What Mobile Home Repairs To Make Based On Exit Strategy?
What Mobile Home Repairs To Make Based On Exit Strategy?
I’ll admit that over the past 10+ years investing successfully in mobile homes I have become a bit of a mobile home snob. In the same way traditional real estate investors tend to turn their noses up to mobile home leads, lately I’ve have been turning my nose up to skinny-single-family-home leads. Mobile homes are not the end-all-be-all of real estate but they do give average people an above-average opportunity to invest profitably in real estate today.
Mobile home investing seems pretty straight forward to most traditional real estate investors; however there are hundreds of steps to investing and reselling manufactured homes successfully. Along this path there are dozens of errors and secret-traps (some counter-intuitive to traditional investing) to slow you or stop you from investing.
Manufactured home investing errors happen in 3 main areas:
- Over paying for the mobile home when buying.
- Over improving the mobile home while rehabbing.
- Undervaluing the mobile home when selling.
Purpose of this article:
The purpose of this article is to help bring clarity to your understanding of 1. who will be purchasing your used mobile home in a park and 2. what each buyer will be looking for in a mobile home to buy.
The video below was recorded with the help of Carlos G. from Tennessee. Carlos G. is a new member using the Mobile Home Formula training system for investing in mobile homes and was helpful enough to record the following video. Watch below as we discuss what strategies are working and not working in Carlos’s business for selling mobile homes to low-risk buyers quickly versus slowly. Learn the surprising discoveries about selling mobile homes that Carlos now understands.
Pro Tip: It is vital to your future business that you understand this information below to help save you money, time, and confusion while reselling your next mobile home. If you have questions please comment them below or email me personally.
3 Mobile Homes: 3 Months: 3 Lessons
What you should have learned:
The video above contains a brief history of Carlos’s real estate investing experience and then jumps right into his first 3 mobile home formula deals. Scattered throughout the video are helpful tips and lessons to follow. The bullets and headlines below will help outline more of these lessons bit by bit.
- Carlos’s only real estate investing experience was renting his own home prior to starting MH investing.
- Originally it was the monthly cash-flow that attracted Carlos to investing in manufactured homes.
- First and foremost mobile home investing is a people-business. Be disarming. Be a people person. Be excited to help people.
- Carlos just moved to Tennessee 2 months before learning to investing in mobile homes.
Mobile Home Deal #1:
- Mobile home with 4 bedrooms and 2 bathrooms.
- Single-wide mobile home in a family park.
- Invested $6,500 and overpaid for the mobile home due to excitement and pulling the trigger too early. Overpaid based on repairs needed and sheer excitement of closing your 1st deal.
- Hired a traditional single family home contractor for all repairs and grossly-overpaid on repairs.
- Home sold in 45 days. This is ideally 15 days too long and will be explained why below in Lesson 3.
- Even though Carlos overpaid on the repairs and acquisition of this property he will still profit because he is willing to sell to a payment-buyer via monthly payments and will recapture all his investment plus years of profit in the future.
Lesson One: Do not hire a general contractor for most MH repairs.
Remember that every dime you spend on improving a mobile home will be a dime you have to recoup from your buyer before you make a profit. While some repairs are very important, others are less important for a fast sale. Depending on your seller you may be doing yourself a disservice by improving and over paying to rehab your mobile home before resale. We will discuss more about knowing your target-buyers in Lesson Two below.
When rehabbing a used mobile home an experienced and reputable mobile-home-handyman will very likely be your least expensive and quickest way to make repairs. Carlos paid roughly $6,000 for repairs that should have costed $2,000 or less. Make sure to always ask for any handyman referrals from park managers and community residents. There are likely experienced, sober and inexpensive handyman living somewhere in your park eager for you to hire them.
As rule of thumb for all non-skilled and general repair work I typically pay $10 per hour. For all skilled work, such as electric and plumbing I typically hire a licensed professional in my area.
Mobile Home Deal #2
- Carlos purchased his second mobile home from a park during a park-auction
- Carlos paid $2,000 for the home.
- The mobile home quickly sold in As-is condition to a low-risk payment buyer.
- Carlos’s phone was ringing off the hook with buyers eager to purchase and repair the home themselves.
- Carlos learned that many buyers will be happy to make some repairs in lieu of a lower Move-In payment when purchasing.
- The mobile home sold for $21,480. Payable as $3,000 to Move-In and 42 monthly payments of $440
- Took just 3 weeks to sell in as-is condition.
Related article: Three types of mobile home park managers
Lesson Two: Know who your buyers are and what repairs they want before they buy.
Question: Which MH will seller quicker? A or B…
- A.) Beautiful mobile home ready to move-in? or
- B.) Mobile home needing some TLC?
If you said “A. beautiful home ready to move into” keep reading because you will soon discover why this is largely inaccurate. If you said “B. mobile home with TLC needed” you are correct in most cases. Here’s why…
Not all mobile home buyers are looking for a perfect-condition mobile home to own. Most are simply looking for a safe home they can afford. The reason for this is because many buyers that desperately want to own an affordable mobile home do not have $10,000 or more saved up to purchase a mobile home outright. Coincidentally many beautiful mobile homes and many mobile home sellers are looking to sell their mobile homes all cash. Sellers of mobile homes that can afford to sell their home via monthly payments:
- Sell faster.
- Sell for a premium price.
- Sell with repairs needed.
But John, I don’t want to sell my mobile home via payment? Let’s take a look at the 3 categories below. The lists below outlines advice and data from my own experience investing in mobile homes and folks I have helped around the country. With proper due diligence and proper planning you may be able to find many buyers that counter my statements below.
A. Who are your main buyers? Mobile home buyers will fall in 3 major categories.
- 80%-90% of buyers in many markets are payment-buyers. Of all these “payment buyers” that are ready-to-own, only a small percentage of them will have good credit, no evictions, good income, and money in a savings account. These are your buyers if selling for payments. Does this make sense?
- 10%-20% of buyers in many markets are cash-buyers for used mobile homes inside parks. There are some exceptions: NYC, NOLA, Washington State, Coastal cities, Parts of Maryland, Virginia, and NC have a population of approximately 40% of buyers that can easily pay $10,000 or more cash for a used mobile home in a park. Disclaimer: If you are in most areas of the country a mobile home priced for-sale at 25% below the competition and in nicer-condition will likely sell in short time for all-cash. Why? Because every buyer wants an undervalued home.
- Bank approved buyers with good credit, approximately a 20% down payment and nice collateral are few and far between in most markets. Banks and credit unions nationwide have a variety of programs to choose from concerning mobile home lending. Many of these programs have strict and lengthy criteria both for the buyer(s) and mobile home(s) before becoming approved. For more information please call Steven McMahan at 21st Century Mortgage 1-800-955-0021 ext. 1251 to learn more and/or ask him further questions. If your price is firm and your property is for sale at a 20%-30% discount then perhaps a bank-approved buyer may be found quickly. If you are in a hot market you will likely find bank approved buyers easier than in slow-markets simply due to a much higher volume of potential buyers.
Not in a rush to sell? If you do not need to sell quickly than by all means please continue to ask for any price you feel is realistic. Allow the market the speak for itself and if you do not receive much attention you can alter the price and terms in the future.
B. What are these buyers aiming to buy? Every buyer is a unique person. Some buyers expect a beautiful move-in-ready mobile home and other buyers just love a handyman-special that needs TLC in order to save some money.
- Cash buyers: Cash is king! And few buyers have it. Cash buyers expect to get a deal. If you are aiming to sell to an all-cash buyer please aim for pricing your property 20% below recently sold comparable homes. Start by advertising at full price compared to other comparable homes “sold”. If you receive little interest from potential buyers lower your asking “all cash” price within 20 days. Consider selling on payments for a faster sale. Be advised that there are new mobile home owner financing laws to be concerned about while reselling to a owner-occupant buyer who will be living in the home.
- Payment-type buyers: Payment-buyers understand a premium will be added for the luxury of paying over time. Payment buyers include low-risk buyers with good jobs, fair credit, no evictions, good income, saving accounts, and are likely handy. Payment buyers will typically prefer to make needed repairs in lieu of a lower Move-In payment (or Down payment) when purchasing from you. These repairs will be discussed briefly in paragraph C below.
- Bank Approved buyers: Bank financed buyers will often desire a stunning manufactured home ready to enjoyed. Buyers with 20% down and qualifying at a bank will frequently be searching for an under-priced and newer manufactured home with many modern updates.
C. Repairs to make based on your exit strategy and specific buyers?
- Cash buyers may either be searching for a handyman-home or a move-in-ready home. Both buyers will be looking for specific traits.
- Looking for a gorgeous move-in-ready home: A typical buyer with $20,000+ desires a pretty home. These buyers have money, and they want to buy something they love. If you have a rehabbed mobile home and are looking to sell for all-cash then you are competing with every other seller in your market looking for the same few cash buyers. For a faster sale aim to advertise your sales all-cash price 20% below comparable homes sold recently. Rehab the mobile home to “Gently Used” condition.
- Looking for a MH with repairs needed: A typical cash buyer that is willing to purchase a mobile home with “repairs needed” is looking for a “deal”. A seller wanting to sell their mobile home in a park in as-is condition and will not accept payments should understand there few buyers [with cash] desiring your home unless it is for sale 40% below comparable home sold prices less all needed repairs. Make no repairs and sell as-is for an attractive price. To help appeal to most “handy” buyer follow the steps outlined below in the BIG 6.
- Payment-type buyers are typically happy and willing to make repairs to a mobile home for a reduced Move-In fee when buying. Keep in mind that someone is going to make these repairs, either you or your buyer. When selling a mobile home needing repairs via monthly payments you always want to make certain you have agreements in place so the buyer know which repairs to make by what date. The purpose of this agreement is to cover yourself should the tenant-buyer default you will receive the home back in better condition than when it was sold. Does this make sense?
- In order to appeal to most handy-type-buyers and help sell the home quickly it is recommended by this website to correct the BIG 6. The BIG 6 is a list of repairs most handy buyers will frown away from. The roof(1) should be free of leaks. The sub-floor(2) should be free of soft-spots. The walls and broken windows(3) should have all major repairs and holes fixed. There should be no plumbing(4) leaks. Electric(5) should be functional. All appliances(6) should be provided if not already present inside home, excluding central A/C, washer, and dryer. Cleaning out any trash from the home and fixing these major systems will make the home attractive to as many handy buyers in your market without overspending.
- You may leave all cosmetic repairs and minor rehabs. Fix what is broken however be cautious about making upgrades.
- Bank financed buyers: Much like selling a mobile home to an all-cash buyer, a typical bank-approved-buyer with 20% down and good credit desires a pretty home. These buyers have money and bank-support, and they want to buy something they love. If you have a rehabbed mobile home and are looking to sell for all-cash or bank financing then you are competing with every other seller in your market looking for the same few buyers. For a faster sale aim to advertise your all-cash price 20% below comparable homes sold recently.Rehab the mobile home to “Gently Used” or better condition.
Disclaimer: If you are like many other mobile home owners with a high-pride-of-ownership then your home is likely in very good condition with little rehab needed. In your situation your mobile home should be attractive to most buyers as it is move in ready.
Mobile Home Deal #3:
- Carlos’s 3rd deal was referred to him by same park manager as deal #2.
- Originally the park was asking close to a retail price for the home.
- Carlos offered a payment arrangement of $1,000 down today and 36 monthly payments to the park for $111.11.
- Carlos quickly sold the home for $1,000 from tenant-buyer and monthly cash-flow payments of $300 for 48 months. Net cash-flow = $188.89 per month for the first 36 months, then the cash flow raises to $300 for the remaining 12 months.
- The mobile home sold in As-is condition to a happy buyer within days.
- Buyers were handy and happy to make all final repairs.
Lesson Three: Make repairs with your end buyers in mind.
The more you invest to repair your mobile home the more you need to recoup from your buyers. If you remember from Deal #1 it took Carlos 45 days to sell his nicely rehabbed mobile home. That is 30 days longer on average than it took to sell the handyman specials. Carlos hired a contractor that over-improved the home. Although the home is now very attractive Carlos now needed to recoup his money sooner than later.
For this reason Carlos desired to sell the home to a payment-buyer with $3,000+ cash to Move-in versus a smaller amount. Had Carlos only made minimum repairs he could have resold the him investment mobile home quicker to a handy-buyer with less cash needed to Move-In and own. Remember: The length of the repayment-term will remain the same, only the Move-in payment (down payment) will be reduced.
Related article: Determine the reselling value of your investment mobile home
In conclusion it is vital to know and understand who your target buyer(s) are and what will make them happy. Let’s give buyers what they want at an affordable and sexy price. Some buyers have money and want something fixed, and other buyers would much rather fix a home to save some cash.
Too often I speak with sellers that have over spent on rehabs and now will lose money on the sale not understanding their home is not a desirable as they once thought. If you have any questions or are concerned you are having trouble selling due to the price or condition of your home don’t hesitate to reach out to me at the email address below.
All data and advice above come from my own experience investing in mobile homes and folks I have helped around the country. With proper due diligence and proper planning you may be able to find many buyers that counter my statements above.
Every seller whether owner-occupant or investor should get what price they believe their home is worth. However the market will determine if your mindset is realistic or unrealistic for active-buyers to pay. If you are motivated to sell then drop your price or start considering selling your mobile home with payments to a low-risk and credit-conscious buyer.
If you have any questions about this don’t hesitate to comment them below.
Love what you do daily,