Thursday, March 4, 2010

My $2,000 Nightmare

Awhile back, I wrote this post about mobile homes in the $2,000-$3,000 price range.

While I still see these types of homes all the time, I wanted to share a little story with you about my experience buying one of these $2,000 mobile homes.

It was a 2 bedroom/1 bath, 14x48, 1985 mobile home. No central heat, no central air. The seller was a single mom who just couldn't afford lot rent anymore and needed to get out of a bad situation. She had been living in the home for less than a year.

When I got the call from the park manager, I should have known to stay away from this deal. There were so many things screaming that this was not my typical deal. Why?

Most of the homes that I have bought have had certain qualities that have made it easier when it comes to finding an end buyer. For one thing, most of the sellers that I've worked with have had their homes for more than 5 years - they are long term homeowners. Being the long term homeowners that they are, this means they take better care of their homes.

All of the homes that I've bought are kept in good condition, all have central heat and air conditioning and overall are mid to large size homes (in the mobile home world). Plus, they have been in mid level to upper level type parks.

Already, this deal had all the wrong things with it. But, I pursued it anyways since the park manager kept insisting it was such a great opportunity for me.

Initially, the seller on this deal wanted $4,000. I cut it in half being that it was a smaller home (14x48 - there are smaller but this is really small compared to others that I've bought).

Going into this deal, the "homeowner" side of me told me to walk away. But, the "investor" side of me told me this was a great deal. Why?

As a homeowner, I wouldn't live in this home or in this park. While the park was a family park, it was much a lower end type of park. There were a mix of homeowners and renters. But, it's one of those parks that is always having a lot of turnover - many evictions every month.

Now, there are some investors out there who work these kind of parks - it is their bread and butter. Yes, there are many opportunities in these kinds of parks to purchase low priced homes. But, the kinds of people it attracts and the rate of turnover is just something that isn't really my style. I found this out the hard way.

When I put the home out on the market, I went through my list of buyers (I get homeowner type buyers who call me on a regular basis who are looking). Most of the people that I talked with wanted a newer and larger home in a higher end park. They wanted quality, not cheapness.

Through experience, I found is that the park will attract certain type of clientele. Since this park had a lot of evictions and was more of a lower end park, it attracted more of a lower end type of buyer. What do I mean by "lower end?"

Many of the people who applied for the home had evictions, bankruptcies, unstable job history, low credit scores, etc. Personally, I just wasn't comfortable dealing with this type of clientele. The park manager told me I was too picky and I just needed to make a decision from the stack of applications received. The park manager also said that if someone defaults, I just need to get the eviction paperwork ready now - helping me with the paperwork process would be no problem.

Before making a move, I thought really long and hard about this. I went back and did some reflecting. I knew, I did not want to be a landlord - going into something like this would make me one. I just knew it. While I know there are some risks with "Lonnie Deals," I have learned to lessen my risks by having very high standards and criteria when it comes to working with potential homeowners.

In the end, I went with the "homeowner" in me. Doing a "Lonnie Deal" with this home and in this type of park was too much of a risk. I held out and finally sold this home to an investor who put homes on his land at a loss. But, it was a big lesson for me.

It really taught me that I really need to be working with homes and parks that I would live in. Now, I only work in high end parks. Though, the lot rent is usually the highest in the area the high end parks really attract the type of clientele I feel comfortable with - they are more of a fit to my personality.

These high end parks have very strict criteria which makes it easier on me when screening buyers - they do a lot of the screening for me already. For example, the parks I deal with will not take people who have bad credit, bankruptcies and/or evictions (not even one).

After this experience, it really opened up my eyes. It taught me that the type of parks that I work in really needs to fit my personality. Now, I can see clearer.

Happy investing!

1 comment:

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