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Posted about 3 years ago

Personal Podcast Notes (75) - Mobile Home Investing With John Fedro

Link to show: BP Podcast 075: Mobile Home Investing and Getting Started With John Fedro

My personal takeaways

Much of the following also applies to real estate investing in general.

I want to give you a 30,000 foot view of starting out in the mobile home business. You need clarity of your area and market. Every individual market is different. We have to know how you’re going to sell homes. You have to know what they can sell for monthly. You have to know what they can sell for in regards to your move-in fee. And you have to know how many buyers are out there. That’s the first thing. Then having clarity not just of one park that’s next to your house or one park that’s just down the street but really but really understanding your entire market. Not just in your area but in the surrounding county and the surrounding areas, you have to know what is for sale. Who is selling what? Is the park selling anything? Let me talk to every single seller. Let me talk to other investors. This doesn’t take a long time, about a week or two. It’s so easy to over pay for a mobile home. Every mobile home that I purchase, and help folks who want to buy mobile homes, we make our money back in the first 6 to 10 months max. If it’s over that, that’s just not our model. I don’t want anybody that’s listening to this to buy a mobile home and then have to wait 3 or 4 years to get their money back. That’s not how this works. That’s not how buyers and sellers will operate. So understanding who are the buyers and sellers are and what they want, and then knowing which properties you want to purchase on and move on.

You can get comps for a mobile home on land but it depends on the market and the mobile home and the comps might be valid. Is the mobile home financeable? That’s another obvious barrier. So comps are more valid if the mobile home is on land (that you’re also going to purchase). 

A mobile home in a park, now this is something completely different. Comps are not as helpful for mobile homes in a park. You can have two mobile homes that are identical side-by-side and one seller needs to sell this month and the other seller, they have savings they have time. And you can purchase the home from the motivated seller for a couple thousand dollars. If it’s any more than that, I’m not gonna pay for that and you should not pay for it either. Now the seller next door, if they can get full price, If they can wait to find a buyer in the market with cash, they can do so and they can sell it for more. So you’re not exactly just looking for the mobile home that is beautiful, pretty, fixed up, and ready to be sold. You’re looking for a motivated seller. So how do you value a mobile home? In a park, you have to know what they can resell for first. What will the three-bedroom sell for? What will a two bedroom sell for? Does it need repairs? Does it not need repairs? When you purchase a mobile home from a seller, and this is me talking you can purchase however you want of course, but I don’t want it just to be where, ah, you’re doubling your money. That is ridiculous. If you are in this market just to double your money, you can do that very simply. But the returns that mobile home investors are making, especially when you’re holding payments, are substantially greater.

We aren’t using comps to value mobile homes because we are not selling to conventional buyers that are going to a bank or buyers that have cash. There aren’t that many buyers with cash or traditional loans looking for mobile homes. It’s really the testing you do before you get into the market and understanding what buyers will pay. When we sell mobile homes we are acting like the bank and holding a note with a 5 to 10 year term.

How do you find motivated sellers in a mobile home business? With mobile homes and parks, we’re doing a plethora of advertising in order to cherry pick the very best deals and in order to invest in the properties that you know we’re going to earn your money back in the next 6 to 10 months. We can’t predict where lightning is going to strike but we can have many many lightning rods. You need to be an expert in more than just your county because these are mobile homes and we need to purchase them significantly below market value where are you are making a considerable profit. We have to find sellers that are motivated so we’re not just looking in your county but in the surrounding counties as well. You have to cast a big net and a make many many many offers. Sometimes sellers will sell to other people. If they can sell to other people before they leave, great I want them to. Every seller should get just what they want, make the money that they want. It’s their home they should get what they want. If they can’t, then they can go ahead and except our offer. The offers are typically very good. We let them know how we can help. How they can also sell. Long story short is to not just know your own area but to also know the surrounding area and make offers to every single seller. I have that Birdseye view. Know what is for sale and make offers to every single seller.

Getting to know the park managers can be extremely helpful. Whenever I do receive a lead from a park manager, I like to ask him how can I say thank you? What would make you feel appreciated? You’ve given me this lead. Thank you. Sometimes it’s a fee, sometimes it’s a gift card. At the minimum it’s a gift card after the fact.

Mobile home parks have bulletin boards. You can typically put your add there if you ask permission. You can also go and put flyers on everybody’s door with permission from the manager. At some point in the future, mobile home owners are going to want to sell. However, mobile homes can be difficult to sell because there is a small number of buyers. For this reason, if you mail flyers to 1000 mobile home owners you will receive more interested than mailing to 1000 single-family homes.

Realize that the first three months in this business, nobody knows who you are. Nobody knows how you can help park managers or mobile home owners. So in the beginning you have to take a lot of time and massive action to get caught up to where you are a household name.

There is a three-step process when a seller calls you in response to your marketing.

  1. I qualify the home. If you’re doing your first few deals, aim for the path of least least resistance. People like 2 - 3 bedroom homes that are pretty in a family mobile home park (because it’s a larger demographic) with average or low park rent.

  2. If the home passes, I qualify the seller. Why are you looking to sell? Why are you looking to move? What would you like? When do you need to move? What else is for sale in the area? What other offers have you received? And talk to them on a conversational basis. Then I’ll go ahead and make offers over the phone of what I’ve purchased before based on what they’ve told me about their home. And then if they agree, if we’re in the same ballpark, I’ll set an appointment.
  3. After I’ve qualified them and we set an appointment, depending on what they’ve said I’m going to go to the appointment that day or within the next day or two at most. Check out the home. Typically I don’t make an offer while I’m there, but do let the seller know that I work with investors or other partners and make decisions with them. I take pictures, explain how our business works, and build rapport with them. Walk through the home and test every inch of it, add then leave and call them back within 24 hours with 2 to 3 offers. I like to give sellers options about how we can purchase their home. I’ve also explain to them in the very first phone call there’s a lot of bullets in our belt. We’re paying cash for mobile homes. We’re making payments to the seller. We can do trades. Depending on what the seller wants, and what they need, and a bunch of other variables, we can get the sellers cash, payments, or a combination of both. My three offers are cash, payments, and typically another payment option. With that said, they are very spread out. The first offer is a very conservative cash offer. Cash is very black-and-white and it’s typically something to the order of $1,000 to $4,000 cash. Then, we get very close or we can meet their asking price if we give them payments. And then here’s the kicker. I want to hear from them over that phone call when I give them the offers, What did you think? What did you think about offer number one? What did you think about offer number two, number three? Typically they’re not loving any of the offers because again, I’m an investor. We have to make money. I want to solve their problems, but we’re not going to do anything if we don’t meet eye to eye. So then, from that point, we’re going to come up with a win-win offer. I gave them my offers that would be winning. They’re gonna come back and say well we can’t do that but here’s something that we can do. Ultimately, if we’re too far apart, we’re too far apart, but often we can make a deal. If not, then that seller can always call us back. A temporary “No” can definitely turn into a “Yes” down the road.

Making multiple offers can focus attention on your offers instead of alternative options.

Some red flags, or even beyond red flags, a full Stop Sign, include: The notoriously small bedroom, typically on a single wide with “3 BR”. If the ceiling is too short. If there’s chronic rehab issues, major roof or floor issues. Holes in the floor. If I don’t like the park manager or if their application process is just ridiculously thorough, I won’t invest there. So really the main deal killers are a park that’s too strict and a small bedroom.

There are three types of mobile home sellers.

  1. The first type of seller, about 10 - 12%, is very irrational and illogical. They’re pulling out their hair. They want very little money. They might be getting evicted by the park and their homes go very quickly. The next group of people, about 10%, do want your help, but need more time to sell, typically 2 weeks to 2 months. They have a little bit of time. The third group is the majority. They have money and time. They have 5-6 or more months to sell. So really understanding who you’re talking to is the first thing. When you talk with low priority sellers, which is this largest group, the majority, with lots of time and money, understand that your job is to educate them. Our job is to educate every single seller. Some want to work with us. Some don’t. That’s sort of the first thing to understand, once we take on that mindset of education versus “It’s me versus the seller”. Now it’s you and the seller joining forces to sell their unwanted home.

It can be helpful to have a partner so that you are the lower guy on the totem pole in your small investing business, company, partnership, whatever you wanna it , so you don’t have to know all the answers. If you don’t know something, “that’s a great question let me talk to my partner and I’ll get back to you.”

You become known in this business by taking a massive action. You have to be on top of minds of the other people in this industry including realtors, other investors, brokers, park managers. The first nine weeks to three months you’re going to be doing a lot more than you’re going to be doing moving forward. People have to know who you are. You have to be following up with sellers. You have to be following up with realtors with park managers with other investors reminding them of what you do. You don’t have to throw money at things. People have to know that you’re in the business and you do what you say you’re going to do. Obviously five years from now if you’re still in this business people know who you are and you’ve done what you said you’re going to do. In the beginning we have to be following up with sellers five days a week. I make seven calls a day 5 days a week. I call 3 old sellers who I’ve already talk to, 2 new sellers who I’ve never talk to before, and 2 park managers to follow up with them. That’s in addition to my other marketing, my other advertising, and going to networking meetings. That’s who I’m talking to that’s why am following up. Staying on the top of everybody’s minds. That’s how I have leads coming to me sometimes seemingly out of nowhere. That’s the best advice I can give and there’s really no magic there. It’s persistence loving what you do and being loud about it.

If you’re just starting out, spend a couple weeks understanding a bunch of different niches and then, from a birds-eye view, pick two or three that really interest you. Then talk with local investors, take them to lunch, who are experts in those niches and understand the clarity, the foot work, that you’re going to need to take moving forward. Maybe not every step that you’re gonna need to take, obviously, but the basic foot work moving forward. Then take massive action to become known in your area and find those deals. When you take this action you are rubbing shoulders with other sellers and other dealers you’re doing something. You’re getting traction. Could you do a few deals? Yes. Will it be your ideal niche? Probably not. You’re gonna find something else that you like. Then, maybe organically, a multifamily seller will call you and you will say “what the heck is this?”, and then you partner with someone who knows multifamily and that’s her niche and you really love it.

Have clarity about what the deal is. If you’re scared about a deal or you don’t know if you’re going to make a bad purchase, then you don’t have enough understanding and you should find someone who does. Then put 1 foot in front the other and the other and the other.

When sellers see about how much you care, they don’t care about how much you know, within reason.



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