Exploiting Location and Financial Factors with Mobile Homes
About ten years ago, I made the front page of the Orange County Register when I said that I could buy a home in Orange County, California within one day for under $60,000. I did. This house was in a mobile home park in Placentia and the price was $28,000, not $60,000. It had been there all along, but investors didn't have their sights on mobile home opportunities. They still don't. That means with very little competition, homes are still easy to buy, and to sell; but you have to learn something about the business first. Here's a quick tour of the fundamentals:
Location and financing control mobile home profits more than any other factors. There are plenty of lenders for new mobile homes that have been moved from the factory to the dealer's location, and from there to the final site. From that point on, in general, financing becomes harder to get; especially for single-wide units. This is bad news for the owner when he tries to sell it, but good news for cash buyers and buyers and those who need to buy with seller financing. On the one hand, cash buyers can drive a pretty hard bargain. On the other hand, the buyer who needs seller financing can usually find it with used units on rented lots.
From time to time an unexpected scenario plays out when a unit is bought in a park; particularly when the park has several vacancies. The park manager knows that when a unit moves out, it may take months to fill the vacancy thus created. He's often a lot more flexible than otherwise. I've seen managers offer free lot rent for as long as it takes to re-sell a unit. This is money in the bank when a unit can be rehabbed and re-sold in place. It can cost as much as $3000 to move a single wide to a new parking spot, and to set it up. When you consider tear-down, transportation, and re-assembly, a double-wide can be many times as much plus.
Being able to leave the unit in place and avoid paying lot-rent can really boost profits. The benefit to the park owner is that he'll have a more attractive unit in his park to enhance its appeal, and he won't have to fill another vacancy. Sometimes this manager-flexibility translates into a bending of park rules against rentals to allow a unit to be rented, or sold on a rent-to-own arrangement. It opens up possibilities for buying units and paying for them by leasing them back to sellers for little more than rent credits.
