Last week I was able to respond to a mobile home investing question that read, “Am I able to purchase a mobile home that needs repairs and resell the home for a profit without making any of the repairs on the home before reselling?”
The short answer is “Yes;” however, let us dive deeper into this question/answer to find out why this is and how value is created with regard to mobile homes.
First thing to make sure we all understand is that in order to grow a long-term investing business with great word-of-mouth advertising, we need to resell only win-win mobile home deals. This means that although the condition of the mobile home may not be 5 out of 5 stars, the price and terms are affordable and very attractive to the end user. In no situations should an investor omit known repairs needed or fool a buyer into buying a misrepresented mobile home. Now that we are in agreement, let’s move forward.
5 Creative, Profitable Ways to Increase a Mobile Home’s Value
1. Buy, Fix and Flip
Perhaps the most commonly thought of method to increase price is to increase the value via repairs and sweat equity. If a mobile home is worth $5,000 with repairs needed, then surely making some or all of the needed repairs will justify a higher retail price once completed. This is the most common method of increasing value that investors understand.
But what other ways are there to increase value of a mobile home?
2. Move the Home to a Better Location
If the mobile home is inside of a park and the costs to move the mobile home fits into your deal figures, this is a very valid way to increase value of the mobile home. Perhaps you are moving the mobile home from a rundown park to a 5-star park, or perhaps you are moving the mobile home from an inland small town park to a bustling oceanside park. Both of these moves will typically create a higher resale demand and therefore a higher resale value, equaling profit for you.
3. Add More Homes to the Land if Possible
If you own a mobile home on land, then perhaps the zoning of the land and the size of the parcel allows for additional mobile homes to be a added to the property. In many cases this can increase resale value and cash flow potential from the parcel.
4. Sell Via Payments
When buyers cannot or will not turn to banks or credit unions to finance their new/used mobile home purchase, then selling via payments* can increase the purchase price of a mobile home out of sheer necessity for the buyer. Said another way, no matter how you purchase a mobile home when you resell the home for monthly payments, you increase the amount of buyers interested in the home. This increase in demand will typically increase price, in addition to charging a premium for this service.
*Selling on payments is a vague term that includes lease options, rent to own programs, owner financing, and other methods. Some of these methods are frowned upon and others illegal in many areas due to new laws and acts. Selling via payment is still possible; however, please make sure to follow all laws and rules when selling via payments or terms of any kind.
5. Find the Right Properties
If you were paying attention, you may have realized that we really have not discussed the original question’s answer yet. Can we buy and resell a mobile home without making any improvements to the home? Yes, and this answer stems from the act of finding and securing (purchasing or obtaining a signed purchase contract) the subject mobile home before any other buyer or investor.
As investors, much of our job is to attract, find, negotiate, and secure a “profitable” mobile home typically undervalue from the retail price. Realize that once you find and buy a mobile home below value that you have captured some profit immediately.
Let us look at this another way. Perhaps you know you can resell a fixed 3/2 mobile home in a park for $20,000 with payments. If and when you find a seller who will sell their handyman 3/2 mobile home for $4,000 cash today, you make an offer of $4,000, and the offer is accepted. Once you own the home, you may now resell in an as-is condition for a higher price if possible.
Selling for cash may be difficult, as the seller was already trying to sell for cash, so you will need to market better than the previous seller in order to sell to a higher bidder. If you rehab the home slightly or all the way, you can increase the price. If you resell for monthly payments, you will increase the value and therefore increase the price. However, if you truly did buy the home at the right price, and only a handful of repairs are needed, you can fast-turn the home or even wholesale the contract to a buyer for a higher price than you paid without making any need repairs.
We can talk about this for days, so if you have any questions, comment them below, private message me on BiggerPockets, or email me personally for fastest reply. As mobile home investors, it is important that our reputations speak for themselves. By investing correctly and with daily consistent effort, profit is very possible; however, this is only possible with a correct understanding of your market and win-win-win deals.
As always… love what you do daily.
Mobile home investors: How do you profit off of your properties?
Leave me a comment below, and let’s talk!