Posted by Tony-VA on February 17, 2001 at 16:00:06:
Basing these purchases upon blue book is what got the finance companies in trouble to begin with. If they could rely upon blue book sales, they would not have 54 repos they need to unload to this one buyer. The blue book is merely a single tool in the craft.
Blue book can be a guide for those who do not know the market. I suggest that local investors become experts in their market and rely less upon the opinions of others. A home sold Lonnie style will sell based upon the terms. A home sold blue book style will sell based upon the credit worthiness of buyers and their ability to obtain 3rd party financing. I would suggest that with todays market, and 54 repo’s in this one deal, 3rd party financing is less and less a reality.
No matter how you invest, making money going into the deal is vitaly important. Knowing your exit plan, price and terms is next. Combining the blue book approach with Lonnie deal terms can be fatal to an investment career.
Certainly there are many mobile home investing approaches. Yes, some will need to be supported by the blue book. Selling the notes you create will be based upon blue book to some extent. But if you bought based upon your best ability to negotiate, instead of blue book, I suggest that you will still fare better in the deal. Blue book may be higher than reality for a quick sale. If you purchase price is based upon a blue book opinion of value, you may find that you pay too much. Knowing your market and the terms it will accept is a safer bet in my opinion.
How does one determine what their market will accept without previous experience? Blue book seems a logical choice. In fact, if I were purchasing notes on homes outside of my area, I would consult the blue book. I would not solely rely upon it for the note purchase of course but use it as a tool.
To learn what your market will bear, take a look at what comperable apartments are renting for in the area. Say a two bedroom apartment rents for $600 a month. I would gauge my sale based upon this price. If lot rents are $300 a month, I would shoot to sell my homes for $250 per month for say three years. My competitive advantage would be home ownership for less than they pay in rent. Own in three years. Why rent when you can own?
I would also ask the park managers what people are paying to rent homes in their parks. I have found that for some reason, these rental prices vary widely, even within the same park. Many are above the apartment rate as private owners capitalize upon a market rejected by apartement landloards for credit etc. They charge these people a premium in rent.
Many of these people have established themselves in the park and as such, are already park approved. This is a ready made market for that park. I advertise that they can buy a home just like the one they are renting and do so by making monthly payments that are LESS than what they are paying to rent that home.
Find the niche and ask what it is willing to pay. Get the answer straight from the horses mouth. The blue book is a historical market summary and has its place. It can be very useful, depending upon your buying and selling strategy.