I am about to close on a 50 unit park and have found out that one tenant is marketing their home on craigslist for 4k. The mobile home needs a lot of work (probably around 4-5k of work). It is a 1998 2br 2ba.
What is the best strategy here? Do I try to buy it from her so I do not lose an occupied lot and do the repairs, or do I let her sell it to someone else who may haul it out of the park?
If the home leaves, it is likely I would have to spend close to 10k including moving/setup to get another home on the lot.
Why assume the new buyer will move it out. As the community owner would you not have the say on approving the buyer. What are your state regulations regarding the community owner having right of first refusal.
Personally I would not make assumptions and would not be rushing to buy if you have options. Having a quality buyer approved by you with the intent of keeping the home in the community would be preferred over buying it yourself, unless…your intent is to upgrade the community by purchasing and renovating homes to resell to attract higher quality residents.
I agree with Greg. And it’s highly unlikely that a buyer will spend the large amount of money to move it (at least $3k) out and then rehab it. Also, to move a home, it’s likely that the buyer must obtain a permit and a clean title must exist. If a clean title doesn’t exist the home may not be able to be moved. I don’t know what the market value is for that home in your location, but if it is $4k and you decide to buy it, tell the owner that you can only offer ‘wholesale’ value for the home - say about 75% of the market value - after all, you are a ‘retailer’ and deserve to make a few $$. Like Greg said, if you are trying to clean up the park it might make sense to buy it and rehab it per your standards. If not, I wouldn’t waste the time, effort and money to do it myself.
The most likely scenario is that someone will buy it and live in the park. I suggest that you tell the home owner that any buyer who plans on living in the park must be approved by you. Hopefully you state this in your park rules. If there isn’t a tilte on the home the seller will most likely sell the home on a bill of sale. This could get messy for you in the future. Try to require that the seller have a clean title (all current and back taxes should be paid) and require that they follow the necessary steps, per the county/city, to transfer the title to the buyer.
I suppose it depends on how much working capital you have. But if you have the bucks, why not buy it and do what need to be done to it and sell it for $15,000 to $17,000? The deal would be $2k down and say $700 a month (including lot rent) at 0% interest (just to make it easy while playing around with the idea) – I don’t know your lot rent but if it is $300 then $400/month goes towards the house. You are into the house $9,000 but with $2,000 down you are only out $7,000 and owed, say, $15,000. If you count lot and loan payment you get your $7,000 back in 10 months, but if you only count the loan payment you get your $7,000 back in about a year and a half. And you are still owed another $8,000.
Where do you find deals that good?*
So you get, over time, a nice little pile of cash out of the deal and you get a home in your park that is in sound shape and ready for years more of service to its family and to you.