Flipping mobile homes - what am I missing?

[Justin R.]

First, I plead ignorance other than everything I can read about mobile homes on BiggerPockets and mobilehomeinvesting.net in about 3 hours time.  :)

I own and manage a modest portfolio of MFR properties and have been involved in a couple SFR flips, so I know those games. But, I've never done anything with mobile homes.

Locally, a 4bd/2ba 1990s double wide in a central, preferred park on a spot with, say, a 2000sqft back yard, will sell for somewhere in the $120k - $150k range.  Brand new ones are listed for about $170k.

We're contemplating a flip and I'm scratching my head since almost everything online talks about buying $5k MHs and reselling for $15k and carrying the paper.  I don't see much (any?) conversation about the $130k price range.

Summary is: $50k purchase from a distressed seller, $20k in work (imagine pets and chain smoking for 25 years ... yeah), multiple comps of the same vintage within 6 months in the same park above $120k.

I'm trying to find the gotchas here.  What am I missing?

FWIW, the manager seems to want to be sure we're moving into the home rather than flipping it.  How important is park management's opinion of what's going on (answer: more than I'd like, I suspect)?

THANK YOU BP Nation!

[Bill Neves]

@Scott Schultz 

Just a different business model.

Correct - mobile homes are depreciating assets. So the question for an investor is "do I want to make money or play the stick built game?" One does not always equal the other.

I used to train people in stick built real estate deals. Worked for the Robert Kiyosaki Rich Dad Real Estate folks, when it was called Russ Whitney. Funny - you mentioned him. I played in that arena for over 10 years and did 160 stick built deals. Made great money... Until the market crashed and LOTS of investors got crushed.

Fortunately, I didn't get hurt but stopped for 3 years. Attempted to get back at it in 2012. No traction. Auctions, many times, are over run with newbies who have 401k money and frequently overpay. Short sales are difficult compared to 2005-2009. Lease options are not what they used to be. Flips are great but many MLS listings are over run with investors out bidding each other to get the deal.

Tried one mobile on a whim and haven't looked back. Almost 40 now. No competition thanks to the stick built 'fact' that mobiles depreciate and are a waste of time. We love that.

10% of all housing... but a waste of time.

@Justin R. is in San Diego, California. There are lots of depreciating mobile homes that sell in the several hundred $ thousand range and more. I've seen 'mobile homes' in parks on the Calif coast for $1 mil and more. Brad Pitt, movie guy, has one worth over $1 mil.

Correct they don't appreciate... but VALUE is different than appreciation. 

Most investors want income and cash flow. But need credit, a pile of cash or hard money to do most deals. And most investors don't have those readily available. 

The monthly cash flow on rentals after repairs is a joke many times. We see nice pay days and several mobiles we've done are $300-$500/mo cash flow with no maintenance. Most stick built investors don't see that. Some, but not most.

So now I show folks that you can do stick built if you have those tools mentioned above or do mobile homes and both can make good to great money.

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Just yesterday a 'recovering' stick built investor called me. She and her husband invested $50k cash into a 60 day 'quick flip' to make $20k with 2 other investors. A FULL YEAR later they made the 2nd sale. 1st sale fell out, after 12 months of rehab and sales attempts. So after many nights of lost sleep... They got their $50k back and $15k net. 

Now, $15k net is still 30% annual return on the money which is a great return. But wasn't the 60 day 'quick flip' for $20k net they thought they were doing with their experienced stick built investor friends.

She called because she just got her 2nd mobile home deal in 2 months. Working on fix up on the 1st one. Both should net $10-15k each. And in 45 days tops each. And on to more.

Just sayin'!

We love that stick built investors have that opinion. No competition.