Help me decide whether to fix or scrap my rougher homes

So I purchased a park that had several abandoned homes, some of which are quite rough. I’m trying to pencil out the projections of rehabbing the rough homes, versus tearing them down and replacing them, and it’s tough for me because I don’t have quite enough experience to fill in some numbers

My park is an older urban park where most lots can’t fit homes longer than 60 feet. As a result I’m somewhat limited on buying repos. The average age of the homes is 1974 too, so any homes moved in would look quite odd against the backdrop of the older homes (only two homes currently have vinyl siding). The park is also in Ohio, which I hear is cumbersome and expensive for moving homes.

Unit 14:

rehab interior: $8000 (confirmed bid)

Electrical: $1500-$2000 (estimate)

New Roof: $800-$2000 (estimate)

HVAC (not sure how well it functions currently): $1000

Tear down:

Demo: $1000

Lot prep: $1000 (shot in the dark estimate)

New House: $10,000 down, $20,000 finance

Each of the above estimates are very rough guesses. Each approach would likely have hidden cost overruns.

Noel -

Welcome to the ‘gray area’ of mobile home parks! The right answer is ‘you should do whatever is most profitable.’ Of course, the nuances in a situation such as this are many - and I think you need to define profit both in terms of time and money.

As a general rule, we will ‘only’ spend $7,000 to rehab an older home (1980 or earlier). This is about 1/3 the cost of bringing in a new used home into our community. That newer home will rent for more money and attract a higher-quality resident. In our market, we can get a nice-quality 10-year old 16x80 home renovated and installed for $20,000. So we will ‘only’ spend $7,000 to rehab an older home. Above that amount, I’d rather have a 16-wide 2002 sitting in my park for $20k, than have dropped $10k on a 1973 Detroiter Starlight Deluxe just to keep getting a few more years of rent out of it. In our market, people actually turn their noses up at anything 12-wide, and even some 14-wides. So we probably would not spend any money at all on a 12-wide. We’d spend a lot more renovating a newer 1995 16-wide.

You may need to run some test ads and really see what you can rent a 10-year old house for, vs. a rehabbed 12-wide from the 1960s. In our market, we can get an extra $150 - $200 per month on a 2002 16x80 3BR/2BA, vs a 1980 14x70 3BR/2BA. Considering our increased payback for spending the ‘extra’ $13k to bring in a new used home ($20k total), vs. spending ‘just’ $7k to rehab a much older home, and considering that the new home will attract a far better-quality family that will do less damage and have less turnover, we opt to just replace any pre-1980 homes in bad condition.

But it is a judgement call. Many prefer to invest less and just deal with the higher headaches of keeping that old home alive.

Run some test ads, think about the incremental returns (higher rents, fewer headaches) from having higher-quality residents in your community, vs. renovating older homes that attracting more marginal residents (lower rents, higher headaches), and then do what feels right for you. Remember, your mileage may vary. (:P)

Try this: do one of each type of home; 6 months from now you’ll know for certain which is the right choice for you.

; )

-jl-