10 unit manufactured home deal analysis

3 Replies

I’m looking for advice/guidance regarding a 10 unit manufactured home deal, on a 0.39 acre lot in FL. These are three modified double wides. Here are the numbers I have so far: Purchase price: $191k Rent: 8 units at $520; 1 unit at $400; 1 unit for a live-in manager. Total monthly rent: $4,560 (2.4% of purchase price) Monthly expenses: Taxes ($200), Insurance ($275), water ($200), sewer ($150), electric ($30), pest control ($50), and cable ($105) for a total of: $1,010 per month. Property manager lives in his own unit, on site, for free. Repairs needed: roofs need replacing within the next 1-2 years ($10,000). A few overhangs need fixing: $2,000. Needs new gutters: $1,500. I am currently under contract to sell one of my rentals in AZ. COE takes place in two weeks. After all sale expenses I expect to have approximately $42k which I will 1031 exchange as the downpayment for my next rental property. This means I will finance approximately $150k, with an approximate monthly P&I payment of $700/month (interest rates on loans for manufactured homes generally seem to be higher). Additional info: 4 units are HUD one year leases 1 unit, the tenant is moving out next month 1 unit is 90 Works (a program in FL that helps people with services such as finding a home) 2 units are on a 6 month lease 1 unit, the tenant is being evicted. Eviction will be completed prior to COE. 1 unit is for the live-in manager Vacancy costs for these homes should average around 10% or less of monthly rent. So, a quick calculation of the numbers tells me I can expect to cash flow $1,000 or more per month. This sounds great, but I know next to nothing about manufactured homes. I know I need a specially certified appraiser to ensure I get the real value, but will the appraisal look at the land and homes separately, or together? From my understanding, manufactured homes are viewed as personal property. Is this true? Or are they considered Real Property if the homes are permanently fixed to the land (the land is included in the sale)? As far as I know, I can depreciate manufactured homes just like a regular home, correct? I ran the numbers based on 0% appreciation. Now I’m wondering if I should run the numbers with a negative % appreciation, as I know these homes tend to go down in value. The current owner has owned these as rentals since 1989, so I imagine they’ve already dropped in value considerably, but I’m sure they will continue to depreciate. Thank you all for taking the time to read this. Any guidance/advice is much appreciated.

I thought manufactured homes (you mean mobile homes correct) are not treated the same as real estate.  They are treated like a car in that they are personal property and are much harder to get loans for, since they depreciate so quickly. If the structures are a normal house just pre-fabricated then they would count as normal real estate.  If it is possible to still "pick them up and move" with wheels then I would say they are treated like a car.

Those expenses numbers seem insanely low, or is that just for the PM/landlord unit?

If these are mobile homes, what year were they manufactured?  Older homes aren't worth much and are sometimes worth hardly anything.

I am not sure how 3 double-wides equals 10 units, can you explain that?  3 double-wides converted back into duplexes is 6 units, how are they setup?

After further discussion with the broker, I discovered it is 9 units total, not 10. Each double wide has 3 - 1 bd/1bath units. The manager lives in one and only pays $400/month. However, the manager is compensated for his work managing the property and has been doing so for the past 6 years. All the double wides are permanently attached to the land...so they’re not necessarily mobile at the moment, but they can be if the owner wanted to for some reason. The expenses I included are some of the basic ones and are for all 9 units. However, I ran my own calculator and included all other expenses. That is how I came up with the approximate $1,000/month cash flow. However, now that I know the manager is compensated separately and already pays rent on one of the 9, not 10, units, I’m much more skeptical about this sort of investment. Cash flowing $1,200/month can somewhat make up for a depreciating property, by I think cash flowing only $500/month doesn’t. 5-10 years from now I could potentially be upside down on a loan that is backed by very old manufactured homes (they were built in 1989).

Any further thoughts or questions I may not have thought of are much appreciated.

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