HELP ANALYZE: Manufactured Homes Deal

[Andrew Bonar]

Hey BP,

I'm becoming familiar with manufactured homes and have come across a deal that grabs my attention. This would be an investment. I have not invested in these home types before so I would love some feedback on the deal. Preferably from investors who have experience with this niche, as I want to hear from those who really work with these types of properties. Below is a quick breakdown of the deal. I understand that manufactured homes do not appreciate the same as traditional homes. I would LOVE some valuable feedback!

- 5 identical units, average condition, all manufactured in 1997 and permanently connected to the land/foundation, land comes with the purchase, slanted roofs not flat, 690 sqft, 2 bed, 1 bath, living room, kitchen, double wide.
- Total price = $250,000 or $50,000 each. I'll attempt to negotiate the price closer to $150K, maybe even lower. Original price was $300k and seller dropped the price by 50K a month and half after it was listed, so I feel there is real room for negotiation. For calculations purpose let's use $200,000 as the negotiated purchase price. With taxes and insurance taken into account with mortgage, the total annual mortgage payment = about $16,500 for all properties combined.
- All units currently occupied with rents at $550/month or $33,000/yr
- Cash flow = $33,000 - $16,500 = $16,500

These seem like good cash flowing properties. They’ve been on the market for almost 3 months and I feel they’ve not sold yet because of the known unpopularity of manufactured homes and it being a niche. I think the seller got these for $11,000 each in 2013. So they paid roughly $60,000 for them, so you would think that gives room for negotiation, right? Ideally I would like to get this property for close to $100,000 and raise the rents to $650. Average rents in area are $750. This would be an investment for income, not so much appreciation, since these home types don’t generally appreciate much.

Please send me some insightful feedback BP!! Thanks!!!

[Rachel H.]

@Andrew Bonar You'll probably need to verify your numbers and find out how quickly you can fill the units and what types of tenants you'll get. This is part of learning the market which can save you a lot of time and headache in the future. You may want to try to get some more information from the owner regarding they types of tenants they rented to, how long the units sat on the market until they rented them, and what they received in rents from the tenants. 

Another thing you want to look into is retention rate. How long did the tenants stay? Was there a lot of turnover? Why or why not? Also, you'll want to evaluate the overall economy and job market in the area to make sure there's a demand for this asset class and type. 

Hope that helps. Best of luck with everything!