The mistake I made buying a mobile home deal

[David Abarca]

Here is a post that is about a mistake I made that hopefully won't actually cost me any money. Back in May I purchased a property that had one mobile home and 2 empty lots that could accommodate a mobile home each. I had a $75000 LOC and purchased this property for $53000. The property had one septic tank for the mobile home that was on it. The mobile home was set horizontally on the property so it was actually occupying 2 of the lots. I made several mistakes when it comes to the analysis of this deal.

- I didn't think it would cost as much as it did to move the mobile home.  I ended up paying $2600 to turn this mobile home 90 degrees on the property.  The last time I payed to move a mobile home across town it cost me $500.  

- All of the other costs that came with developing the property were higher than expected.  Septic systems $3000 a piece.  Plumbing installation $2500.  Electrical connections $700.  To purchase a mobile and move it out to the property I am looking at close to $20000.

-The biggest mistake of them all was the financing aspect. I did not know that refinancing a rented mobile home would be so difficult. I thought once I moved the mobile home I would simply refinance the mobile home and lot, which is renting at $800 per month, and use that money to purchase the next 2 mobile homes and place them on the empty lots. Unfortunately the only place that would do a refi on a mobile home would only do 55% ltv and 8.5% apr. That was definitely not going to work for me. This left me stuck with 2 empty lots, and about $65000 on an LOC.

Luckily there is enough equity in the lots and mobile home to offload them and come away with a little cash in my pocket.  I would rather offload these properties and purchase something that I can refinance, rather than be stuck here saving money to place a couple of mobile homes on a couple of lots.  I just wanted to share this so that hopefully you won't make the same mistakes as me.

[Kirk Lewis]

Thanks for sharing this. I’ve heard that mobile home financing is nothing like single family. Now I see what they mean. 

[John Teachout]

If I'm looking at your numbers right, is it true that you're close to breaking even on the investment with just the one home rented? If you spent 20k on another mobile, could you rent that one for $700 to $800 per month? This deal may not be as terrible as you think.

[David Abarca]

You are absolutely right @John Teachout. The payment on the LOC is abouty $470 per month. Assume 50% expenses and it really isn't so bad, especially with 2 empty lots. The problem that I run into is that I am estimating about $20000 per trailer to purchase, move, and install. That will take me more time than I am willing to wait to save up. The thing that I am working on now is to just rent out the empty lots. Even then I still want to sell in order to recover my cash and purchase something that I can refinance.

[John Teachout]

Is your HELOC used up or is there still some left?

[David Abarca]

It is used up.  I'm just using the rented property to hold the fort while it sells.  I'm going to try to get some tenants to move a mobile home out there and rent the other 2 lots.  That way I get a little income while the property sells and hopefully it sweetens the pot for another investor if they are interested.

[Samera Harvey]

Bummer! Yes, mobile home financing is very tough to find! We've always had to use private lenders when we sell mobile homes. Thanks for sharing... I learned a lot!

[Ned J.]

The value is in the mobile home land....not the homes, A mobile home is a depreciating "asset"....... they only go down in value and have very little resale value.....pretty much disposable.....more cost to move than just demolish and replace.

I would not buy homes for the open lots...... I would try and find mobile home owners/soon to be owners and rent the spaces...... the values is the land for the home....not the home

[Rachel H.]

@David Abarca Interesting story. Sounds like it was definitely a learning experience for you. And yes, when doing things the first time and encountering deals we've never done costs tend to be higher than we expected. Good to know you've made a plan on what to do and get out of the situation. Thanks for sharing! 

[Jason Ray Richardson]

If you had 2 mobile home renters just park their homes on your lots and they rented for 200 a piece, you'd have a great cash flowing deal that most single family investors would love to see. But I see that your plan is to do a BRRRR and move on to the next property so I see your point.If it's in a desirable area I wouldn't think you would have a problem getting that deal done.