All Forum Posts by: Frank Rolfe

Wholesaling mobile home parks is called "selling an assignment" these days. All good mobile home parks should show as buyer " XXXXX and/or assigns" which gives the buyer the ability to assign the contract to an LLC that they form for the transaction -- but it also allows you to assign to any other buyer, as well. In an assignment, the person who ties up the deal signs an agreement to sell that contract to a third party and, in so doing, receives their earnest money back and then gets paid the agreed amount at closing. The third party then does all due diligence on their own and at their own cost, gets a loan (unless it's seller carry) and then closes on the deal and pays the assignment fee. The danger is that the third party does not close. So it's vital that the person selling the assignment does diligence on the buyer to make sure that they have the funds and desire to pull the trigger.

It's also important to remember that you can't just assign any deal -- it needs to be a good deal. Solid location, infrastructure, density, and economics. When you put your assignment fee on top, it strains the existing economics, so you have to get a price lower than what it's worth to handle the fee.

Most people find assignment buyers by posting on the MHU forum and saying that they have an assignment for sale.

Figure out how much it would cost to renovate the mobile homes and the stick-built house. Figure out how much they would rent for if renovated. Figure out how much it would cost in expenses to rent out the four mobile homes and the house. Calculate the net income. Cap that income at 10%. Subtract that amount from the cost to renovate all five structures.

Now compare that number to what you can sell the property for "as is". If it's significantly higher to do all that work, then you might proceed. Otherwise, dump it. That project sounds very capital intensive and my bet is that the numbers will demonstrate that you should just sell it "as is" but I leave it up to you.

We have a similar project underway in Omaha, Nebraska. These are very complicated deals and probably not appropriate for a first time park buyer or someone who does not have a lot of capital at their disposal. You have to calculate the value at the end of the project, subtract the cost plus the money required to rebuild it and re-fill it, and then see what the return is, which is much harder than buying an existing, finished asset that you can just raise lot rents on or fill a few lots.

Don't do anything until you talk to the Texas Manufactured Housing Association (TMHA) and have read all about the SAFE Act and Dodd-Frank regulations. You cannot typically do seller financing unless you are SAFE Act licensed and compliant, although there may be exclusions in Texas. But don't even think about doing a seller financed transaction on a mobile home until you have a complete handle on this!

A person who has good sales skills that lives in a mobile home park is seldom a technology whiz. I would not be concerned about prospect tracking software, only that the phone gets answered, that the sales pitch to get the customer is professional, that showings are set up, that showings happen, and that deals get closed. You could have the sales person as completely separate from the park manager -- it's a completely different role with different skill sets.

OK, let's start this all over again. Here's how you do it correctly in a modern world:

1)  Port your park phone number through Who's Calling so that you get a record of every phone number that calls in, if the call is answered, the duration of the call, and a complete recording of what was said.

2)  Find a resident in the park that is a great salesperson -- positive attitude, great with people -- and make them your sales person at a commission of 3% on every home sold. They answer the phone.

3)  Follow the 9/3/1 rule -- for every 3 calls you should get a showing, and for every 3 showings you should get an application to buy the home.

4)  If you are not getting at least 9 calls a week, you need to ramp up advertising using Craigslist, Facebook, the largest metro newspaper classified ad under "mobile homes for rent", direct mail to Class B and lower apartments, a banner on your entry fence, for sale signs in yards and windows, and a resident referral letter.

5)  If you're getting 9 calls a week, but not getting any applications, then listen to the Who's Calling recordings and see how good they are on the phone.

6) If they're good on the phone, then call those numbers and do exit interviews with the customers and see why they did not buy -- often they'll tell you the manager didn't show up or they were drunk, etc.

7)  If these customers tell you that the manager showed the home well but it's more than the ones down the street, then you need to adjust your price.

8)  If the customers who apply can't qualify, then you may need to alter your terms for acceptance.

We operate over 200 parks in 28 states in this manner, and we've never seen a park you can't fix if you take a scientific approach. That's assuming the market and home product is decent.

Demolish it on-site. It will cost you about $2,000. Any other direction you go you will have liability exposure -- if you try to pull it out it may break apart in transport and if you sell it you may get sued for it being tainted with mold. You can never remediate the mold enough to satisfy a personal injury lawyer, and in most states you can't sell a mobile home "as is" with the problems you are describing due to the "habitability warranty". You can find someone to demolish it if you Google up "demolition company" in your area, or just call your local mobile home park retailers.

As for the lots, yes, if you rent them out you will be responsible for the water, sewer and any other utilities. Personally, if there is any market at all, I would sell the lots off as it sounds like a lot or risk (well or septic failure) for not a lot of money.

Renovating mobile homes is a lot more complicated than it looks. The first thing you need to avoid is breaking the rules regarding HUD and the seal on the home (assuming it's built 1976 or newer and has a HUD seal). HUD does not allow you to enlarge any windows or doors, add weight to the roof, or to replace any wall material with something heavier (for example, replacing paneling with drywall). You can probably find information on-line (or by contacting HUD) regarding their rules and regulations. Then you also have to realize that many of the parts on a mobile home are not the same as a SF home (different water heater, different furnace, different doors, windows, etc.) and you can't just run down to Lowe's and buy the right ones (but they are available on-line).

On the flip side, in most mobile homes the interior walls are not load bearing but instead decorative, and you may have greater latitude to move those around to meet modern floor plans (but consult HUD before you do this). I have seen homes where people have removed most of the interior walls and the end creation looks fantastic (even one in which they removed all the interior walls other than the bathroom and it looked like a mid-century modern masterpiece).

You will also need to work on energy efficiency, as mobile homes rate poorly in this category (based on the year it was built). We have studied this and most of the energy loss comes from the floor vents, the windows and doors and even the outlet covers. You may also be able to increase insulation (but ask HUD). Some caulk and weatherstripping can do wonders on reducing your energy bill.

Finally, if you want to get the absolute best remodeling designs, go to the local mobile home dealer and walk through the new homes and take notes on the color treatments and textures. Mobile home manufacturers have hired some great designers in recent years and you will get some great ideas (which you can copy verbatim so take some color chips from the hardware store with you to match).

We find over 50% of our deals from MH brokers. We find the other 50% from a combination of cold-calling, direct mail and on-line at Mobilehomeparkstore and Loopnet.

Do NOT cold-call park offices. All you will get is managers and all they hear is "can I please buy your park and fire you". You have to find the owner through tax assessor records.

In most states you can surrender the title to the mobile home and it becomes real property. This may help you obtain the loan you need to buy it. As far as appreciation, at the end of the day it's still a mobile home and that's not a big draw with 99.9% of future buyers. But if you are buying it for your own purposes, then who cares? You could always sell it again as raw land and tear down the mobile home 30 years from now.