One of the key factors in your decision-making actually has nothing to do with the house itself. It has to do with your lot rent. How much is your lot rent?
What I’m getting at is that your budget for repairing a mobile home (and your budget to bring in a new home) is at least somewhat dependent upon how much value it will bring to your land when that lot is occupied. A savvy operator will not over- or under-improve his/her mobile home park.
The industry average value of an occupied lot is the lot rent times 60 (if you pay utilities) or times 70 (if tenants pay utilities).
So if your lot rent is $225, and your tenants pay the utilities, then your land value will increase by $225x70=$15,750 when you fill the lot with a rent-paying tenant. My rule of thumb is that I will spend up to 1/3 more than the improved land value to bring in a new mobile home (actually a used home, but ‘new’ to the community).
So my budget in this scenario would be that I would bring-in a new home for $20,000 (all-in delivered, set, rehabbed, ready-to-rent cost). Bringing in a $30,000 home would definitely be over-improving a property with $225 lot rents, and bringing in a $10,000 home would definitely be under improving the property.
So knowing that I would get a better-quality resident, and even make some profit on a $20,000 home (see my posting in the ‘NNN POHs’ thread) in addition to making money on the lot rent, the question then becomes, “How much would I spend to rehab the junky home that is there? Or should I scrap it and bring in a new home?” My rule of thumb is that I will spend 1/3 of my ‘new’ home budget to rehab a really old 1970’s mobile home; roughly $7,000 in this case. (I’d spend more if it is a newer 16-wide.)
Your question about budget for rehabbing a really old home lands squarely in a grey area. Frank & Dave would probably not spend more than the $15,750 on a new home (e.g. not more than the amount the land increases). I’m willing to go to about $20,000; I nearly double my money with the increased land value, plus the mobile home still has considerable value.
The decision on ‘fix junker vs. buy new’ is yours, but think about how much capital you have, how much value it will add to your land value to get a home occupied and pumping rent into the land, and what the ‘soft’ benefits are worth to you to have a better-quality resident (less turnover, damage, and drama) in a $20,000 new home, vs. having a lower-quality resident in a 1970s 12-wide that you’ve spent $7,000 on (and the occupants of which may drive away better-quality residents, and turnover every 9 months leaving you with 1 month vacancy, and leave after doing more damage).
Hint: you’ll make money either way. (:P)
My bias is towards upgrading the parks I own, even if it means I make a bit less money percentage-wise. Frank & Dave invest somewhat less in homes and make a higher return and are about 80x larger operators than I am. ::o
Your mileage may vary, but that is my advice,