All Forum Posts by: John Fedro

Hi Tiffany,

Congratulations on getting to a point where you are ready to take action and for putting yourself out there for feedback and comments. 

First off, continue what you are doing and never give up the desire to help others and build a business for yourself. 

Good feedback from Christopher and Nilesh.

Due to the fact you have little money, little credit, little experience, and we are talking about mobile homes you should find a local MH investor at your local real estate investor's club to shadow. Ask this investor what you have asked above and he/she may likely help. 

The reason I mention work with someone local versus working with a mentor across the country is because:

• This local investor can hold your hand. 
• This local investor will likely know your market and will share his/her insights with you.
• This local investor will tell you just what homes he/she is looking for so you don't waste your time. 
• Nationwide mentors or active investor/mentors will not likely work with someone with no experience. 
• Nationwide investors will not likely invest money in an area they know nothing about, especially on a MH in a park. 

Additionally, you mentioned that you have no money or credit. While this niche can be started with no money, you will have much quicker results with $3-$5k set aside to invest with. Continue saving money and when you are ready to pull the trigger on your own deal you will be more prepared. 

Hoe this helps. 

All the best,
John Fedro

Hi Brady and the BP group,

First off thank you for posting this story of your first MH deal in this section. Your story is one that should be read by everyone thinking about getting into mobile home investments. Secondly I am glad you got all your money back out of the "deal". I must commend you that you never gave up during this journey, you could have bailed or threw in the towel however you did not, well done.

This story is powerful and so very similar to other "brand-new MH investor-stories" told by seasoned SFR investors who turned to MH investments to make profit, with less than happy results.

For everyone reading this who has never owned a MH investment be aware that it is too easy to 1.) over pay for a used MH 2.) over repair a used MH and 3.) leave thousands of dollars on the closing table when you resell. 

Now it is obvious that the Brady likely did not go through a year of effort and hurdles to make only $1920 in profit. In reality if Brady could have done things differently with regards to his desire to invest in mobile homes he likely would have had a very different outcome. 

Brady did a great job outlining the deal and we can learn a ton from what he did and did not do. With everyone's permission I would like to take Brady's original post and comment on the many red flags I see. I have never seen anyone do this in this forum so I hope it will be alright and educational for everyone. 

Brady's original posting is in bold and non-italic letters. My comments are in Italic letters. I hope this makes my thoughts easy to read and differentiate. 

"I was looking to buy some mobile homes last summer for cash and then flip it as an owner finance. I had read up on Lonnie Deals and decided to go for it. In May of last year I put up several ads on Craigslist and called a few ads for homes sale from Craigslist but did not have much luck in my area. I started driving for dollars and had better leads by calling for sale signs that I saw in homes. It takes a lot to simply build up the nerve to start investing so well done on this. The 2 strategies are a good start however they will only open your eyes up to a small percentage of homes for sale and sellers to help. It is important to know every MH that is for sale in your county and the surrounding counties. This way you can have clarity on every seller's property and then you can make purchase offers to every seller, not just one or two.

I called on about 25 homes in 4 months and after screening for deals ended up walking through 5 and made offers on 3. This is a good start compared to others however you have a much larger inventory near you than this. In 4 days you should have (could have) aimed to speak to 25 sellers, not 4 months.  

The one deal I ended up doing was a 2 bed 2 bath 14' x 66' Melody. In early August the owner, who lived there with his wife and 3 kids, was asking $6,500. That was about $1000 less than comparable homes were asking for and he wanted to be out by the time school started, which was in a month from the time I walked through the home. How were the comparable homes sold? Via all-cash or monthly payments? If they were sold for all-cash then you were comparing apples to oranges, meaning that you may have sold for way to cheap of a price for payments. It is crucial in my opinion to know what buyers will and are paying for 2 bedroom, 3 bedroom, handyman specials, clean homes, older homes, all-cash, monthly payments, amount down, etc? Once you know this with somewhat certainty you can now make purchase prices to make sure you make all your invested money back within 10 months or less. 

There were several issues with the home. The exterior was light green with dark green trim and the interior smelled like old food. Not disgusting but it smelled baked in and like you could never get it out. Fly paper was hanging in the kitchen and only partially doing its job. Not uncommon. The smell and other issues shows low pride of ownership and a lack of money to make improvements in my experience. There was a bedroom door off the hinges and a bathroom that had some "minor plumbing issues," but nothing major according to the owner. Make sure to walk every inch of the home for soft spots and to find hidden leaks. He wasn't sure what year it was but thought it was an early 90's model. Many sellers are liars. Make sure you verify all repairs, issues, taxes, lot fees, ages, utilities, appliances, mechanical systems, walls, windows, roof, etc yourself. The registered title didn't show a date either. This should be listed online in TX, however you may have verified this. Odd that he didn't know. Even with what I knew was going on, there didn't seem to be structural problems or any leaking and most of the fixes appeared to be cosmetic. The property tax and lien records also came back clean. Good that this was checked.

I did no further investigation of the house. I didn't check electrical, but I knew the AC worked because it was cool in the middle of the summer both times I went in. I spoke to the park manager about what I wanted to do and she was fine with it. However, she did have a few requests. 1) She wanted the exterior of the house repainted because it was an eyesore. This is common. This is our job as helpful investor in the park. If we keep the park manager happy then she can help sending leads our way. 2) She was raising lot rent to "market" which would make it $420 a month! ($420 is very high in my area but the park was in decent shape with decent tenants.) How much of an increase is this? 3%-10% raise per year is common. Make sure you can sell and net $300 per month if possible. I haggled with her on both accounts but she would not budge on the lot rent. She said we could leave the re-painting up to whoever ended up moving into the house.

After several back-and-forths with the homeowner I ended up getting the home for $4500 cash and had generated 3 very interested buyers by the time I purchased the home. I also had to pay a $200 deposit with the park. Without looking at pictures or knowing what local buyers will pay for a 2 bedroom I can only assume that $4,500 all-cash was too high of a price or terms to pay.

I scheduled a time for all 3 of my leads to come see the house. Only 1 showed up and was clearly on drugs of some sort. This very common. If 100 potential tenant-buyers call you from your payment sales offer, 95% of these folks will not be low-risk buyers you want to sell to. This is a rough but fairly accurate generalization. I ended up holding the home for a month and had to pay an extra lot rent. Not as bad as it could have been if you purchased a home most buyers didn't want or were trying to sell over the winter holiday months. 

During that time I also went to transfer title at the courthouse. I had to pay the next year's taxes in order for the title to transfer (Tarrant County law, I believe) so I did that and it cost me another $190. 

I finally found a buyer. A boyfriend and girlfriend and the girlfriend's 2 kids. Boyfriends and girlfriends, especially in their 20's, have a high likelihood of defaulting. The park runs a solid background check and the couple passed and both had sources of income. They bought the place for $7500 and put $1,000 down plus the taxes. They would replace my deposit with the park once the note was paid off. $7,500 seems like a cash price. A payment price should be closer to $15,000+. 

I financed the $6,500 over 3 years at 9%. Aim to hold 5 years of payments when possible. That gave me payments of $208 per month and kept the buyers cost under $650 each month, including lot rent. What can a local 2 bedroom apartment rent for? If you answer $650 then this home is priced correctly per month. We also stipulated in the contract that if they paid it off the note in 12 months I would take $500 off the principal. Many well-meaning buyers may agree to this however an early pay-off rarely happens.  I would get all my money back in about 17 months (longer than I wanted) but would have about 19 months of $208 a month free and clear.

They made their first 4 payments before I got an email from the owner asking how much I would take off if they paid it off in 6 months. I told them I'd take an extra $250 off the balance, but had no communication after my response.

The following weekend I got a call from the park manager asking if I knew the tenants had moved out. Apparently there was a domestic dispute. I went to survey the damage and was dismayed. A fist sized hole was in one wall and trash was everywhere. Instead of repainting the exterior of the house they had painted the interior literally every color of the rainbow, including alternating green and yellow cabinets in the kitchen. For some weird reason this wacky paint is not too uncommon either. In the 4 months the home was sold to them it would have been ideal if you made a trip to see the home and verify repairs were being made. These buyers were clearly not a vetted or screened as well as the park may have wanted you to believe. I advise to always charge every potential buyer over 18 years old living in the home an application fee to verify their history and credit yourself. 

I hope all this has made some sense and is helpful. If not please let me know. 

Thank you for the shout out Leslie. 

Additionally, Omar is very correct about the new Safe Act and Dodd Frank acts. Make sure you know these acts and how not to fall within their scope. 

In conclusion make sure to have a proper plan when investing in MHs. Have clarity of what you are buying and how you will sell it. This business is very profitable and very rewarding as we are only here to help solve problems. However, again it is all too easy to over pay, over improve, and sell for too little of a price.  

All the best,
John Fedro

Hi Flaure and the group,

Welcome to BP and for your interest in the exciting world of MH investing. Mark and James give good feedback with regards to wholesaling MHs inside parks, as these homes will not be attached to land and therefore will be more akin to cars and car titles. 

The real world application of wholesaling MHs in parks can be tricky as any contract or agreement to purchase would not do anything to prevent that seller from going around you as you send potential buyers through the home. You can hold the title in escrow or make sure the seller is out of the home however these hurdles sometimes prevent problems moving forward as seller(s) may not agree. 

In addition to the lack of security you have as wholesaler the only value you bring to the table is to market the home better then these sellers and try to sell to an end user. Perhaps you can wholesale to another local MH investor or another park to move the home there, however this is unlikely in my opinion as experienced MH investors may think they can get the home cheaper than your price and only few MH parks will buy homes.   

Now, on the other side of the coin you have more success wholesaling mobile homes on real land. In many areas there are more MHs on real land then inside rented parks. Finding and attracting these motivated sellers can be rewarding, plus more investors and end users will have money or credit to purchase these deals from you. However I would advise you line up buyers and serious/active Mh investors in the area and ask what they are looking to buy. Get a seller's home under contract to purchase at 50% of the After Repaired Value minus repairs and minus your assignment fee. If you are negotiating terms than perhaps you can ignore the 50% price above.

Every deal is different and I am sure if you have any specific deals or leads you can post their pictures and data on this forum and get some great advice from many investors quickly.

Thanks for the shout out Steven.

After reading the above comment you may now have more questions than before. Don't hesitate to reach out if you have any more questions or thoughts.

All the best,
John Fedro

Hi Alex and the group,

Good to hear you are considering investing in mobile homes in your area. You are in a very good are for this type of investing. Your initial comment has a few questions in it that I will try to answer below. 

1. Question: Are you able to do the same types of deals Involving subject to?
Answer: Concerning mobile homes on private land then yes, it is very possible and likely. Concerning mobile homes inside parks then yes it is possible, however this is very very advanced strategy as it involves speaking to underwriters, trusts, and your buyer signing personally to the bank. So in short No for the most part inside parks. 

2. Question: Can we do lease options? 

Answer: On land yes. Inside parks No with regards to most parks. I suggest you aim for buying and reselling for cash or payments. 

Side note: We can purchase homes the ways listed above however with new acts and financing laws be very careful with your procedure and paperwork when selling with financing or via LO to your end buyer.

3. Question: What should I look for?  

Answer: So so many things. It is so easy to over pay, over improve, and sell for too little. Aim to help sellers and buyers and have clarity of you surrounding market with regards to parks, buyers (and what they'll pay), sellers, Realtors, park managers, and other important people in the business.

Great feedback from Steven and Shawn.

Thanks for the shout out Steve.

Hope this all makes sense and helps. If not don't hesitate to reply back.

All the best,
John Fedro

Hi Juliana,

Welcome to the BP group! Like Jon mentioned we do have a great forums section to check out other questions and answers from other active investors. The pod casts are a wealth of info too. Thanks for the shout out John.

You haven't asked yet, however here is some free info and advice about your local area. While I'm unsure if you are interested in investing in mainly mobile homes/RVs in parks OR mobile homes on private land OR complete mobile home/RV parks, your local market is unique. Because you are located near the bay you are in a very popular area for affordable homes. One of the most affordable homes in your area will be mobile homes, however due to folks flocking to your general location from all over the country the prices of even mobile homes in parks will be very high compared to other areas nearby that are more inland. In other words you will likely be able to find many more mobile homes for affordable prices, lower lot rents, and a larger "for sale" quantity if you travel further inland than you currently are. This is a very obvious statement however I hope it has helped some.

As you move forward feel free to post your specific questions in the MH forum section for us all to comment our thoughts.

All the best,
John Fedro

Welcome to the group Donald! 

Best,
John

Hi David,

Good to see you're willing to help MH sellers that need your skills and quick action as an investor. Additionally good job finding this lead. 

Ann gave very good feedback with regards to comping a mobile home on private land. There are additional factors to consider however basing your numbers on recent comps nearby will have you understanding if this deal is a pass or worth making an offer on. You say this sellers is motivated so I would encourage you to make an offer regardless of what the seller is asking as long as the home itself can be profitable, is at least a 2 bedroom, and doesn't need much rehab.

You didn't yet address is the home is in a park or on land. Ann has some good point here as well. Additionally, mobile homes in parks will often times sell much much faster with payments versus an all cash or conventionally financed sale. For this reason make sure you have a demand in your area and know what buyers will pay, and how to find said buyers.

The only extra item I'd like to discuss is the fact that all the investors Ann knows of said, "they will not invest in mobile homes again". This is an all too common response I hear from folks that jump into this market without training that think MH investing is anything like traditional SFR investing. MH investing is very unique and it is sooo easy to purchase a property for too much money or leave extra profit on your closing table when you resell.
With that said be careful and try to get some advice from a seasoned investor locally or otherwise that can help. If you have any pictures feel free to add them here so we can comment on them or email them to me personally if you wish for any further feedback.

I hope this helps and makes sense.

Best,
John Fedro

Hi Marlisa,

Good comments everyone. Good resource Gerald.

Welcome to BP Marlisa. Glad to see you are taking an interest in mobile home investments for creating value and profit. There are many pros and many cons to investing in these types of properties. There is far to much to discus on this thread however I am sure others will give their input as well on the matter. I have provided a link below to many Mh articles on this site.

In your area of Ca you do have many senor parks compared to all-ages allowed. For this reason it is very important you verify a resale demand in your area and how much buyers will pay. From here you can begin to look to help local sellers and park managers. Additionally, inside and especially outside of your immediate area you will also find many all-ages family welcoming mobile home parks to consider investing within, if the PMs allow you there.

With that said here are some past articles I have written for this site almost specifically about mobile home investing. http://www.biggerpockets.com/renewsblog/author/joh... I hope this provides you some extra help and insights. If you have any specific MH investing questions from here don't hesitate to ask.

All the best,
John Fedro

Hi KC and group,

First off congratulations on being ready to take action and jump into R/E investing. Also, welcome to the BP family.

As always good comments from Jefferson about being transparent with the park managers and owners. However, because this is your first MH deal I would highly advise you being cautious and really consider purchasing in this park. 

I say be cautious because when reselling a mobile home in a senior park you are eliminating much of your buying demographic. Depending on the inventory of the park and other local parks you may have a hard time selling the home versus reselling it in a family park. With that said you could have a easy time selling it too. Make sure there is a strong amount of senior buyers in your area and know what they will pay for a 2 and 3 bedroom Mh in this area. I see you have many senior parks around you perhaps seniors are flocking to this area and a sale will be quick, but make sure you know versus just assuming there is a good demand. It should takes days or weeks to sell, not months. Additionally, senior buyers will have a more difficult time making repairs (if the home needs repairs at the time of sale) AND some senor buyers are just as flaky as their 30 year old counterparts (so do not assume that seniors will always pay on time due to gov't money). 

Mobile homes in senior parks can be profitable and they can often times be purchased for typically a lower price than homes located in family parks. Jefferson was right for sure about you being "allowed" to invest in a senior park "if" the park manager or owners allow it. You may also have to be approved by a park-community-committee of residents, this is not common but it does happen. Additionally a park may not want you to be there even though they know you will not be living there, if this is the case then you don't want to be there either.

You did not mention the size of the home, age condition, lot rent fee, amount you can resell for as a Move-In amount and monthly, number of bedrooms, bathrooms, what else is for sale in the park, local park inventory for sale, etc?

It is my strong opinion that you get to know many local park managers (both family and senior parks) and make your first few mhs purchases in park be clean 3 bedroom mobile homes in family parks that you know you will make your money back within 12 months (max) or less plus 4-9 more years of monthly payments.

I hope this helps and makes sense. If not let me know and we'll get it cleared up.

Talk soon,

John

Hi Jack,

Congratulations on actually calling a seller and stepping outside your comfort-zone for this one. 

Great advice and 2 cents Jefferson.

Jefferson gave some good advice with regards to many of the concerns I would have as well. The septic could be an issue however with proper inspection and upkeep this is workable. 

Personally I am a fan of owning the land of a mobile home park and not owning any of the homes. With this park you will have to maintain and rent the homes forever to continue receiving this income monthly, as I doubt lot rents are $430-$500 per month. 

In addition $400,000 is not a motivated seller, sounds like over retail price to me. It also sounds like there is little upside for you to develop more lots or improve the park for a higher resale value or to increase the income. However I may be wrong about this as I am do not know much about the park except for what you mentioned. 

In my mind this is a pass. However I am just one person and if this type of investment and cash flow and maintenance-involving park is right for you then do your due diligence and find out more.

I hope this helps. If you have any follow up questions or are still confused don't hesitate to reach out. Keep up the good effort.

Talk soon,

John Fedro