How to calculate the value of mobile homes

8 Replies

My cousin found a mobile home which seems like a good investment. The guy wants to move out of America back to his country and he is also behind on his mortgage payements so he's quite motivated.

Its in Florida, Lake Worth; a 4 bedroom mobile home which he originally bought for 80k and he's selling for about 55k.  At first when I saw these numbers my jaw dropped.

My cousin says you can rent places out for about 600-800/month with a 5% vacancy rate.  Only rehab expenses are a broken window and painting the ceiling, he also just recently replaced the roof.

According to my cousin expenses a month will be about 500 a month + 1000 a month to rent the land, so we're looking at about 1500/month for monthly expenses and its all cash buy.

I looked up the cap rate and its about 7%.

With all this information I get a NOI of about 13,920 and if you divide that by the cap rate you get the value:

13,920 / 0.07 = 198,857.

We can also calculate the ROI: 13920 / 55000 = 0.25

So in conclusion I've calculated:

NOI: 13,920

ROI: 25%

Value esimated at 198,857 (Hes selling for 55k and bought it for 80k)

These numbers are unhead of and I don't know whether to be super excited or super confused here.  

I've done some research and realized the biggest drawback to mobile homes is it's susceptible to storms since there's no foundation and you have to pay to rent the lot out.  But jesus, with these numbers I would think ANY mobile home is a good investment, they usually go for about a third of a house and you make your money back in less than 10 years - An average mortgage is about 30 years!  On top of that, I did a quick google search on life expectancy of mobile homes and apparently they last about 30 - 55 years!

Am I missing something here?  Why isn't every single person not investing in mobile homes?

@Matthew Ng  My boyfriend and I briefly looked at a mobile home and were told you need to check on how much is the lot rent if it is in a mobile home park, and to check if you are allowed to sub-let. 

Lot rent in California is usually between $700-800. That all by itself made it a bad cash flow investment for us.

Yeah my land tax would be 1000 a month. Even with that my ROI is 25%. I guess my main question is how should I be valuing the mobile homes? They go for about a third of regular homes so should I just divide the value I got with 3? If I compare these homes with real homes I feel like they will all cash flow by far

@Matthew Ng If the home is in FL, you may want to look into hurricane insurance. Though it may be expensive, if the area gets hit by hurricanes a lot then it's worthwhile if you're looking to hold the property long term. Have known others to lose their homes in hurricane-type areas without insurance. It's definitely a big risk. Good luck with the deal! 

Assume a mobile home is worth nothing.  Mostly its worth what you can get a contract for.  People buying these don't have the best credit so figure out a pmt and then turn that into a price.

Add in the pad rent also for your calcs + prop / personal taxes.

What do you mean its worth nothing?  Do you mean there is no resell value?  If you buy a mobile home and you rent it out, you can overturn a profit much quicker than a regular home right?  Since it often sells for about a third of a price of a regular home.

What do you mean its worth nothing? Do you mean there is no resell value?

No, I said assume it's worth nothing.  Just getting a big discount doesn't mean much, its what it can generate.  Don't forget, you own, so add in maint.

If it can generate $500/month at 4% return then you can calc a NPV for it.