It’s likely you’ve come across a mobile home or manufactured house and you’re wondering:
“How do I wholesale this puppy?!?!”
Well, since we have a staff member here at Call Porter who’s done business in mobiles homes ,we’ve asked him to chime in.
So this article will be your ultimate guide in making money with mobile homes.
But first…
What’s the difference between manufactured homes and mobile homes?
The words “mobile homes” and “manufactured homes” are sometimes interchangeable but they technically mean 2 different things and affect how “wholesaleable” they are and how much profit you can make.
- Mobile homes: A mobile/manufactured home built June 1976 is considered a “mobile home”.
- Manufactured homes: A mobile/manufactured home built June 15 1976 and post, is considered a “manufactured home”.
Why this matters when wholesaling mobile homes…
This matters a whole lot because it drastically affects who will buy your deal; are there any cash buyers?
There are certain investors that will only buy a manufactured house on land.
Land you own vs leased land
Another thing to consider is whether or not the mobile/manufacture home is sitting on it’s own land, or the land it sits on is is own by someone else and it’s leased (AKA: a mobile home park).
These are typically easy to spot:
The dynamics of selling a mobile home that doesn’t own the land it sits on, is VERY different when it comes to wholesaling it — we’ll cover that later since it’s a bit more complicated.
So, first step is to recognize whether or not your mobile home is in a leased park or not.
A lease park = Rent space being paid to the park owner.
(Not EVERY park that looks like the above picture, is a “leased park”. There are some parks called “Community owned” where they SORT of look like a mobile home park, but the residents actually own the lot it sits on. There might be an HOA as well; these have particular rules about flipping or renting in the park that you should be aware of BEFORE getting anything under contract)
Mobile home on land
These are far easier to wholesale.
The paperwork and the transaction is typically the same as almost any real estate transaction.
And there are far more buyers of this asset class than a mobile home in a leased park.
Investors/cash buyers want to OWN the land too (which has more value).
Buying a mobile home not on land is more like flipping a car (we’ll go into how to do this and how to profit from it later).
How to wholesale mobile homes on land
Ok so cleared up the difference between mobile homes and manufactured homes, and homes on land and those on leased land… it’s IMPORTANT for you to know which is yours (if you have one under contract right now)…
If you don’t have one under contract and you’re trying to figure out what it’s worth, then lets dive into the next section..
- Compare apple with apples for value — We won’t go into the dynamics of comping (you can find some instructions in this article titled “How to run your own property comps…” ).. so’ll we’ll assume that you already know how to comp.)The biggest mistakes that people make when evaluating mobile homes is that they look at prices of single family residence. Big mistake. Single family residence are going to be more valuable than manufactured homes. So when pulling up your map or comping list, you have to filter for:
- Size
- bed/bath
- area
- Type (mobile/manufactured homes only) — Leave out parks (don’t get homes in leased parks in the mix as these are drastically less value)Should you filter out mobile homes?
Remember how we went over the technical differences of mobile home vs manufactured homes? Well you may want to consider that difference in your comping. Because mobile homes typically can’t get the traditional lending that a manufactured home can. So that can drop the value. So if have a manufacture home on land (built June 15th 1976 or after), you may want to ONLY include these type of homes in your filter.
- Find the buyers — There’s only a small percentage of cash buyers that’ll buy these. They’re typically buy-hold investors but you can find flippers too. The easiest ways to find them are 2-fold:
- Visit your local REIA (if you have areas filled with manufactured homes you’ll find a buyer at your local REIA
- Pull a list of all the cash buyers of manufactured homes AND all the landlords of manufactured in that area and mail them, call them, and text them.
- Go through a traditional closing — The great part of manufactured homes on land is that you can go through a normal closing of a deal just like a SFR; unlike mobile homes or homes on leased land it’s a whole different closing process that we’ll cover later.
Comping mobile homes based on cash flow
If lots of cash buyers in your area are buying mobile homes for cash flow, you might want to consider this as well when comping price, not just re-sale value.
Many investors might go after manufactured homes because they can’t find much cash flow with Single Family residences in their area (AKA: they’re in a highly expensive area). So they can get the 1% or even the 2% rule by buying manufactured homes. So consider that your deal will look good on cash flow paper if it falls under the 1% rule.
How to estimate repairs on a manufactured home
If you haven’t gotten your deal under contract yet, you’re most likely wondering what it’ll cost cash buyers to repair it.
This is a tricky one.
Because it’s not entirely the same as SFR’s.
And it varies greatly in areas (and parks — we’ll cover parks later).
Here are some ways to accurately estimate rehab costs for manufactured homes:
- Ask the local handyman — There are some locals that have a “go-to” person to make repairs. Ask around and get his contact and just ask: “Can you estimate what it would cost (labor and material) to get this to good condition?”Make sure you let him know that you’re not price shopping so he doesn’t have lower his prices. That you need to come up with a very accurate price of what the costs of labor and material will be for good condition (A salable for top dollar condition vs a “rental condition”.– it’s important to know the difference as for your area “rental quality” might be far different than “re-sale quality”.
- Reverse Wholesale
Reverse wholesaling is a common strategy to lowering your risks when wholesaling; yes there are “risks” of not finding a buyer. Reverse wholesaling means that you find a buyer BEFORE you put anything into contract. That buyer can walk properties with you and tell you straight up what he would pay for (or you send photos and address).Here’s a video from our founder, Ryan Dossey, explaining Reverse Wholesaling (which he’s used to help create his 150+ portfolio and 30+ deal a year wholesaling business):
How to profit with mobile homes in a park
I’m going to include this section in the article because there’s a good chance the deal you’re considering is one inside a park .
It’s naturally going to happen…
All the marketing you’re doing as a wholesaler (whether direct mail, or cold calling, or whatever) is going to attract owners of mobile homes on land.
Now..
You can just disqualify these leads…
… Or you can make some good money off them.
So in this section we’ll cover 4 different ways to make money off of them:
- Wholesaling it — Like mentioned before, this is a little more tricky because mobile homes are more like cars; they’re not a typical “house transaction”. So, deepening on your state, you’l have to do some research on how to transact these (each state is different, in California, the “government authority” with mobile homes is called “HCD” (Department of housing and community development). You MIGHT be able to find an escrow that can close it for you (there are some that specialize in mobile homes — you hav not either ASK the park manager or research).The tricky part…If you can’t do a normal wholesaling transaction with mobiles (assignment fee inside escrow or double close), then how do you get a cash buyer involved… and get yourself PAID? And most parks have to “approve” of the buyer before you can close.This is where trust comes into play.Your cash buyer has to be the sole “buyer” in the contract. Meaning, you can’t “assign” a contract.. you can’t the contract to your states housing authority that deals with mobile homes and tell them: “I’d like to assign this contract”… they’ll look at you with raised eyebrows not having a clue what you’re talking about (most likely). So you have to bring a buyer in from the beginning, more like a partnership.
- Flipping yourself — Because mobile homes on land are so much cheaper than SFR (in some parks where the avg Single family home is $500,000 you buy a mobile home for $20k-$90k), you might be able to put you own cash into, rehab it and re sell.However, understand that the Brrrr method won’t work if you’re considering holding on to it. It won’t work for 2 reasons:1. Getting financing on a mobile home on land is VERY difficult… it doesn’t work the same as the traditional SFR world. There are very few lenders that lend to mobile homes NOT on land.2. The park might not allow renting… there are a lot of parks (mainly the nicer ones that are “corporate owned”) that just have a policy of no renting… you’ll have to talk to the park manager to get the full gist of it.(NOTE: understand that because mobile homes are VERY difficult to get a loan on, your end buyer will mostly likely be a cash buyer. There will be occasions however when a buyer is prequalified with an approved mobile home lender.)
- Selling on a note — This is by far one of may favorite ways to make money in leased park. Since these type of homes are very inexpensive (some areas you can buy them for $5k), you can put little money into it, and then sell on payments; seller finance (a creative financing strategy).- Buy a mobile all cash (for example $5k)
– Put some rehab money into, and make in good condition
– Advertise it as a home they can for only $200 a month
– Ask for $5k+ down payment (to get most of your money back)
– Amortize the payments for 5 years plus (whatever makes sense)
– Do up to 9% interest.(NOTE: we aren’t lawyers so consult with a real estate lawyer who understand the Dodd Frank laws that restrict seller finance deals. What we’ve seen done is using a mortgage broker to facilitate the transaction and insure that the buyer is qualified) - Renting — This is a little more difficult since some parks don’t allow “subleasing” however it you’re into rental Arbitrage, mastering leasing, or just plain finding a tenant to rent to… it’s worth finding (or asking) if they allow it.
Now let’s move on to the final part (our favorite)…
Marketing to find mobile homes to wholesale
If you’re a wholesaler, you already understand that importance of marketing and advertising to find sellers directly.
So here’s a list of real estate marketing strategies for finding mobile homes
- Direct Mail
The nice part about finding mobile homes is that they’re easy to spot in an area. They typically are clustered together and you can pull list based of a location filled with mobile homes. Mobile homes in a park are different, and the best way to implement direct mail marketing is just send them mail to each address in the park, you can use a USPS service for this. - Network
If you “rub elbows” with park managers, they’ll let you in on any deals in the park. And there are some realtors that have NO idea what do with mobile homes, so you can be their “go-to” person. - Cold calling
If you pull a list of mobile home address, you can also cold call using scripts that wholesalers use. - Door knock
If you’re targeting a specific park, all you have to do is walk that park, knock on every door asking “do you know someone who’s looking to sell” and there’s a very high chance there’s someone selling. - Social media
Lots of mobile home owners who need to sell, post their house on Facebook. Browse through the marketplace every week and see if you can spot a deal; social media marketing is growing and becoming popular to find deals.
Summary
Alright, so wholesaling manufactured homes IS possible, you just have to understand the technical differences, what investors are looking for, and how to profit off them!
Good luck on your real estate investing journey!