Welcome back,
This article is designed to help provide the newbie mobile home investor with some foresight to notice some not-too-common red flags that you will find while investing in individual mobile homes inside of pre-existing mobile home communities.
The three red flags below have all been costly mistakes that I have made myself over the past decade investing in these homes. Some of these mistakes I am still living with now as some homes are still located in these less-than-ideal parks. Below you will read some tips to avoid buying a mobile home lemon.
After reading the list below please keep these items in the very back of your mind in the event you find yourself looking at purchasing a mobile home inside one of these types of communities.
1.) A Large Number of Empty Pads/Lots
Imagine you are driving through an established mobile home community you have never been through before. You notice that approximately 25% or more of the existing pads are vacant and without mobile homes on them.
This could be for a number of reasons.
A. Transitional Period: This mobile home park could just have kicked out a majority of the less desirable owners and/or homes in the park, thereby cleaning up the quality of the park. This happens when new management or ownership takes control of a loosely operated park. After asking the manager about the issue she confirms this is the reason. If this is the case there is little to be concerned about. It is a good question to inquire how they plan to fill these empty pads however no red flags are raised here.
B. Poor Ownership and/or Management: Another reason there could be a healthy amount of empty mobile home pads is due to homeowners moving their mobile homes out of the park. I have only seen this twice. The community residents logically and almost unanimously despise the park manager and/or owner to an extent the mobile home residents are willing to pay to have their mobile homes moved out of a park they have lived in for years. If a park manager is too strict, bossy, demanding, or the park owner is too negligent or greedy with regards to raising lot rent prices you could have a mass exodus in a community. If you get this impression from a resident or park manager strongly reconsider a long-term relationship within this park. This is a red flag.
2.) Too Strict of an Application Process
Screening buyers and residents for past evictions, credit worthiness, criminal history, sexual predator status, income, employment, etc is all within a park’s rights as landlords and without question should be performed as due diligence by any investor allowing strangers into their properties. When dealing with mobile homes inside a mobile home community it is important to note that each park owner may dictate within reason who lives within their walls. This screening criteria will translate into who you can resell your investment mobile home to.
In the beginning of my career I invested in a mobile home community that required a minimum credit beacon score of 700 to be approved to live in the park. This is an insanely high beacon score for everyone to reach in a mobile home park. The community also required a 4 page application that detailed employment verification for the past 4 years, past housing, references, bank information, automobile information, etc. Much of this information is standard and will be asked for when applying to almost any mobile home park. However the high credit score, 4 page application, and $75 application fee per adult made this investment home terribly difficult to resell.
The mobile home spoke for itself and was a beautiful investment purchased for a nominal price. I had no shortage of potential buyers wanting the home. The trouble came after the potential buyers left my investment and headed to the park. Once finding out about the high criteria and high application fee the park demanded few ever followed through with an application. After 2 month of holding the home I began offering to pay for “verbally-qualified” buyers to run their applications. I paid for 6 application fees before a family of 2 was approve for the park. I took a discount on the home when I resold it, collected my profits and have never done business in this park again.
Important to note was that I met a number of other sellers that were having the same complaint about selling their homes. I could have purchased more homes within that park for a true discount however the hassle and time would have not been worth the immediate savings.
3.) Snippy or Unfriendly Park Manager
Park managers are average people just like you and me. In addition they often times have thankless jobs and give much of themselves to the local community. I say this completely serious because the majority of mobile home park managers want nothing more than to do a good job and to bring up the lives of the residents in their community.
If you meet a park manager most of the time they will be as pleasant and helpful as an old friend. However sometimes park managers wake up on the wrong sides of the bed, this happens to the best of us and can lead to a less than desirable first impression. When meeting a park manager for the first time be aware that you are screening this person just as you screen an investment home or seller. You will be forming a relationship with this park representative and it is important you both like each other.
Without meeting the manager a few times it is difficult to say whether or not he or she is always happy, rude, greedy, bossy, etc. Instead plan to interact with the park manager at least 3 times before you purchase a mobile home within their community.
Conclusion
In conclusion there are many moving parts to every decision that goes into whether or not you should invest in any income producing property. When a mobile home is located in a mobile home community this only adds to the variable of factors to consider. If you have further specific or general questions do not hesitate to reach out and ask them below.
Love what you do daily,
John Fedro
support@mobilehomeinvesting.net
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25 Comments
Henry
August 21, 2014Hey again 🙂
I am looking at a mobile home in a family park that is very nice. The home needs some repairs but the place is large and in decent shape. The sellers only want $6,000 and I am pretty sure I can resell the home for $10,000. My questions are is this a good deal and if the manager is already being rude to the seller would this be a red flag?
Again thanks in advance for the help.
henry
John Fedro
August 21, 2014Hey Henry,
Thanks for commenting. Great job being on the look out for inexpensive mobile homes. Please be aware that simply purchasing a mobile home for less than what the seller ‘was’ asking can be a bad recipe. I say this because it is too easy to over pay, over improve, and under sell your mobile home investment. You say that you can resell this home for $4,000 more than the seller? What will you do differently? How did you come to this conclusion? I would be cautious about wishing to sell to a cash buyer, it does happen occasionally however most buyers you find will not have $10,000+ cash laying around tto purchase your home. Again, this is a generalization and you may already have a buyer lined up.
I do not want you losing out on any potential deal nor do I want to stand in your way so please email me personally at support@mobilehomeinvesting.net with the exact details and pictures that you have and we’ll go from there.
Talk soon,
John Fedro
Henry
August 22, 2014Thank you so mcuh John! You rock man! Yes, this does make sense and I’m emailing you now.
Dan
September 12, 2014Hi ,
I bought a mobile home without first speaking with the park . And now guess what ? I found out there was a consent judgement on the previous owners for behind pad rent . The title is free and clear . What happens next ? What can I do ? Can the park take the mobile home from me even though I was not the one on the consent judgement ?
John Fedro
September 12, 2014Hi Dan,
Thanks for reaching out. You are not going to like my thoughts. Even without a consent lien the park manager could start the eviction process of your property due to non-payment by your seller, in this case you would be responsible for the past due amount. However now the late fees, late lot rents, and lawyer fees may likely be more than you paid for the home.
The one who should be on the hook here for selling you a home with known-defaults and liens that were not disclosed is the seller! I would consult an attorney with the aim to sue the seller/previous owner of the home. These are the type of lying sellers that purposefully aim to be selfish and take advantage of their buyer. You should be able to get your money back and move on.
In short unless the park will settle with you for a dollar figure you are content with paying to simply end-this-ordeal the park can and likely will take the home back. Or at the very least place a lien on the title and stop you from reselling. If you were as low-moral-quality as your seller you could sell to another unsuspecting buyer that didn’t first check with the park manager.
For everyone reading this make sure to always check with park management before purchasing a property, even if you will be removing the home from the lot.
Hope this helps with some possible options. Keep in touch.
John
Sarah
September 15, 2014In December I bought a repo from a bank that specializes in them. It sucks. We had to replace all the water pipes. The electric doesnt work right. The floors are noisy, (in some spots weak and spongy), and now I have found mold.
I am not a DIYer, I have no money, and I am finding it difficult to get the right pro to work on a mobile home.
I don’t want this thing. I have a 20 yr. Mortgage. What can I do?
John Fedro
September 16, 2014Hi Sarah,
Thank you for reaching out to me. I so regret to hear about your situation. Unfortunately you are not the first person I have heard this from. I speak to sellers weekly that have overpaid (not saying you have) and now can not sell their property for the money invested. Plus you only purchased the home in December and are already having these issues. If there is no warranty when you purchased the home then there are only a few scenarios I see moving forward.
1. Look for a handyman with referrals from owners in the park you live inside of. If this is not in a park then consider posting a “gig” on craigslist for the repairs and setting your own budget.
2. Move and default. This strategy will ruin your credit and is highly unadvised, however it is an option.
3. Sell the home for what you have in it. Aim to sell to an all cash-buyer. If you can not find an all cash buyer and need to sell ASAP then perhaps sell to a low-risk buyer who will make your monthly payments and provide you a move-in fee, make all needed repairs, and continue to make your monthly loan payment. This is not likely the way you want to go however it would solve the immediate problem, and as long as the buyer is screened will this could be win-win while still maintaining your credit.
4. Call the bank and ask to refinance or a loan modification to help offset the cost of repairs.
5. You could rent a room in order to pay for repairs.
These are some ideas and if you need help with any of them don’t hesitate to ask me. In addition I would highly advise you consult an attorney to see if there is any lemon law in your state for mobile homes sold with known defects that weren’t disclosed. The attorney may be able to help you further and more accurately than I can based on your situation.
Hope this helps and best of luck,
John
Talk soon,
John
Fidencio
September 16, 2014Awesome site on mobile home investmates. I just purchased a mobile at a very good price. My fault at this time was that I did not check on any late fees since it sits at a mobile home park. But the best thing about this though I really feel that the previous owner would not do something like that since the elderly lady did see me in my Texas Peace Officer uniform..
John Fedro
September 16, 2014Hello Fidencio,
Thank you for reaching out and the kind words. Congratulations on the mobile home purchase!! Excellent job pulling the trigger and taking action on a good deal. I hope the lot rent was current and up to date when you checked. Interesting idea showing up to the park in your work uniform. I wonder what feedback or looks you’ll receive dealing with the small percentage of sellers we do who do not care for peace officers.
Congrats again and keep up the great effort. Let me know if you have any specific MH investing questions.
Talk soon,
John
Sarah
September 16, 2014Thank you for responding.
I don’t want to be annoying or anything. I just needed some help, and if I couldn’t get in then maybe I could warn others.
I wasn’t trying to flip a mobile home. I was looking for somewhere to live after a house fire. I’m not in a park.
Now that I know about the problems it is seeming impossible to fix them. Because 1) I have no money 2) when I call repair people they say, ‘sorry, ma’am we don’t work on mobile homes.
My floors may be made out of something called particle board. What is that? I don’t know, but I can’t get a carpenter to fix. How do you fix things if no one will do the work?
If I let them take it back they they will take my home, ruin my credit, and then they could sue me for the difference between what I owe and what they sell it for.
I have worked all my life to have good credit. Now I’m stuck, scared out of my mind, and ashamed of both where I live, and the fact that I ended up in this situation.
I guess I just needed to vent I won’t bother you again.
Dan
September 18, 2014Can I press charges against the seller ? I paid $2,500 which is a fair price considering it’s condition but now I have to pay the past due pad rent and the park is telling me they have put a Levy on the home .
John Fedro
September 18, 2014Hi Dan,
The short answer is “yes”, you can sue anyone for anything these days. The question is if this argument will be ruled in your favor. Some states have a “buyer beware” attitude and other states favor a “lemon law” attitude to help protect buyers, and many states have a mixture of both.
If you can find the seller and an attorney feels it would be financially worth the time to go after this seller than I would pursue this deadbeat. I say if an “attorney feels it would be financially worth the time” because it may take over $2000 just to get them to court. Plus who knows if you would ever get the money.
You are obviously upset and very rightly so. This seller obviously misrepresented the property and was lying right to your face. I would be very pissed to, and I almost learned that lesson the hard way like you. Do not give up. I suggest you consult a few local real estate attorneys and see where they point you for help and guidance. Aim to meet with attorneys over the phone via a one hour free consultation to help get your questions answered.
I hope this helps. Please keep us in the loop.
Talk soon,
John
Jeff
September 29, 2014Hi John,
I found your site today through an article you wrote on biggerpockets.com. I’ve already watched several of your videos, and the idea of investing in mobile homes has captured my interest.
You mentioned in one of your videos that you look to make at least $300 per month on a deal. Now, is that $300 net after the monthly payment to the seller is made? For instance, if you offered the seller $250/month, would your deal to the buyer include them paying you $525/month? Also, I assume the buyer pays the park rental fee during the payoff period, if the mobile home is in a park, is that correct?
Thanks for all the great info!
Jeff
John Fedro
October 2, 2014Hi Jeff,
Thanks for reaching out and following along. I hope these videos have been somewhat helpful for you already.
Concerning your questions about cash-flow. The $300+ is net only if you are paying cash for the home. If you have negotiated structured payments to the seller than a conservative $125-$150 is what I aim to net per month after all outgoing payments. This is of course on a case-by-case basis because if a seller needs more per month than $150ish, and the home is a “deal” then a win-win offer can also be giving the seller 100%+ of your net cash-flow per month to get them paid off quicker. My advice is to start with offering the seller approx $150 per month until paid in full and increasing from there depending on the payment length and total price, also depending on the needs of each seller.
With regards to your next question I ask that all payment buyers make the payment for the home and park to our company. Form this 1 payment I make sure the lot rent is paid personally. This allows for more opportunity to speak with the PM and keep a solid relationship as well as other perks. After 2 years of on-time payments I allow the seller to make the payment to the park themselves.
Does this make sense and help?
Talk soon,
John
Ace Pruitt
October 5, 2014We are trying to sell a mobile home inside a trailer park on the coast
The buyers are asking us to do personal financing but what about the title for the mobile home, how to handle/
John Fedro
October 6, 2014Hi Ace,
Thanks for reaching out to me on this issue. What state are you in? In most states there is a simple method to adding your name as “Lien holder” to protect your interest. Remember that as Lien holder you will hold the Title in your possession until you are paid every dime you are owed by your buyer. If you let me know which state you’re in we can go from there. (Additionally how much money is you buyer paying you at closing? If you don’t mind me asking this question of course. The answer can tell me a lot about this buyer.)
Talk soon,
John
Mary Hackett
November 14, 2014I am thinking of buying a mobile home for investment purposes. I have never bought a mobile home before and would eventually be renting. Are there usually park rules about renting a mobile home? How does that work? Can you get an inspector to look at the home prior to buying like a home purchase? I have no idea what to look out for in terms of structure or plumbing/electrical problems. I would probably pay cash. Home owner dues are $545.00. They are asking $55,000.00. I estimate I could rent it for about $1,300.00. Does this sound reasonable? Trailer was built in 1977. It is in a nice park but I have not met the manager. I also feel like the asking price is to high.
Thank you for your reply.
John Fedro
November 15, 2014Hi Mary,
Thanks for reaching out and commenting. I am glad to hear about your wishes to invest. Please see my thoughts in bold below.
Are there usually park rules about renting a mobile home? Yes, many parks will not allow rents or subletting. How does that work? You will have to sell the home for cash or payments if the park does not allow renting. Check with the park manager to know for sure. Can you get an inspector to look at the home prior to buying like a home purchase? Yes. Aim to find a MH experienced inspector. I have no idea what to look out for in terms of structure or plumbing/electrical problems. For starters walk every inch of the home, bring a flashlight and look for leaks and soft spots. Also check all appliances, AC, furnace, and hot water heater. I would probably pay cash. Home owner dues are $545.00. These seem reasonable. What is the area of the country you are in? They are asking $55,000.00. I have not seen the home but that is much too expensive for investment purposes inside a park. At this rate it will take you almost 5 years to recoup your investment. We aim to recoup our investment after 1 year. My strong advice is to not pay this amount. I estimate I could rent it for about $1,300.00. This seems a bit high, where is it again? Trailer was built in 1977. A big older but may still be nice. Is it a 3 bedroom or 2 bedroom?
Talk soon,
John
Joshua Seaton
December 7, 2014Great site John. I am already learning a bunch and having fun watching your videos. You ahve a ton of content and I thank you for all of this and time you have given.
I know I’ll have a bunch of questions for you in the coming days. 🙂 Thanks for the help.
Sincerely,
Joshua Seaton
John Fedro
December 8, 2014Hi Joshua,
Thank you for commenting and for your kind words. The site and providing help to others has been a labor of love for sure. I have made countless mistakes and have kept going so I hope to provide clarity and help to others looking for it. If you have any specific questions don’t hesitate to reach out.
Talk soon,
John Fedro
Chef Nick
December 20, 2014Hi John,
Great video!
Regards. Chef Nick Holdin
Joey
February 12, 2016Thank you John. This is just what I needed. Cheers, Joey
John Fedro
February 13, 2016Hi Joey,
Thank you for commenting and reaching out. Additionally, thank you so much for your kind words. I’m very happy to hear that this post and video has been helpful to you thus far. If you have any follow-up questions or concerns please never hesitate to reach out anytime. Always here to help. Keep in touch.
Talk soon,
John
Navid
February 13, 2016Hello John,
Can you recommend when to find a good mobile ispector. I want to purhcase a home with my son but we know nothin about repairs or mobiles.
Love your very very helpful site.
Sincerely,
Navid
John Fedro
February 14, 2016Hi Navid,
Thank you so much for reaching out with regards to your question. Additionally, thank you so much for the kind words. In order to find yourself a good quality mobile home inspector I would encourage you to both look online and search Google for “my city manufactured home inspection” and see what you find. Look for reviews. Also, I would encourage you to reach out to local mobile home park Managers and asked them who they would recommend to inspect your manufactured home. Lastly, you can always call one a few different local inspection companies and inquire if they also look through mobile homes, if they do not then they can perhaps point you in the right direction of those who can help. I hope this all helps and makes sense. If you have any follow-up questions or concerns never hesitate to reach back out anytime. Keep in touch.
Talk soon,
John
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