One of the great reasons for investing in mobile homes with land is the ability to constantly test new markets without having too much at risk financially.
Let’s review one of my property deals that is a great example of that.
Mobile Home Deal BackgroundIn January 2013, we had a crazy month of rehabbing and finding tenant-buyers for two properties (properties 4 & 5) and buying two more properties (properties 6 & 7). By mid February 2013, we had tenant-buyers in place in all of our homes and we felt like we could breathe again.
We made an offer on this property at that time. Here’s the details:
‘99 2 bedroom doublewide (~1,100 sq ft) on a ½ acre lot
New area for us: Close to jobs but not in a very good school district.
The neighborhood consisted of similar mobile home and land properties in good shape overall.
Asking Price: $12,075
Repairs needed: Outside central A/C unit, roof repair, kitchen floor repair, and general clean up.
Expected cost: About $5k
Bank REO
For those who know our business model, our goal is to buy and rehab these mobile home and land properties for $20,000. So, with the asking price around $12k and putting about $5k into this property, we should be able to meet our goal; however, there were 2 big unknowns.
**Don’t get too focused on our numbers. If properties are more expensive, you can probably collect more monthly. Just make sure you know your numbers and are happy with your return.**
2 Bedroom Home – We had never bought a 2 bedroom home before and didn’t know how people would respond. Most families want at least a 3 bedroom home.
New Market – This was a new area for us. We were less than 10 minutes to the interstate and less than 25 minutes to the downtown city where many jobs are located. However, we knew that the area was a little poorer and that the schools were weaker than where we had invested before.
I know that I have said this many times, but the nice thing about these cheap properties is that it allows you to test new products and markets without risking too much.
However, looking back I wish we had just tested one of these concepts (2 bedroom home or new market) as a slow demand from tenants/buyers wouldn’t allow us to pinpoint the exact cause. Even better I should have ran a Craigslist ad for an imaginary home similar to this property and see how many calls I get.
Making An Offer & Closing The PropertyWe made our first offer around $8k cash for the property that got rejected pretty quickly. We made another offer around 10k and were informed that we were in a multiple bid situation. We then went to $12,125 or $50 over asking price, which the bank accepted.
Looking back, buying at the asking price was a great deal and we shouldn’t have gotten greedy in trying to go a little lower. However, at that point, we just weren’t sure about that market and didn’t know how good of a deal we had.
The property closed in about a month without a hitch.
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