As an active mobile home investor you have been reading and studying is much as you can concerning helping and working with local mobile home sellers and buyers in and around your area. Most of my How-To articles and videos on REIClub will express the importance of what to do correctly as well as proper procedures from start to finish. However in this article let us discuss some common mindset-pitfalls even seasoned investors may experience while investing in manufactured homes.
1. Treating Factory Built Homes like Single-Family Homes.
This is a mindset pitfall with so many fallacies. While it is debatable that modern-day manufactured homes are of comparable or better construction quality to many site built homes, factory built homes and site built homes are like apples and oranges – very different.
- Manufactured homes and SFRs appreciate differently.
- The construction is different.
- The sellers can be different.
- Located inside a pre-existing mobile home park or attached to private property is very different.
- Financing is different.
- The buyers can be different.
Pro Tip: This is a common pitfall when estimating resale price and demand for an investment mobile home. Aim to always base your exit strategy on a realistic price determined by recent comparable sales and “time on the market” data within a 2-mile radius of the subject property or within the specific mobile home community (if located inside a mobile home community).
2. You are a Master Negotiator.
Do not be fooled by your smooth negotiation skills. Here is a situation that will absolutely eventually happen in your mobile home investing career, within a matter of minutes you are able to negotiate a seller to accept a 50% discount of of his/her original asking price. At this point you pat yourself on the back and rush over to the mobile home with cash in hand.
Mobile homes inside pre-existing mobile home parks are particularly susceptible to this negotiation pitfall. A seller that is willing to discount his/her property 50% over the phone may be selling you a time bomb, or perhaps the seller is simply motivated for innocent personal reasons. Either way proper due diligence must be factored in with regards to acquisition price/terms, holding costs, repair estimates, resale demand, hard to spot issues, exit strategy, etc when making any purchase offers to sellers.
3. Senior Mobile Home Communities & All-ages Mobile Home Communities
Many mobile home investors may be biased or jaded towards senior citizen type mobile home parks. Senior mobile home communities are not the same as all-ages mobile home communities. This is typically because senior citizen communities restrict a major portion of society that is actively looking to purchase mobile homes. This in theory may make it harder to resell a home in a senior citizen only park. However with proper due diligence, proper foresight, adequate negotiations and a knowledge of your market, mobile home in both types of parks can be very desirable and profitable.
Pro Tip: Make certain there is strong resale demand with any new real estate niche you invest within.
4. Purchase the Home Quickly without an Inspection.
If you have not purchased a mobile home in the recent past or you are not a seasoned mobile home handyman always consider hiring an expert to walk through any investment home with you to point out minor and major repair issues that may go unnoticed. Any additional repairs spotted should absolutely be negotiated from of the current negotiated price. This will likely more than pay for the inspector you hire. Handymen and handywomen may also walk through your property for a small fee or free.
Pro Tip: Follow your inspector and/or handyman around the property and ask questions when possible. This is a great way to learn what inspectors are looking for and possible repair estimates for future walk-throughs.
5. Park Will Handle Your Application Process
Almost every mobile home community will have some form of a “screening process” to vet every new adult resident that wishes to live in the community. This screening process may include a background check, credit check, verification of income, reference check, etc. While some mobile home parks perform a very thorough and complete tenant background screening, other parks simply look for adequate income and nothing more. Some mobile home parks will verify criminal history nationwide, and others only check the local state database.
If you will be renting or reselling a mobile home via owner financing make certain your application process meets current seller financing restrictions. The use of a mortgage loan originator may be needed to properly screen and verify your tenant-buyer’s are qualified and have the ability to pay.
In conclusion, many of these pitfalls are typically preceded by surges of excitement and emotion. As you skillfully negotiate a deal your excitement-level may rise. Additionally, whether you are estimating repairs solo or about to rent an investment mobile home to the first person with money, your emotions may cause you temporary blindness of your better-judgment. At these times it is important to take a deep breath, gain clarity, and ask someone more experienced if help is needed. Please comment below or reach out personally with any questions or help.
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