When investing in a mobile home, the main thought running through every investor’s mind is “what will my return be? Can I be sure to make a profit on this property?”
Although several factors affect the final number, one thing must never be overlooked:
Know the property’s current and After Repair Value (ARV) before making an offer.
If you’ve seen a single episode of HGTV’s “Fixer Upper”, you know that failing to spot damage before purchasing property can quickly add up to a costly mistake down the road. Any issues found after the mobile home is purchased will be your responsibility to repair — reducing your profits in the end.
NOTE: We just finished one that was a hoarder’s dream inside. (As seen above)
To get good deals, this happens sometimes. When we bought it, we knew we ‘might’ have hidden damage when we made the offer but moved ahead anyway. We always include 5% ‘contingency’ money in the budget, just in case. And in this case, we estimated $30k total costs so 5% contingency was $1500.
And we had some unforeseen floor damage. It was less than $300 to repair because the structure was ok. If the structure was not ok, we would have had more work but again we built in a contingency amount. Always a good idea for unexpected expenses.
As intimidating as this can feel, don’t let valuating your mobile home scare you off from experiencing a huge success in investing! One of the biggest components in determining a property’s value will be its overall condition, found in an inspection. Just knowing a few key things to look out for will have you inspecting mobile home properties like a seasoned pro.
In an article recently posted to BiggerPockets, rental property manager Ryan S. shared fantastic tips on what to look out for when inspecting a mobile home. The article, titled “7 Must-Check Items When Inspecting a Mobile Home”identifies a checklist of relevant issues, specific to this type of property.
In summary with some examples:
Roof – Look for signs of a roof leak, such as water stains on the ceiling inside. Additionally, check for rust, cracks or issues with the integrity of the roof’s structure.
Floors – Soft spots are very common with the floors of mobile homes. Check for these, as well as any signs of water leaks or torn insulation beneath the home. As shown in floor pics.
A/C Units – Check to make sure there is a physical unit, not just a window unit. Examine the appearance of the air conditioner unit and note its age, to estimate condition.
Doors – Check for issues with the doors’ sealing, by looking for any sunlight peering in through cracks from outside. Ensure that all doors and windows close and lock properly.
NOTE: Sometimes the unit will settle causing walls, windows, doors and floors to be uneven.
Electric – Although electricians and plumbers are highly recommended for an in-depth analysis of the home, a $10 receptacle tester will easily verify that the outlets are functional. These testers can be purchased at most hardware stores. Additionally, ensure that breaker panels follow local electrical codes.
NOTE: Units older than June 15, 1976 can have aluminum wiring. Copper was expensive in the 1960s and 1970s and many units were built with aluminum wiring. Aluminum can corrode, short out and cause fires. When working on one older than 1976, make sure which kind of wires are present and adjust accordingly. Home Depot and Lowe’s sells aluminum rated plugs and switches by request. They also sell a paste that you can out on wire ends to avoid corrosion.
For example, one we bought the plugs in the master bedroom were not working. The owner had dangerously run wire directly from the breaker box to a plug so he could have power. We found a plug that was an off the shelf one rated for copper. He could have started a fire and burned down the unit.
Septic – If you intend to keep the mobile home on the property, a septic inspection should be considered a “must” and can save thousands of dollars down the road.
NOTE: Many parks are on city water and sewer so septic is rare is most urban areas.
Vapor Barrier – Inspect the barrier on the underside of the mobile home. Look for sagging, rips or de-lamination.
To read this checklist in more detail, check out the full article, here.
Whenever investing in or flipping a mobile home, make sure to perform an in-depth inspection first. Successfully spotting damage can give you negotiating power to save thousands off your purchase price, increasing your profit margin later.
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