I just put a mobile home under contract. Did I screw this up?

Question

I put a mobile home under contract about a week ago near Yuba City north of Sacramento. I never intended to get into mobile homes, but this seller responded to my marketing, and I'm new enough I'll take the time to look at almost anything. The couple had a long and compelling story which, as always, I enjoyed taking the time to understand. I made them an offer that was sufficient to meet their very specific needs, but I thought at the time it was a good deal for me too. I was VERY clear with the sellers about the fact that I might not be able to come through on the sale, and that everything was contingent upon me finding a "partner" to do the deal with me.

The house is a 1500sqft double wide, built in 1992, and in fairly good shape. I put it under contract for $13,000. It will need new kitchen appliances, and they smoke inside the house. It also needs new flooring in about half the house. I was not able to find great comps in the area, but I felt like this was a pretty good deal, because I couldn't find any mobile homes of its size on Zillow sold within the last 18 months for less than 18k, and most were 25k or more. I figured at this price point, buyers wouldn't expect much, and I wouldn't put much money into making it any nicer than it is. Maybe a little new carpet and low end kitchen appliances, and it should be good to go.

So far though, I'm having trouble finding anyone interested in it. Most of my contacts are interested in standard flips (that's what I'm mostly looking for, after all), and a very well connected broker friend of mine has not been able to find anyone interested. Even the organizer of one of the local REIAs who seems to know everybody didn't know of anyone who might be interested.

I am probably going to call the sellers tomorrow and let them know that I will continue trying to help them sell it, but that they are free to continue searching for a buyer on their own. They won't be excited about it, but I made sure they knew this was a possibility.

I've considered advertising it on Craigslist, but I'm reluctant to deal directly with retail buyers. How do you explain an assignment fee to retail buyers?

Ideally, I would like to find an investor who is knowledgeable about mobile homes and knows what to do with the deal. There just don't seem to be many of these around.

It seems to me that at this price, it should move. Am I missing something?

Nic Williams · Answer

@Zachary A. I was looking at a mobile home in Sacramento last year that needed a very similar amount of work done to it (maybe a bit more), and the comps were all in the same price range that you mentioned.  It was also in a park and the monthly lot rent was in the $650 range if I remember correctly.  The seller had it on the market for a few months at around $12k and couldn't sell it.  I was planning to make an offer to buy it from him, but after speaking with a couple realtors I changed my mind.  I was told by two realtors that the commissions for selling a mobile home like this would be in the $3k - $5k range depending on the brokerage, and that it is not uncommon for a mobile home to sit on the market for a long time.  Considering the cost of realtor commissions (if I was going to sell it on the MLS), the monthly holding costs due to lot rent, and the inconsistent and low comps, I felt it wasn't worth the risk so I decided to pass.  I wanted to share my experience because I assume other investors may have some of the same concerns that I did.

I also recently looked at a couple mobile homes in another park in Sacramento.  Both were owned by the park after they were basically foreclosed on when the owners stopped paying lot rent.  This particular park allowed owners to rent their mobile homes and they actually got pretty decent rents for them.  I know that most parks don't allow this, but it could be worth asking the park manager or owner if you could buy it and rent it.  Each of these mobile homes needed a significant amount of work, and the park wanted around $20k for each one, so I passed.  I think they just wanted to see if anyone was willing to pay that much, and if not, they were going to rent them out.

If you decide to move forward, if you haven't already done so I suggest contacting Housing and Community Development (HCD) which regulates mobile home parks.  If you give them the decal number, serial number, and possibly another piece of info that I'm not remembering at the moment, they will give you title information and let you know if there are any outstanding fees or fines against the mobile home.  And if you decide to buy it, I believe you'll actually have to go to HCD and fill out some paperwork and pay a fee.  I don't know if contacting HCD is an actual replacement for using a title company (or if a title company is even needed when buying a mobile home), but the info I got from HCD was basically the same info you'd get from a title company.

Anyway, I hope this info and my experiences are helpful to you and not too discouraging.  Good luck!

Rachel H. · Answer

@Zachary A. Try finding investors doing business in the park. Most times, park management can point you in the right direction. Also, you may want to check with local mobile home dealerships who work with mobile home investors all the time. Hope this helps!

Wes Blackwell · Answer

@Zachary A.

Before getting involved in mobile homes, you really ought to get in touch with @John Fedro. It's a completely different kind of investing strategy, and often involves you selling the property to the end buyer through seller financing or for cash. Most investors won't want to touch it.

In the future, I would stay out of trying to wholesale these deals. It'd be a better play if you flipped it yourself or just got it cheaply and resold it. The juice simply isn't worth the squeeze for most investors, too much risk for too little reward when having to pay a middleman.

P.S. If you're getting your comps from Zillow, it's only a matter of time before you screw yourself. Your well-connected broker friend should be pulling comps for you straight from the MLS.

But keep up the good work though, it's only a matter of time before something pops up that becomes a deal. Best of luck! :-)

Jeff Kennedy · Answer

I'm a local investor in Yuba City. I might be interested. I sent you a message.

Thanks.

Derek Robinson · Answer

So you don't have the money to make the 13k purchase?  Again, I don't know your market, but an investor would probably purchase at a lower price point than that since the sellers seem some what desperate to move out and they don't have any other offers.  I don't know that there is enough meat on the bone for an investor to come in and give you a profit and themselves.  Most people are buying deals like this for $5k or less and selling for 20k or more.

Risk of owner financing isn't as high as you'd think if you screen well and have fair terms.  Most people will take more pride in something they are purchasing.  Plus, if you structure the terms well, making their lot rent payment and payment on the trailer should be at or below what they could rent something for.  They will be less likely to default if their other option is to pay more in rent.

Sounds like you should pass on this deal if you don't want to get involved with owner financing it to an end user.

Derek Robinson · Answer

I  don't know your market...I'm assuming at 13k that it's in a park and the lot is rented?  Have you considered owner financing the trailer to an end user?  Most people that would want to live in a single/doubewide in a park can't afford to pay cash and banks won't finance them.  You could be the bank, sell it for more than you paid without doing any work, plus make money on the interest.  Most of these buyers do not care about the asking price but more about the monthly payment.

Damarius Gilbert · Answer

I just met sellers today, for a mobile home also. Numbers were to tight so I recommended them to rent it out or owner finance to someone.Dont force a deal thats not there. My investors wouldn't take me serious anymore if I brought something like that to them. Plus it was outside of El Paso in No Mans Land by the border. You will know a deal when you get one. It's hard but keep searching

Zachary A. · Answer

I just called the park manager, and this time he told me we could keep the plot rent at $460 after I told him I knew that's what the current occupant paid. I think he was just trying to gouge it up the first time we talked.

Dylan Vargas · Answer

@Zachary A. That is a tough price for lot rent. Wow! The nicest parks don't even charge that much unless in your neck of the woods. I would run now that I know the lot rent of $700/month. Just my two cents.

Zachary A. · Answer

@Dylan Vargas

It's kind of a low end family park outside Marysville (on Hamonton Smartsville Rd). They don't allow rentals, and the lot rent is about $700/mo (current resident is at $400, but I think they are trying to raise it).

I just put a mobile home under contract. Did I screw this up?

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