Looking for your advice on this deal (my first property)

[Molly Hane]

I’ve found a “deal” but I’m having trouble understanding if this is a good fit for me. I’d love to hear some perspectives from more experienced investors on what you think about the info below:

$75k for a 5bd 3 ba manufactured home that rents out each room for $500/month

Pros:

1. Reliable tenant payments
2. Cheap purchase price relative to income generated
3. Potential for ~16% CoC ROI

Cons:

1. Long distance investment (requires property manager)
2. Month-to-month leases per bedroom (& no deposits collected)
3. Located in Utica, MS – not a thriving market for rentals
4. Manufactured home – not sure this type of home will build equity
5. Unsure what kind of tenants live here

[Caleb Brown]

Manufactured might get tricky on financing so I'd chat with a lender. Do you have experience with renting rooms or have a PM that can handle that? I would be leery in doing it out of state and with it being your first one. A lot of moving parts and most PM's don't do it. Can you locally house hack and do the room by room strategy? 

[Benjamin Aaker]

I think you have it in our Cons. This will be tough to run from far away. Especially as your first property. Keep looking.

[Cory King]

That's enough cons for me to not do it. What attracts you to it, just the price? How'd you pick that market? Where are you managing it from? Is anyone helping you underwrite these or are you doing it all yourself?

[V.G Jason]

How do you weigh these pro's and con's? For you to ask this, you're valuing that "16% CoC" so highly it's likely overriding the real material aspect of the investment. And that's in all the cons.

[Molly Hane]

Caleb, Benjamin, Cory, and V.G Jason - thanks y'all! those were some great questions, perspectives, and insights that really helped. I've been reading a lot to understand where to start in my investing journey and I felt unsure why I was so uneasy with this deal, thank you for the gut check.

to answer your questions:

1. No, I don't have a local PM so that would have added another unknown variable and expense

2. Though i would not mind a local house hack, my partner would not be supportive. 

3. Attracted to it bc of the price, and I'm interested in properties in Natchez, MS and Vicksburg, MS and some in Louisiana. This one was close-ish to Vicksburg. Based on all the books I'd been reading, this seemed like it should qualify as a "good deal" but I was not convinced it would apply to manufactured home which led me here.

4. I am managing these from the NCR where everything feels incredibly expensive.

Thanks again for your kindness, patience, and for helping me learn. 

5. I do not have an underwriter, just figuring it out on my own. But I like the idea of finding someone to help analyze and assess risk! Do yall have any recommendations?

[V.G Jason]

You need to not necessarily follow a book to a T, but just basic principles. Also the fatal flaw with books is they're written at a point in time, which means they are not necessarily related to today.

Still can learn a thing or two, but I would resist the urge to follow the book that hard. 

The definition of a good deal is essentially buying right for what you're trying to achieve. If it's simply cash flow--irrespective of hard assets-- then you're better off buying some form of debt. Just an example.

[Molly Hane]

Quote from @Paige B.:

Quote from @Molly Hane:

I’ve found a “deal” but I’m having trouble understanding if this is a good fit for me. I’d love to hear some perspectives from more experienced investors on what you think about the info below:

$75k for a 5bd 3 ba manufactured home that rents out each room for $500/month

Pros:

1. Reliable tenant payments
2. Cheap purchase price relative to income generated
3. Potential for ~16% CoC ROI

Cons:

1. Long distance investment (requires property manager)
2. Month-to-month leases per bedroom (& no deposits collected)
3. Located in Utica, MS – not a thriving market for rentals
4. Manufactured home – not sure this type of home will build equity
5. Unsure what kind of tenants live here

 Hey Molly! I agree with the other commenters. Beware with manufactured homes, as getting lending as well as insurance is tricky! Not saying to stay away, but with the cons listed, this may not be the one! If your goal is to buy and hold for a long time, you need to consider factors other than just cash flow, like appreciation. I work with many investors here on the Mississippi coast, please let me know if you are interested in this market and I can add you to my email list!

Thanks Paige! That would be wonderful, please add me to your mailing list