Mobile Home Cash Flow Added To The Portfolio

Welcome back,

In my business-life when someone is looking at my business and cash-flow from the “outside” I get asked, “John, how did you build such a portfolio of properties?”. The answer is obviously, “one after the other”. When getting started in the mobile home business in 2002 many people called me foolish to waste my time with such small deals. Now (some) people call me a genius. The truth is I am neither.

Hard work, daily action, and determination have helped push me through all the mistakes and victories I have had over the past 11 years. One deal after another added to my portfolio has led me to the point I am at today. Over the next 12 months my situation will only improve as more homes are added.

Enough about me, let’s talk about you.

Let’s say your business starts today. Now what? Is a quick 6-figure payday soon at hand. My conservative and realistic answer for you is no. As the bearer of realistic news for you I would rather give you clarity in your future rather than disillusion you into thinking retirement is right around the corner.

With hard work and daily “correct” action you too can expect to add 1 new mobile home property to your investing portfolio every 30-45 days. Below is an example of a recent mobile home transaction I found and was able to help a seller move from. I have attempted to organize my thoughts and popular questions in bullet-form below. In addition please watch the walk-through video of the subject mobile home below. Enjoy!

Describe the home and land please:

This is a 1996 3/2 double-wide mobile home located on approximately 1/6 acre of private land in semi-rural Texas. The property has an average-sized shed and is surrounded by other comparable mobile homes on similar sized lots. Water per year is only $114 via a community well and septic system. The low cost of water will be a nice selling feature for my new buyer or renter.

Describe the owner’s situation:

When the owner contacted me I found him to be one of the friendliest people I have ever met. With a warm smile and over tea the owner and I discussed the recent situations leading him to his current financial hardship. There is an existing lien on the home for roughly $18,000 payable as $288 per month, not including taxes and insurance. The lien was in default and past due for 60 days. The owner’s credit was then in jeopardy and being harmed more and more as the weeks passed without a payment being made to the bank, a foreclosure was imminent.

Investor Note: I say owner above because at the time the owner contacted me he was not in the process of advertising the home for sale.

The seller understood he could not afford the home and only wished to save his credit and have enough money to move. The owner was asking for $2,000 over the lien amount to help with moving costs and miscellaneous bills.

How was the home and owner found:

This mobile home owner was found via an incoming call from a bandit sign placed in the same zip code as the subject property. The owner has been motivated to find a solution to his problem but was unsure of where to turn and embarrassed about his situation.

What where the out-of-pocket costs to purchase the home:

The lien will continue to be paid on by my company while the Deed is immediately placed in a Trust under my company’s control. I agreed to give the owner the full $2,000 he had asked for payable in 8 monthly payments of $250. The terms of the lien and cost of the home were great enough that I did not feel right negotiating any further.

To bring the defaulted loan current we paid $561 including late fees and other miscellaneous junk fees to the loan-servicing company. In addition there were closing costs and title insurance fees totaling $1,128.74. This brought the total expense at the time of closing to $1939.74 to own this beautiful home.

Repair costs:

The home needs 2 closets added to the 2 non-master bedrooms. These closets will be completed by adding 1 non-load-bearing wall to each room. The home is being advertised currently “as-is” for anyone willing to move in and complete the work themselves for a “sweat-equity discount”. The home was left vacuumed and free of debris, minus the small junk you see outside in the video.

Update: $100 was invested in labor and $203.76 on material to build 2 walls and closets in the 2nd and 3rd bedrooms.

Holding cost:

The electric has been turned on in the home for showings and we will pay a neighbor to mow the lawn every 2 weeks. The cost for this monthly is roughly $50 or less, including the minimal electric used. Water has been paid through the rest of the year.

The exit strategy:

My exit strategy for this home will be to rent the mobile home for passive income. I will curb maintenance calls by offering a $60 discount for every month the tenant does not call in need of repairs. This effectively encourages the tenant to make there own minor repairs.  The exception being water leaks, these repairs we will always chose to fix ourselves to ensure they are done in a timely manner and preformed correctly.

I typically do not rent out mobile homes however this home/land is in a nice area and will most likely appreciate a significant amount in the coming years. When the home/land price increases to a price I am comfortable with I will sell via owner financing or all cash. This home will currently rent for $950-$1,000 per month.

Is this type of mobile home an average “deal”:

While there are no-cookie cutter deals I can say 100% that every deal I close, and my members close is one to be excited about. This should be the same for you. Remember that the seller(s) you are helping need to sell their property more than you need to buy their property. Always make sure to stay in control and never agree to invest in any real estate until you understand your resale-market, the subject home, the subject park (if inside a park), the purchase offers you are making, and your exit strategies.

This article is a summed-up version of me discussing this particular deal to anyone interested in an informal setting. If you have any follow-up questions or comments please comment them below.

Love what you do daily,
John Fedro
support@mobilehomeinvesting.net

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