Mobile Home Opportunity - Please Help

[Michael Giuffre]

Situation:

I'm an investor with a few single family rental properties under my belt and am looking at this particular mobile home opportunity in North Carolina (where I live):

-1 acre of land, convenient to several centers of work/city

-4 mobile homes are on site and have been grandfathered, meaning they can never be removed, only remodeled.  If any were removed a new one could not be moved to the site due to new restrictions (1 dwelling per acre).

-Monthly rent total (from all 4): $2,200

-Tenants pay all utilities

-Asking price: $135,000 cash only

My Assessment:

The cash flow is there with a ~1.6% monthly cash on cash return (not including repairs).  However, the fact that 2 of the mobile homes are old and will likely need to be stripped to the bones and rebuilt over the next 5 years scares me a little.  If I were able to move newer mobile homes to the site to replace the old ones that would make me feel better.  Additionally, it would probably be hard to resell this investment property to anyone else due to the grandfathered nature of the homes.

Questions:

1.) I would imagine that it would be difficult to resell this particular parcel of mobile homes and land down the line to another investor - is that generally true?  Any ideas on a better exit strategy?

2.) Does anyone with mobile home experience have a perspective on whether this seems like a good deal from a purchase price / rent / longevity perspective?  Looking for good buy and rent properties and believe this may be a good one given the good cash on cash returns.

Thanks in advance!

-Mike

[Greg H.]

I am going to go the other way on this.  There is no way I would do this deal unless the land alone is worth 135K.  My reasoning is:

-You are buying cash flow alone as the years pass the mobiles are going to be worth next to zero at some point

-The asset has very little liquidity.  Very very difficult to get a loan on this type of property and you have no option to divide and sell to owner occupants with the shared septic and the grandfathered property restrictions

I buy a couple of manufactured homes per year. My requirements are 2000 or newer that have never been moved(so I can resell to an owner occupant via FHA financing on an acre or more for less than $30K. Those deals should be available in Georgia. I am passing on one today as it is in a good size city on a small lot but is 2008 for $24000. It would make a great rental but I have too many at this point