In the 30 Days of Due Diligence book, Frank and Dave mention that they generally look for areas with single family home prices above $50,000. I’m currently performing due diligence on deals in Columbus, OH and Phoenix, AZ, and the Zillow single family home comps have been under $50,000 (with Arizona having comparable homes in the area of $20,000 to $30,000). Does this mean that those markets should be avoided?
Good that you’re looking into this as it’s something that bit me hard. Given the choice, people are going to live in SFRs and not MHs. If there is a way to get into any type of home, people will do it. It doesn’t matter that the cost of upkeep on such properties far exceeds what it costs to maintain MHs, people will still go for the stick-built home if they can.
What does that leave you?
In my experience you cant always judge the book by its cover. I recently did some DD in an area that had homes priced below $50K. The bottom line of my onsite was the $50K homes were not habitable without major repair and maintenance. In another example we looked at a package of 100+ homes that could be purchased for less than $12K average, but after onsite inspection we discoverd that many of the homes should be bull dozed down to vacant lots, because the cost of repair was far beyond the market value. I would not avoid an area just because Zillow or any other online service says there are homes available for less than $50K especially Phoenix, which is a market I know.
As we all know onsite DD is very important when shopping for MHPs. We can get a lot done online, but nothing is better than touching and feeling the deal.