Turning A Free Mobile Home Into $18,000+ (Some Do’s & Don’ts)

Welcome back,

When evaluating a real estate investment opportunity, it is important to realize there are more conclusions than simply a “great deal” and a “horrible deal” to describe any possible money-making opportunity. In fact, most potential investment homes fall in a range between these two opposite ends of the Deal Possibility Spectrum.

The Deal Possibility Spectrum

deal possibility spectrum

It can be a helpful practice to imagine all possible real estate investments falling within a range from great deals that we can describe as no-brainers and easy opportunities with substantial profit on one side, all the way over to absolutely horrible, time-wasting and money-sucking homes that you have no business closing on as an investor. While it is often times very easy to spot the difference between these two polar opposites, it takes much due diligence and knowledge of your specific market to identify if a particular deal you are looking at can be described as substantial, meaty, worth it, win-win, skinny, risky, etc.

The reason I bring up the Deal Possibility Spectrum is because many newer and unseasoned mobile home investors may be presented with or come across an advertisement for a FREE mobile home. This free mobile home may be currently located inside of an existing mobile home community, or it may be needing to be moved from its current location. Either way, there are a number of things to consider before jumping into any free mobile home investment opportunity.

5 Very Important Things to Consider BEFORE Accepting a Free Mobile Home

1. Competition While Reselling

Be aware of what else is for sale in the park currently. If there are many other mobile homes for sale already, then potential buyers you advertise for may be led to purchase one of these other properties instead of your home. Be aware of the asking prices, conditions, and selling terms of these other mobile homes for sale inside the same park.

Related article: Mobile Home Makeover and Flip, Without the Flip

Pro Tip: Be aware that if the mobile home park is selling a dozen or more of their own mobile homes via a bank financing or rent-credit program, this will directly compete and undercut your mobile home for sale. Parks do not have to worry about paying monthly lot rent; however, you do. If there are many comparable homes for sale at or below your asking price and terms, consider passing on this free home opportunity.

2. Holding Costs

There are few things as frustrating as holding onto vacant mobile homes inside pre-existing mobile home parks that are costing you lot rent every single month. If a mobile home park is selling a mobile home for free, they understand that this mobile home will most likely need a good degree of cosmetic and/or structural repairs to make the home habitable again.

These repairs will of course take time, resources, and money to complete. Always ask for 6+ months free or discounted lot rent in order to give you time to fix a mobile home and resell it to a qualified buyer. You can let the park know that as soon as the home resells, you will begin paying lot rent immediately.

Pro Tip: In many mobile home parks ,you are likely to negotiate free lot rent when purchasing a home directly from the park itself. If you are purchasing from an owner occupant inside the park, the manager has little incentive to discount the lot rent for you.

3. Ease of Resale

Not all free mobile homes are created equal. Four-bedroom mobile homes sell more quickly than three bedroom mobile homes, and three bedroom mobile home sell more quickly than two bedroom mobile homes. One bedroom mobile homes are a pass in most areas unless the market demand is through the roof and very high.

Pro Tip: Any mobile home you buy, whether cleaned or a handyman special, should always have a great deal of potential once finished. Make sure all bedrooms will hold a full-sized bed along with a dresser and room to move around. Nowadays, older mobile homes that are 10 feet and 12 feet wide look and feel much narrower than homes just a few years newer that are 14 feet to 16 feet wide. Mobile homes with 100 amps coming into the home are about as low as you want to go for today’s modern appliances. These concerns will not make-or-break a deal; however, they are very important to consider when justifying your reselling price and terms.

4. Repair Costs

Although the cost of a mobile home may be free, somebody will be paying for repairs, labor, lot rent, material, marketing, holding costs and more. Be conservative in your repair estimates, and always aim to make your money back in your first year if reselling with payments. If you are aiming to resell to an all-cash buyer, use local comps from the past three months within the same mobile home community.

Related post: 6 Self-Sabotages In Your Own Investing Business

Pro Tip: Be aware of major plumbing, roof, and electrical wiring issues. Major concerns like this can be money pits. Lastly, consider the time of year you are purchasing the property. If located in a state with snow, the demand for buyers and handymen will be considerably lower than in the warmer months. Take this into account in your repair and resale estimations.

5. Stress & Anxiety

We all deserve to be happy in life, and our real estate investing business is certainly part of your life. Stress and anxiety come from a lack of preparation and clarity in your REI business. If you were 100% confident in your ability to determine repairs, perform due diligence, and negotiate a valuable win-win deal with a quality mobile home – you would have little worries. A real estate investor that clearly understands his or her path moving forward typically has much less anxiety than an investor running around scatter-brained. Clarity is key! If you have any questions or concerns it is so important to understand the answers as soon as possible. Never hesitate to comment below or email me personally at support@mobilehomeinvesting.net with any questions or concerns you have.

In conclusion, it is not a matter of if you will find FREE mobile homes, but when you will find these homes. Almost all the mobile homes I have purchased that were free or $1.00 were negotiated down from a much higher original asking price. If a seller is willing to give away their home for free, then it is likely because nobody else is willing to step into their shoes and take on the responsibility of owning this headache mobile home. If after proper due diligence you determine that the home is a good deal, then by all means, tie it up as quickly as possible.

Love what you do daily,
John Fedro

 

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18 Comments

  • Charlie South

    June 29, 2015

    Hey John,

    I have spent the past 2 days going over your site. I not only live in a mh but really want to start making this business work for me. You say things on your videos that I can agree to first hand. I think I would be a show in for this business. Do you think I am at an advantage or disadvantage being in a mobile park?

    Your thoughts are appreciated and thank you.

    cheers!
    Charlie South

    • John Fedro

      June 29, 2015

      Hi Charlie,

      Thanks for reaching out and following along. I hope my videos and articles have provided you value while you learn more about this industry. Moving forward any questions or concerns you have feel free to reach out and comment or email me personally. Concerning your question about if you are at an advantage or disadvantage, I would have to say you are at a very slight advantage. You have lived in a mobile home and therefore understand a little bit more about their construction then investors who have never lived in a mobile home. You also possibly understand the mindset of many mobile home buyers and sellers, who want good quality properties at a fair price/terms. The reason you are not it more of an advantage is because you will still be required to put forth daily effort and action moving forward. In the future you may purchase a few mobile homes inside of your community. However this is something that any motivated and educated investor can do naturally. Plus it is important that you not only know your community but every community in your county and the surrounding counties. There is a lot more to know and even more action to take. With that said if you are excited about what you have read and eager to learn more than please never hesitate to reach out to me with any questions.

      Talk soon,
      John

  • Chas Phillips

    June 29, 2015

    Great Article John,

    I learned this lesson the hard way about 7 months back. I was a more excited about closing my first deal than my experience could handle, If I had been more resourceful and asked more questions then I doubt I would have ventured into that home.

    • John Fedro

      June 30, 2015

      Hi Chas,

      Thank you very much for being a part of it, Chas. You have learned a valuable lesson and you’re still sprinting forward with your eyes on your financial goals. In all the time I’ve known you have never been a victim or blamed anyone for your mistakes. Congratulations on your current success and everything coming in the future. Keep up the great work and consistent effort in helping local sellers and buyers. Email or reach out to me personally whenever you have any questions, concerns, or deal reviews.

      Talk soon,
      John

  • Dan White

    July 5, 2015

    Great video! Congratulations Chaz and John on a job well done. Has this home sold already? How long do your properties usually last on the market before you are able to sell them to a buyer.?

    Thanks in advance. Happy 4! I know today is our Independence Day, however I want to make myself independent from my current JOB. Keep up the great site.

    D.W.

    • John Fedro

      July 5, 2015

      Hi Dan,

      Thanks so much for the kudos and following along. I am super proud of Chas as well. He has a bright future within real estate investing and has already accomplished so much for being so young. With regards to your question, yes, Chas has resold the home for just over $23,000. Before we purchase any manufactured home we want to make sure we know for sure what local buyers are paying for these types of properties in today’s market. There specific ways to do this to ensure that we can sell the mobile home and recoup our money in the timeframe we desire. With that said we aim to have all properties filled with a qualified low-risk tenant-buyer within four weeks or less. However there are often times when homes are sold in less than two weeks or two months. With that said I would much rather have a vacant mobile home then one filled with a high-risk type of tenant buyer. I hope this helps and makes sense. If you have any other questions or concerns don’t hesitate to ever comment back any time. Always here to help. Keep up the ambition and dedication to move forward daily. If you wish to leave your current job then there is nothing stopping you except daily effort and a plan moving forward. You can definitely do it if you choose to. Keep in touch.

      Talk soon,
      John

  • Marty

    July 13, 2015

    Hi John,

    This is Marty. I really like this post. I had no idea making payments to sellers was still possible. I was confused with the new rules and Dodd Frank. I can absolutely see the advantages of buying mobile homes with payments. I mean if the prices are good. Thank you again. I will likely have some more questions coming soon.

    Cheers and thanks for all you do.
    Marty

    • John Fedro

      July 13, 2015

      Hi Marty,

      Thanks so much for your kind words and for commenting. I absolutely agree with your sentiment about the price having to be right. As mobile home investors we will not do any deal that does not make financial sense, likewise a mobile home seller should think the same way. Deal should always be win-win. A mobile home investor purchasing a mobile home via structuring payments is absolutely still allowed in most cases. As investors we will not be living in the properties ourselves so much of the Dodd Frank and say fact does not apply to us. However when you resell to an end-user that will be living in the home you can be well within the scope of these acts and rulings. I hope this makes sense and is clear to you. If you have any follow-up questions or concerns never hesitate to reach back out.

      Talk soon,
      John

  • Sibi Manoj

    July 24, 2015

    This initiative is really appreciatable. If there is big competition in resale why should we refuse to buy a mobile home. Even there are many advantages,tiny disadvantages also persist. but who cares. It will be such great thing to own. Planning for a big thing. congrats Fedro keep posting more.

  • Rafael ruano

    September 9, 2015

    Does the price you pay for these mobile homes also reflect the amount they charge per month for lot? I see lots of good deal but when communities are charging $400-$600 a month you gotta find a buyer quick before HOA eats your profits.

    • John Fedro

      September 9, 2015

      Hi Rafael,

      As investors we aim to make $300 minimum per month on top of the monthly lot rent the park charges. To answer your question, yes the lot rents are figured into the prices we sell the mobile home for. When you have a attractive mobile home that you are selling for an attractive price the holding cost should be less than one or two months maximum. Before you purchase any mobile home for sale you should absolutely know what this home can and will sell for from a cash buyer and a payment buyer. In addition you should already know your clear exit strategy for how much you will advertise and sell this home for. I hope this helps and makes sense. If you have any follow-up questions or concerns never hesitate to reach back out anytime.

      Talk soon,
      John

  • Rafael ruano

    September 10, 2015

    Thanks for your reply. I’m very interested to start your program. Where do I sign up?

  • Jeff Smith

    February 4, 2016

    Greetings John
    I live in Michigan and have called many MH parks to see about buying and renting or offering a lease option on the home that I would buy. However I seemed to get the same response from all the park managers I talked to
    ” you can’t rent or lease option a home in our park”. Is this a “typical” thing in Michigan or am I saying or doing something wrong, it seems like a win win win for the park, investor and renter/buyer and I presented the question to the manager that way but still get stone walled, Please advise.
    Thank you for all your info
    Jeff

    • John Fedro

      February 5, 2016

      Hi Jeff,

      Thank you so much for commenting and reaching out. I will certainly confirm your suspicions that this is a very common thing not only in Michigan but all over the country. Typically most mobile home parks will not allow you to rent or lease or sublet a mobile home in any way. This is because most mobile home parks will want only owner-occupants inside the homes, renters typically bring renter-mentalities that will never treat the home or neighborhood as nice as an owner will… there are of course exceptions to this rule. With that said you absolutely will find some mobile home parks that will allow you to rent to an approved renter. Mobile home parks around military bases have a higher percentage of allowing you to rent versus other areas, just FYI. Would you be opposed to reselling a mobile home via monthly payments instead of renting? I hope this helps and makes sense. If you have any follow-up questions or concerns never hesitate to reach out anytime.

      Talk soon,
      John

  • Patsy Newhart

    February 13, 2017

    I made a 1300.00 loan on a title of a 2001 mobile home to cremate a member of their family. I was unaware
    That the lot rent was behind and the owner is being evicted.
    Mobile home is located in a very nice park but the park owner wants nothing to do with paying the lien and owning the home. She says she wants it out of her park. I have the title and a promisary note but the person still lives in it.
    Should I take this to small claims court to evict him and see what kind of offer I can get? We are in NJ and I have a feeling once she evicts him she will file for a reconstructed title and I will just be out of my $.
    Any advise you can give me would be greatly appreciated.
    He has put in writing that I have been coned! Go figure.
    I don’t want to spend more $ chasing my 1300 bucks. Only want my $.
    Help!

  • Patsy Newhart

    February 13, 2017

    Oh I failed to mention it’s a two bed room 1 bath single wide with a nice awning. Looks good on the outside.
    Can’t report on the shape of the inside. Owner was previously employed by park owner so my guess is that it will be dirty but everything should be functional. IDK.
    I have the title in hand with him signed as seller but did not put the title in my name in case utilities or back rent were due….didn’t want to get stuck with it.

    • John Fedro

      February 16, 2017

      Hi Patsy,

      Thank you so much for reaching out and connecting. Additionally, thank you for your detailed comment as the certainly does help me answer your questions. I very much regret to hear that after doing something so nice you are not able to recoup your money and these people left you high and dry with no intentions of repayment. I understand that you have the title currently and it is in the other person’s name. I agree to not put into your name because the park may evict the person on title. If the park owner was not requiring that the home be moved out of the park I would have a few suggestions for you. Because this is a two bedroom and has to be moved the only suggestions I have for you would require you paying more money to try to chase down selling the home to recoup your losses. With that said I do agree that once you have moved on the park will take the title to the home and likely fix it and resell it themselves. You may want to offer to hand over the title to the park for a small fee if possible. You could try to resell the home however there are not many investors that would pay money for two bedroom mobile home that has to be moved. You could try to have it moved to another park that will pay for the move and set up however this is unlikely with such a short timeframe. Additionally, moving it out of the park you will still likely need to give notice and pay the back lot rent due.

      With regards to the people you lent the money to. If you have any documentation about this I would definitely aim to take them to small claims court if possible. This is definitely a civil matter however they should not get away with this if possible. I am not an attorney of any kind so you may want to consult an attorney that offers a free hour of consultation. I apologize that I do not have better news for you. Moving forward if you have any additional follow-up questions or concerns please never hesitate to reach out any time. Keep in touch. All the best.

      Talk soon,
      John