'll take it. Lot rent is $375/month so we could charge up to $995/month and make $620/month in passive income if all those numbers work out. And this is pretty much a turn-key situation.

    I like the sound of this one too.  So, for my first deal, I'm doing three. HAZAAAAAAAH!

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  • Mark Gruetzmacher
    Investor · Box Elder, SD · Member since 2014 · 228 posts · 43 votes
    10y

    Are the 600 in taxes for the current year?  Hear the taxes are paid a year in arrears.  And they are paid twice yearly. Then once it sells they need to be brought current.   Then on top of that after November 1st you have to pay for the next year also.  So for my state that could mean the 600 2014 owed plus 2015 taxes and 2016.  Might be worth calling the county to double check. 

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  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    Our business model evolved from SFRs to double wides on their own land.  Along the way we deep studied Lonnie deals.   In our area the park managers where unfriendly to investors.   This is the risk of buying mobile homes in parks.  The manager can turn against you over night ruining your business.  IE they will refuse to approve your renter (or buyer) or drag it out.   

    Search this forum on "lonnie deals".   You'll read many folks opinions.  Mine is that it's too risky.  We only buy mobile homes on their own land, then you "control" the whole deal and no park manager or owner can shut you down.

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  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    @David Dey   Mobile homes are personal property and titled just like a car.  They are not public info, no counties that I know of puts car (or mobile home) ownership info on public websites.   You have to door knock ask the renter who the owner is.  Good idea though to find prospective buyers.

    Search in craigslist.org for "mobile home".  You'll find:  what other sellers are asking for MHs, and other wholesalers, and some times you'll find an ad for "buying" and you contact those folks.

    Again, I don't recommend lonnie deals, buying anything inside a park with lot rent.  Only buying the actual park.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Curt Smith:

    @David Dey   Mobile homes are personal property and titled just like a car.  They are not public info, no counties that I know of puts car (or mobile home) ownership info on public websites.   You have to door knock ask the renter who the owner is.  Good idea though to find prospective buyers.

    Search in craigslist.org for "mobile home".  You'll find:  what other sellers are asking for MHs, and other wholesalers, and some times you'll find an ad for "buying" and you contact those folks.

    Again, I don't recommend lonnie deals, buying anything inside a park with lot rent.  Only buying the actual park.

    That is not true in Texas.  While a mobile home in Texas can be classified as Real Property(Attached to land with a deed) or personal property(conveyed by title) both will appear of the county appraisal district and searchable by owner's name

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  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    @Ashley Wolfe   I just noticed this thread was not posted in the mobile home forum,,, where you would / could read about others working mobile homes in parks threads.  

    https://www.biggerpockets.com/forums/30/topics/249...

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  • Belinda Lopez
    Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
    10y
    Originally posted by @Ashley Wolfe:

    . . .  Lot rent is $375/month so we could charge up to $995/month and make $620/month in passive income if all those numbers work out. And this is pretty much a turn-key situation.

    Being a landlord on a rented Mobile Home is not a passive income if you're going to have to manage yourself.  MHs are a niche investment and have much higher management costs than SFHs.  How far from your home is the property?  Are you going to be doing all the repairs?  on call 24-7 for emergencies?  Owner financing out the home will eliminate those expenses and time.

    Look up John Fedro and his program for MH investing before you jump into this niche.

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  • Belinda Lopez
    Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
    10y

    A few other comments.  You can look up the home history on the Texas Manufactured Home records site.  It will show ownership as well as any liens.  TX does not use "Titles" any longer but Statement of Locations (SOL), read about that process on the same site.  You will also need to look in the local taxing authorities to see about the back taxes due.  When you go to update the SOL, you will have to pay all back taxes plus pre-pay taxes for the next year.

    The Park will have to approve any tenant or owner if you end up selling and they want to live on-site.  Make absolutely sure the home can stay in the Park BEFORE you purchase it.  Keep the Park Mgr informed of exactly what is going on and what your plans for the home are.  Get a copy of the Park rules and application and anyone wanting to rent or buy and live in the home HAS to be pre-approved by the Park.

    I'd say your $620 is a dream number and your actual cash flow will be more like $2-300 after taxes, insurance (if you can get it) and maintenance, turnover and management.

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Belinda Lopez:

    . . .  Lot rent is $375/month so we could charge up to $995/month and make $620/month in passive income if all those numbers work out. And this is pretty much a turn-key situation.

    Being a landlord on a rented Mobile Home is not a passive income if you're going to have to manage yourself.  MHs are a niche investment and have much higher management costs than SFHs.  How far from your home is the property?  Are you going to be doing all the repairs?  on call 24-7 for emergencies?  Owner financing out the home will eliminate those expenses and time.

    Look up John Fedro and his program for MH investing before you jump into this niche.

     Awesome and thanks for the resource suggestion.  I may have misused the term "turn-key" in that the mobile home I'm looking at for $20K is not in need of major repairs to make the home livable and rentable.  Selling it with owner financing is my first option, I should have mentioned that as well.  You're completely correct, being a landlord is not passive.  If I went that route, I'd hire a property management company, even if it was for one property. 

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  • Ashley Wolfe
    OP
    Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Belinda Lopez:

    A few other comments.  You can look up the home history on the Texas Manufactured Home records site.  It will show ownership as well as any liens.  TX does not use "Titles" any longer but Statement of Locations (SOL), read about that process on the same site.  You will also need to look in the local taxing authorities to see about the back taxes due.  When you go to update the SOL, you will have to pay all back taxes plus pre-pay taxes for the next year.

    The Park will have to approve any tenant or owner if you end up selling and they want to live on-site.  Make absolutely sure the home can stay in the Park BEFORE you purchase it.  Keep the Park Mgr informed of exactly what is going on and what your plans for the home are.  Get a copy of the Park rules and application and anyone wanting to rent or buy and live in the home HAS to be pre-approved by the Park.

    I'd say your $620 is a dream number and your actual cash flow will be more like $2-300 after taxes, insurance (if you can get it) and maintenance, turnover and management.

     You're right, $620 is a dream number.  However, if rented or seller financed, this may be a good cash flow situation.  My plan is to develop relationships with the park mgrs as best as I can in order to stay in good standing with the park.

    In the purchase of the home, would I use a bill of sale and acquire the SOL.  Also, what about the note?  I've read in Deals on Wheels that notes were created and carried in seller finance deals.  I don't quite understand this part of it so any input would be greatly appreciated on this subject.

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