Investor · Wichita Falls, TX · Member since 2014 · 382 posts · 123 votes
I am in talks with an owner who has 8 lots in Wichita Falls. They are in the country but in city limits they have separate water, electric meters and city sewer. These lots are individually platted and have their own taxes, ect.
There are two with manufactued homes ( I am in the process of accessing them) and the other lots are empty. There were MF homes on them at one time.
My plan was to get the existing homes up and running and then fill the other lots with homes that I can find. I plan to rent them.
Upon doing my due dilligence with the city, i found out they require homes "not ever lived in". So they in other words they have to be brand new. $$$$
The existing ones are grandfathered in.
This of course increases my budget for these homes.
If the lots were combined, and designated a MHP. then I would be able to buy used ones, and rent them out.
Im looking for advice. Has any one done this? Also looking for information on demand for MFH in Wichita Falls and just someone to bounce more ideas off of!
Thank you for your advice! My mailbox is open! Hope to hear from you soon!
I don't like to be the bearer of bad news, but both of these scenarios are not good.
Zoning changes are painful, and there are typically minimum area size restrictions - such as 5 acres - in order to achieve this. Some cities also have very restrictive density requirements. I found one that will not allow but 2 mobile homes per acre. They clearly are discouraging anyone thinking about developing a MHP. Even after the zoning changes the economics of bringing in used homes is expensive compared to home already in place. More on this below.
With your original scenario there is not much money to be made buying new homes and selling them. After the land, site prep, set up, and delivery you still have to build porches, driveways, landscaping maybe, etc. Expect to pay 40-50K for a single new home ready to go and that doesn't include land costs...
If you're doing this from California the economics simply are not there. Out of state ownership and management of something like this is a recipe for disaster. You will need something local and that eats into your profits, or if you travel to TX a lot you get the same result. One of the main benefits of mobile home parks is scale - with a 40 pad park you have fewer swings in vacancy and can absorb capital improvements better. Under 20 pads and you start to see 40 to 50% expense ratios which takes away their appeal compared to other multifamily segments.
You'd be better off finding a Park that already exists or individual mobile home already in place. To get a handle on demand I would place a test ad on craigslist, postlets, and the local paper at your target price to see how many responses you get. If you get 3 or more calls per day you can safely assume you will fill a home quickly.
I don't like to be the bearer of bad news, but both of these scenarios are not good.
Zoning changes are painful, and there are typically minimum area size restrictions - such as 5 acres - in order to achieve this. Some cities also have very restrictive density requirements. I found one that will not allow but 2 mobile homes per acre. They clearly are discouraging anyone thinking about developing a MHP. Even after the zoning changes the economics of bringing in used homes is expensive compared to home already in place. More on this below.
With your original scenario there is not much money to be made buying new homes and selling them. After the land, site prep, set up, and delivery you still have to build porches, driveways, landscaping maybe, etc. Expect to pay 40-50K for a single new home ready to go and that doesn't include land costs...
If you're doing this from California the economics simply are not there. Out of state ownership and management of something like this is a recipe for disaster. You will need something local and that eats into your profits, or if you travel to TX a lot you get the same result. One of the main benefits of mobile home parks is scale - with a 40 pad park you have fewer swings in vacancy and can absorb capital improvements better. Under 20 pads and you start to see 40 to 50% expense ratios which takes away their appeal compared to other multifamily segments.
You'd be better off finding a Park that already exists or individual mobile home already in place. To get a handle on demand I would place a test ad on craigslist, postlets, and the local paper at your target price to see how many responses you get. If you get 3 or more calls per day you can safely assume you will fill a home quickly.
@Mary lou L. Aside from the good advice by @Jeffrey H. , i would caution you on Wichita Falls TX for mobile home parks. I have looked at at least a handful of deals on paper and there are a lot of low lot rents. I have seen a lot of low home prices there. Those are not good for mobile home park investments. I would tread with caution on mobile home park investments in wichita falls tx even if the numbers make you think otherwise.
@Mary lou L. I agree wholeheartedly with what has already been stated. I would like to add that rural mobile home parks tend to be unprofitable because many times stick built homes in those areas can be had for the same price as a mobile home. That is hard to compete with. Also, renting mobile homes is almost always a money losing adventure. If you would like to be a mobile home park investor, invest in a park. Let your tenants or local Lonnie dealers invest in mobile homes.
I believe I know the property you are interested in. (Talley Lane.) There is one mobile generating income. One capable of being rented with some work. And two more that are nearly gone. These two will cost a bundle to fix up or haul off. There is also a lot of lot clean up to do. These lots are MUCH larger than a typical mobile home lot. The mobiles on site could be fixed up with less cash outlay than buying new units, of course.
If you decide to move forward, maybe I can be of assistance. I often suncobtract my handyman for repair work.
Just to add one more knock to the list, Wichita Falls is a bit of a soft market and land/home is somewhat popular there. Land/home is in direct competition with your affordable housing option as a potential park owner and is a more appealing option to anyone out there looking to live in a mobile home. You're best play on something like this would likely be to treat this as a land/home thing (that's pretty much what it's set up for) since there is financing for customers to buy brand new homes on individual lots. If it were me, I'd pass. The capital outlay and carrying costs for land/home aren't that appealing and short term capital gains are awful.
thank you everyone for the replies! They are extremely helpful and have given me some items I did not consider! I do agree that by the time the money has gone I to the mh( the new ones) I might as well have bought a stick built one! I am still assessing . It's good practice !
@bill
@Bill Lemmon yes that's the one! I already have a contractor and he is helping me assess it. Have you been to see them? Of course what was attractive to me was the owner financing, I am still in the process of checking everything out.
Just to clear up what land/home is, it's when you take a piece of land and stick a mobile home on it. Once the home is tied into the real estate, it qualifies for more quality financing options. Assuming these can sell for $50k-$60k with payments in the $550-$750 range, you can see how this might be a problem if you were attempting to rent or rent-to-own homes inside a park at the same rent level.
Mary Lou, yes I actually looked at the property prior to the current owner buying it. And made several visits 6 months or so ago when the current owner first started marketing it.
Folks here may not go to the MHP trade shows or be in on the mobilehomeuniversity.com news letters.
Clayton homes and Legacy home have come out with excellent much lower priced homes for parks WITH FINANCING. 3 bed 2 bath Legacy homes are now in the $25k range and depending on your location $2k to ?? shipping to your park.
They are also offering financing. I can't mention the terms we are getting from Legacy because it;s due to the volume the guy we bougtht the park from is doing that he's going to give us his discount and financing terms.
Call Clayton homes FACTORY not the local reps and Legacy FACTORY.
Legacy guy in GA: Barry Burrell (I can't post his email due to BP rules).
It's now so cheap to fill empty pads that it makes little sense to search for used homes. In the SE used have dried up anyway. We have 48 pads to fill and will do so with Legacy 3/2's over the next few years from cash flow.
And to add to @Curt Smith's always wise advice, Richard Voboril at Performance Equity Partners does lending for used homes where MHP owners don't want to carry the paper.
Their website has his contact info. I spoke to him and they do not do land home deals - only personal property within MHP's.
However great I think the Clayton program is, let's not forget that it's still in it's infancy and there are some risks/concerns associated with it. Some of those are:
Guarantees required by the park owner, questions about how this affects the disposition, quality of park and volume needed in order to qualify, how having a park full of financed homes may affect your ability to push rents in the future, Clayton's customer service has not been great thus far, etc.
The market for used homes is far from dead even in the SE. I've seen plenty of 90's model homes advertised on Facebook and Craigslist for under $10,000. Some under $5,000 if you'll come out and move them off of someone's land within a specified amount of time. At these prices in our parks, we can sell for cash and remove ourselves completely from the home. We will be using Clayton soon, but it's not the only tool for filling lots. In an 8 lot park, Clayton won't be returning your phone call.
I found this after searching for 5 mins on a few Facebook community yard sale pages: 1995 4BR already set-up for transport, $9,000. In our park in Burlington NC we have a similar model on a rent-to-own for $800/month. We have also sold homes for cash near this amount out of that park.
if you want to check it out, look up Talley ln in Wichita Falls, it's 8 lots on the west side. The house on the south burnt down a couple of years ago...it isn't part of the lots, just a factoid. The lots end at the north by the river, it is 5 acres total.
I was interested in this as I am investing in Iowa Park and it was in the area.
I do not have all the numbers yet, still analyzing!
I'm going to agree with Charlie here. While Clayton Cash is a great program there are some issues with it and generally speaking a quality used home is still often preferable as it will be cheaper. For instance, I paid 15K for a 2004 1200sqft 3/2 high quality home for my park way nicer than Tru level. End of the day to ship and get a 3/2 up here would cost me close to 30K and I'd pull the same in rent either way. A lot depends on your market though, up here in the mountain west used homes are very expensive as is shipping. Down there, not so much.
I'm not going to speak to this deal specifically as others have made valid points but I would not take what the city is saying at face value. That sounds like a bogus requirement to me and municipalities are notorious for either not understanding grandfathering laws or lying as many want to kill parks. While a requirement for homes to be post HUD era is reasonable I've never heard of a new homes only rule and I seriously doubt it's a legit claim. The park is protected by federal grandfathering laws. If I was serious about a big enough deal I would force them to show their hard or even get a municipal lawyer involved.