Individual Mobile Home Transactions
With Mobile Homes, the average entrepreneur with little money to work with will discover most opportunity at the grass roots level just as with single family houses. Mobile Home owners are no different from any other homeowners. In general we might say that an average new double-wide Mobile Home would be priced at about one third the cost of a single family home of comparable size at the retail level.
For instance, a few days ago we bought a new upscale double-wide Mobile Home measuring about 66 X 27 feet. That amounts to 1620 square feet. The exterior was clad in three contrasting tones of vinyl siding. It had double paned vinyl windows and house-type doors and hardware.
This unit featured an open floor plan with 9 foot cathedral ceilings. Floor coverings included wood, tile, and carpeting. It had an island kitchen with tile counter tops and oak cabinets, taped and textured interiors with rounded corners.
F.O.B. at the factory this cost $41,000. Delivered about 800 miles, assembled and set up on an approved foundation on a one third acre site brought the price up to $60,000. About $7000 of this cost is for delivery from the factory, and about $12,000 is for actual set up. That may be more than in other areas, but so are the profits in this area probably a little more than in other areas. With an attached matching “stick built” oversized garage, patio, and central air conditioning, you might expect to pay an additional $15,000. This would vary a lot depending upon where you live. (Of course, Dealers and those who buy in the distressed markets pay as little as half of this.)
The total package as described above including the $50,000 finished lot on public utilities cost $125,000; or a little over $77 per square foot. A similarly sized and equipped stick-built house would cost around $250,000, or about $154 per square foot on a much smaller urban lot.
Identical dealer-sold homes such as these are bringing $215,000 but so we expect to be able to sell this very quickly for $195,000. Sales and closing costs will reduce this by $10,000, so we’ll only net about $60,000 on the deal . . . in 90 days.
We could do much better if we found older homes and refurbished them comparably with new appliances, cabinets, interiors and exteriors, but the delay in finding the right unit for the right spot and finding financing for it would cost much more in the long run.
Two weeks after we order it, a new unit is ready for purchase. Delivery and set up might take another three weeks. Site preparation can be completed during this period. Five weeks after ordering the unit, we can hold our first open house. With a pre-approved buyer, we can be cashed out in about three months at the outside.
On an annual basis, recycling the invested $125,000 four times a year would produce gross profits of about $240,000. Only a tiny fraction of 1% of all the people in America, or indeed the world, can earn this kind of money each year.
Of course averages can fool you. In some retirement areas situated far from urban centers you can find slightly smaller home and land packages advertised for as little as $69,950, but these offer little opportunity for those who are active in the market. In retiree enclaves in California, Arizona, Texas, Nevada, and Florida you can find fairly new used double-wide Mobile Homes in upscale Mobile Home parks that can be bought with seller financing in the $25,000 – $40,000 range.
Some of these are on golf courses. Others are on small fishing lakes. Most of these parks offer a full range of social and recreational services. In the majority of cases, both the homes and the parks in which they are situated are in excellent condition.
Mobile Home dealers mark up their product just like car dealers do. A few years ago I visited Ocala, Florida to look at a Mobile Home in a park that was for sale. During the course of my visit, I dropped into a local dealer. A mid-range 16' X 80' unit was priced at $44,000. This same unit was priced at exactly half of this at the factory, which was situated in the same city. But, most interestingly, a comparable repossessed unit held by a lender in the same town cost only $8,000.
From time to time I have posed as a Mobile Home community developer in both Florida and Arizona interested in filling my community with units made by a single manufacturer. When I made inquiries as to exclusive dealer prices for a 40 acre community, I was offered one smaller model, which retailed for $44,900 at a dealer's wholesale price of $16,800. This was in addition to $1,000 in incentives for furnishings, haulage and set-up if I did it all myself. This amount of factory-to-dealer mark-up means that there's plenty of room for maneuvering when buying a home at retail.
For the past three years there has been a recession in the mobile home business. When sales slow down, high volume manufacturers can’t simply stop production because their parts and materials are ordered in large quantities way in advance of actual usage. These begin to pile up and the cheapest and most practical way to store them is to continue to assemble them into finished units. These unsold units are usually stored near the factory where they begin to occupy large areas of land.
These “lot” or “yard” units tie up a lot of operating capital of the manufacturer. One person who develops Mobile Home communities has been able to buy these new units in groups of 10 and 20 for as little as $10 per foot. We don’t have the financial muscle to buy in bulk and to squeeze the manufacturers, nor are we dealers; nevertheless the 1620 square foot home we bought at the factory in our earlier example cost $38,000, or $23.46 per square foot.
Construction costs of a stick built house might easily run $100 per square foot more and the house could take many months longer to complete. Much of the difference in cost finds its way to bottom line profits much more swiftly.
