How did you convince yourself to invest in manufactured homes

Question

I found I deal that could be very profitable for me, but it's so hard to pull the trigger on something that isn't pretty,  only depreciates, and might be more work than I expect.   When I see the property, I think how can I put money into this, but when I look at the numbers, it seems like a no-brainer.  How did you make that "leap of faith on your deal"?

deal is 4, half-acre lots. Three with trailers, that rent for 750 a month. Asking price is 145k. I calculated it cash flowing 15k on a loan(if I can get one). That's with 6000 in expenses. So for 20% down (29k) I making a ROI of 51%. I rode by the place today, and it's not horrible. There is a neighboring lot that is kind of junkie. if I got someone to manage it, that might alleviate most of my reservations.

Bill Neves · Answer

@Chad Clement

Welcome to the group.

How did I "convince yourself to invest in manufactured homes"?

I agree with @Rachel H. I had a lot of stick built experience (160 deals) and looked to mobile homes as a hidden market, with low to NO competition investment avenue. Low cost of entry with great ROI.

For years, while I invested in stick built, I heard (and said) all the stuff about trailer trash, crack alley, low life, depreciate, etc. Found that NOT to be the case.

I choose to deal mostly in mobile homes that are in parks. Why? Cost to the end buyer is MUCH lower than buying with land. If you research this.... AFFORDABLE HOUSING shortage is almost in a crisis situation in many areas. People are spending HALF of their take home for apartments in a building with noisy neighbors, no yard for the kids, no private parking, etc.

It's affordable housing that is mid point between rentals and buying a stick built or mobile on land. LOTS of people cannot afford those properties. But can afford a mobile home in a park. They rent in the park. But after the home is paid off or bought for cash, park rent is about half or less of apartment rent in most areas.

There are tons of investors who insist that other investors avoid them at all costs. That's why no competition.

A recent project of mine, in a senior park (over 55) had a lady across the street who drove a Lexus. My wife drives a Lexus. I like to meet the neighbors and tell them what we're doing. Many times, they will refer a buyer for our projects.

I asked the lady, why she was living 'here'. Obviously, she could afford 'better'. She said she sold her $400k 3500 sq ft home with payments because taxes alone were $5k/yr. ($416/mo) Lots of maintenance and she was single and didn't like doing it herself. So she sold it, found a nice manufactured home in a nice park. Rent was $400/mo less than taxes. She has NO house payment.

She could travel anytime she wanted and her neighbors watch her home. She was FREE of the stick built burden. Her previous payments pay for her trips.

Like your question addresses, I started out nervous about mobile homes, too. But a couple deals into the mobile home market and I was sold. We are currently approaching our 50th mobile home project and will obviously keep on trucking with them.

We live in a very nice stick built home but invest in mobiles.

Hope that answer part of how and why I was I was able to "convince yourself to invest in mobile homes".

Have fun!

Patti Robertson · Answer

@Chad Clement - Just think of it as buying the land and getting the mobiles for free.  Someday when the mobiles depreciate to nothing, you can always build houses to sell on the lots, which technically are not depreciating assets.  You may even be able to subdivide and build 8 houses on .25 acre lots.

Rachel H. · Answer

To be honest, I took the plunge solely out of experience. Coming from single-family homes, I already had real estate investing experience under my belt.

Decided to go into the mobile home business due to less competition and the opportunity to focus on a niche not many knew about. Though I've had my share of obstacles, it's definitely paid off in the end.

When evaluating deals, numbers are only one side of the story. Try to evaluate the seller and see if this is someone who is honest and trustworthy. If they are, then look at the numbers even further. If not, move on.

Dishonest sellers are not people you want to work with no matter how good a deal sounds. It could bite you down the road.

Just my thoughts, good luck!

Jason V. · Answer

Be careful of zoning issues, unless they're 4 seprate tax parcels. Be careful of any septic system. Are utilities sub-metered?

Keep in mind the structures themselves are worth a couple of thousand dollars each, maximum. All of the value in a MHP is having the land zoned properly.

You might have a hard time getting it financed too - the National MHP lenders aren't going to be interested in a deal that size in my experience, and local banks are hit or miss on these. They'll take issue with assigning any value to the homes themselves.

Economic vacancy/losses will be much higher than you might expect, depending on the area and condition of the homes.

Good luck!

Jeff Schneider · Answer

Put a pinch between the cheek and gum! Just kidding :) Let us know how it turns out. I just helped an investor pick up a mobile, it's too early to tell how it will turn out but the projected numbers are fantastic.

Chad C. · Answer

They are 4 separate tax parcels, and each have their own septic tank.  The units are 10 to 15 years old. For me the value is having the set up already there.  If I value this like a business, giving no value to the trailers, It is still under priced.  I would have to do a mortgage as if there were no trailers on the property, and all the value is in the land. But I don't think it will comp for that much.

I also think I could sell the trailers on the land for a nice profit,possibly do an owner finance. Or I could just rent the lots.

Thomas S. · Answer

You won't likely get a bank loan so you will need cash or private financing.

Making the decision is based only on the numbers. For myself I opted to by a community and not have the huge costs of maintenance on mobiles.

If doable your best option would be to sell the homes and rent the land to the home owners.

Barbara Housewright · Answer

All (90%) of Denham flooded. Be very careful.

How did you convince yourself to invest in manufactured homes

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