Common Mobile Home Investing Mistakes
This article is designed to help provide the newbie mobile home investor with some foresight to notice some not-too-common red flags that you will find while investing in individual mobile homes inside of pre-existing mobile home communities.
The three red flags below have all been costly mistakes that I have made myself over the past decade investing in these homes. Some of these mistakes I am still living with now as some homes are still located in these less-than-ideal parks. Below you will read some tips to avoid buying a mobile home lemon.
After reading the list below please keep these items in the very back of your mind in the event you find yourself looking at purchasing a mobile home inside one of these types of communities.
1.) A Large Number of Empty Pads/Lots
Imagine you are driving through an established mobile home community you have never been through before. You notice that approximately 25% or more of the existing pads are vacant and without mobile homes on them.
This could be for a number of reasons.
A. Transitional Period: This mobile home park could just have kicked out a majority of the less desirable owners and/or homes in the park, thereby cleaning up the quality of the park. This happens when new management or ownership takes control of a loosely operated park. After asking the manager about the issue she confirms this is the reason. If this is the case there is little to be concerned about. It is a good question to inquire how they plan to fill these empty pads however no red flags are raised here.
B. Poor Ownership and/or Management: Another reason there could be a healthy amount of empty mobile home pads is due to homeowners moving their mobile homes out of the park. I have only seen this twice. The community residents logically and almost unanimously despise the park manager and/or owner to an extent the mobile home residents are willing to pay to have their mobile homes moved out of a park they have lived in for years. If a park manager is too strict, bossy, demanding, or the park owner is too negligent or greedy with regards to raising lot rent prices you could have a mass exodus in a community. If you get this impression from a resident or park manager strongly reconsider a long-term relationship within this park. This is a red flag.
2.) Too Strict of an Application Process
Screening buyers and residents for past evictions, credit worthiness, criminal history, sexual predator status, income, employment, etc is all within a park’s rights as landlords and without question should be performed as due diligence by any investor allowing strangers into their properties. When dealing with mobile homes inside a mobile home community it is important to note that each park owner may dictate within reason who lives within their walls. This screening criteria will translate into who you can resell your investment mobile home to.
In the beginning of my career I invested in a mobile home community that required a minimum credit beacon score of 700 to be approved to live in the park. This is an insanely high beacon score for everyone to reach in a mobile home park. The community also required a 4 page application that detailed employment verification for the past 4 years, past housing, references, bank information, automobile information, etc. Much of this information is standard and will be asked for when applying to almost any mobile home park. However the high credit score, 4 page application, and $75 application fee per adult made this investment home terribly difficult to resell.
The mobile home spoke for itself and was a beautiful investment purchased for a nominal price. I had no shortage of potential buyers wanting the home. The trouble came after the potential buyers left my investment and headed to the park. Once finding out about the high criteria and high application fee the park demanded few ever followed through with an application. After 2 month of holding the home I began offering to pay for “verbally-qualified” buyers to run their applications. I paid for 6 application fees before a family of 2 was approve for the park. I took a discount on the home when I resold it, collected my profits and have never done business in this park again.
Important to note was that I met a number of other sellers that were having the same complaint about selling their homes. I could have purchased more homes within that park for a true discount however the hassle and time would have not been worth the immediate savings.
3.) Snippy or Unfriendly Park Manager
Park managers are average people just like you and me. In addition they often times have thankless jobs and give much of themselves to the local community. I say this completely serious because the majority of mobile home park managers want nothing more than to do a good job and to bring up the lives of the residents in their community.
If you meet a park manager most of the time they will be as pleasant and helpful as an old friend. However sometimes park managers wake up on the wrong sides of the bed, this happens to the best of us and can lead to a less than desirable first impression. When meeting a park manager for the first time be aware that you are screening this person just as you screen an investment home or seller. You will be forming a relationship with this park representative and it is important you both like each other.
Without meeting the manager a few times it is difficult to say whether or not he or she is always happy, rude, greedy, bossy, etc. Instead plan to interact with the park manager at least 3 times before you purchase a mobile home within their community.
In conclusion there are many moving parts to every decision that goes into whether or not you should invest in any income producing property. When a mobile home is located in a mobile home community this only adds to the variable of factors to consider. If you have further specific or general questions do not hesitate to reach out and ask them below.