Whenever I make a mention to others that I invest in mobile homes I am typically greeted with a look of confusion and bewilderment. In my previous two articles Mobile Home Investing: Part 1 and Mobile Home Investing: Part 2 you discovered who your buyers are, who your sellers are, and even what constitutes your ideal mobile home investment property. In this article we dissect a real “mobile home in a park” deal to see where your money is made.
The below case study is a mobile home located within a pre-existing mobile home park. The monthly lot rent is $370, which includes trash service, sewer, and community pool access. I have broken down the below case study using the four “Fs” of real estate investing–Find, Fund, Fix, & Fast-Sale.
Find: The seller, Silvia, called my hotline number via my local bandit sign marketing campaign in town. Silvia was selling a 3 bedroom, 1 bathroom mobile home in a local family mobile home community that I was already familiar with. Silvia had just started selling her 1991 single-wide mobile home and was originally asking $11,000 cash. The home includes a shed, working appliances, and central heat/air conditioner. The only real repairs are minor cosmetic updating in the bathroom and kitchen (maximum $500). Silvia's motivation is to quit paying lot rent on this second home. This 3/1 is Silvia's second home that she allowed her daughter to live in while in college. Now that the daughter has move away Silvia has no use for this home.
Fund: Silvia has another home inside this park and likes the neighborhood very much but she has no use for two homes. She is on-time with the monthly park fees and she wishes to get top dollar for her home as quickly as possible. So far Silvia has only showed the home to one other investor (I was surprised as I was not aware of another mobile home investor in the area). Silvia mentions that the last investor that was here made a firm cash offer of $3,000. Silvia said she did not like this man and that his offer was insultingly low.
I made two offers to Silvia to purchase her used 1991 3/1 mobile home:
Offer 1: Cash offer of $3,500 paid from business savings.
Offer 2: Payment offer of $6,000. Payable as $300 for 20 months at 0% interest with the first month due at closing. I had already had a small reputation at this park so the park manager endorsed me to the seller which didn't hurt my odds. Without any counter offer Silvia accepted my 2nd offer. The fact that Silvia did not counter for a higher price indicates that she likely would have accepted an amount lower than $6,000. Lesson learned.
Fix: Once closed I began showing the home regularly and making small updates to the home. The 5th couple that saw the home loved it and signed an application that day.
Fast-Sale: After a short, yet thorough background check the purchasers where approved and we closed on the home making my new buyers the owners. The new owners did not have all cash to pay for this home, nor did I want them to pay all cash. We agreed to the sales price of $19,200; payable as $2,000 to move-in and monthly payments of $350 until paid in full.
This makes the total monthly payment due from the seller $720–$370 for lot rent and $350 for the mobile home–this amount is roughly $50-$80 below market rent for a comparable apartment home nearby. I was happy to take less monthly for a quick sale with good buyers and a healthy move-in fee.
If you are wondering why a seller will sell for such a low price OR why a buyer will pay such a price reread the articles (Part 1 and Part 2) linked above.