Posted by Tony Colella on March 22, 2006 at 09:58:16:
I live in North Carolina but there are folks here from all over the country doing much the same.
Don’t be too quick to decide that it can’t be done where you live. We often assume that it cannot be done because all we see is the retail listings. Finding the wholesale deals does take work but the money can be made. We are providing affordable housing. Knowing how best to create the property so that it has market appeal as well as appealling to banks to finance is very important.
Our area we see land/home deals retail for $85,000 to $120,000 plus all the time. We do not buy at those prices of course.
We stick to $40,000 - $50,000 (including purchase of the doublewide and land plus all fix up costs). We could retail the homes out for a “flip” sale but personally choose not to (for the many reasons we detail in the book).
The spreads may run a bit lower than what you heard of in CA (but seeing is believing). But there are other factors that come in to play such as exposure to debt service etc.
My experiences are not unique as reading this board will confirm. Welcome to mobile home investing Tracy.
Posted by Tracy Lance on March 21, 2006 at 23:28:35:
I have two different friends, who do not know each other, who both have been telling me about investing in manufactured houses on regular lots - not MH parks. Friend 1 says that he knows some investors/developers who are buying 10-12 manufactured houses at a time and putting them on land (not parks) in southern California and are making on average about $80K each house. I have been very skeptical. I recently asked Friend 2 about this idea of investing. His dad just completed one, and has done this 4 or 5 times (one manufactured house at a time). Friend 2 says that his dad is very casual about it and subs out all the lot prep and setup work, etc., and still clears $60-80K each. He just finished another last week and it is going on the market any day now. This one will probably net him closer to $100K. This is also in Southern California.
I want to know from others out there if this is for real. Are people really paying over $300K for manufactured houses on small lots? I know that there are a lot of new manufactured houses these days that look really nice like stick built.
I am not a complete beginner in REI. The most I have made on any one deal has been $30K (stick built). And I was very happy with that, and others that have been similar. If investors are putting up manufactured houses on land, and turning $60-80K each in 3 months, why are not everyone in California doing this?
By the way, Friend 2 says that the easiest way to get a lot to put the manufactured house on is to buy a junker mobile home that is on land and get someone to haul off the MH, leaving you an empty lot. This way you don’t have to deal with all the permits, utilities, zoning, etc.
I am really looking into this, and would appreciate any input you can give. Is this stuff real, or pie in the sky?
Posted by Tony Colella on March 22, 2006 at 09:03:39:
Tracy,
I cannot speak for your market but I would not be suprised by those numbers since you are in CA.
Similar profit spreads are made in my area (but at much less costs).
Buying wholesale and putting the land with the home does create value far in excess of the individual value.
Housing demand and alternative stick built pricing will dictate the final value.
We wrote a book that we have here called “Investing in mobile homes with land” in which we explain how we make money with land/home properties and discuss developing the properties as well as (what we call) semi-developing the properties as your “Friend 2” suggests (with some exceptions).
Your friend is sort of right. If you can buy a property with an old home already on it and remove that home, you have a good head start but that does not mean you don’t need permits, inspections, zoning etc.
As we discuss in that book, you will have to confirm with authorities (and private deed restrictions) that you can replace that home with another mobile home. Sometimes that homes is grandfathered in but no other mobile homes (or perhaps no singlewides) can replace it (another reason we discuss why doublewides are a better alternative for financing and zoning reasons).
The older home may not meet modern requirements such as 200 amp electrical service. If a septic is involved then the number of bedrooms allowed will need to be confirmed.
Permits for the move and set up as well as inspections will apply. These are by no means a deal killer but you don’t want to go into a deal “not knowing what you don’t know.”
I have been buying these for years… I usually just sell the one already there. we have new strict codes on new homes, Ie no singlewides…ect… one deal I got the lot off a bank who didnt know they owned it, bought a doublewide repo for $18000 , rented it for 3 yrs @$550 a month, and then sold the entirepackage for $54000… all in how you work your deal
Posted by Tracy Lance on March 22, 2006 at 09:51:28:
I actually do not live in California myself. I live in Utah. In my state manufactured homes don’t sell near as well. But, if the spreads are really that good in California, I might go there and do a few deals.
What state/area are you in Tony that has just as good of spreads but with lower costs? Do you know of other areas around the country that are similar?