Dan Paton: Hey, welcome back, everybody. Today, we’re going to talk about the three most costly mistakes to avoid in mobile home investing. So go ahead, Dan, and take it away with the first one.
Dan Leighton: All right guys, so the first one we’re going on about is avoid falling in love with the home versus the deal. You’ve heard Dan and I talk about this in previous sessions, and you hear it so much because it’s that important. We can’t stress that enough. Dan and I, being partners, have bounced ideas off each other constantly because sometimes even seasoned investors will fall in love with a home versus the deal. So I’m going to give you a case study. We bought a beautiful double-wide. I think it was in the 2000s. It was a porch model. How big was that home again?
Dan Paton: 32 x 66 – a big double-wide.
Dan Leighton: Yeah, this was a mack daddy. That’s the biggest, widest you can get. You can get them longer. But this thing was sweet. So we brought it up and paid for the home to come up. I think we paid twelve grand or something like that for the home. It might have been less than that. We paid seven grand to bring it up. And we put it in a park, in a resort community up in the thumb right by Lake Huron. We had to put a garage on it – a one-car garage. We had to renovate it. And I was so enamored with “Oh yeah, we can make 40 – 50 grand on this” because there were other homes that sold a few years earlier. Before you know it we had it up for sale. We had a lot of money invested. And it didn’t go the way I thought. We ended up barely making a buck if we did. It tied up our money for over a year. Even though we had some mobile homes that we were using as cottages up there, it was that anchor that was always next to us. We were always just hoping and praying, “When is this thing going to sell?” So what we’re saying to you guys is, stay in your lane. We got out of our lane. Use our experiences and our failures to guide you. Because that was where even seasoned investors got out of our lane. It cost us.
Dan Paton: In hindsight, I think bringing that home up there might have been okay had we worked something out with the park owner to maybe sell that home to him. Make a quick flip with a margin of ten grand or somewhere in that range and be done with it in 30 to 60 days.
Dan Leighton: Or, we could have just brought it up. And put it there and had it in two pieces and had it for sale.
Dan Paton: Right.
Dan Leighton: Some residential person, who’s out there who wanted to buy it, could have said, “Oh my gosh, it’s right here.” And boom they could have had it. But we just fell in love with that whole romance of building, this cool mobile home in a resort.
Dan Paton: Right. So the next most costly mistake to avoid is the lack of a thorough inspection, whether you’re doing the inspection yourself or you’re hiring someone to do the inspection. First of all, if you don’t do an inspection, you’re already playing with fire. And if you do your own inspection, you risk overlooking and ignoring some things. Sometimes you go into a home, and maybe the person is a hoarder, and you can’t see everything because there’s too much stuff in the way. Then when the home is empty, now you have a discovery process, and you go, “Oh my gosh, if I had moved some things around or waited a little bit longer, I would have found this and that.” So lack of a thorough inspection is definitely an issue. We bought a home recently in Indiana. We bought it based on the photos from the seller. The pictures were phenomenal. It looked fantastic. But it had all kinds of problems as it turned out. When our buyers started to go look at the home, they started discovering things that we would have discovered in an inspection. They discovered odors. They discovered potentially some mold issues. They discovered that getting the home off the property was going to be very difficult. So had we spent two or three hundred dollars on an inspection, we would have avoided all that stress, those headaches, and those problems. We may have passed on that home had we spent that $200 or $300.
Dan Leighton: We might have, you’re right. The next one is overpaying. Once again, you can’t say it enough: you make money when you buy, you get paid when you sell. That’s going to be a mantra that you want to just put on your board. Put a tattoo on your hand, whatever it’s going to be. As a mobile home investor, you guys get that ingrained in your mind because it happens to the best of us. So I’m going to give you an example. I bought a home in a park that I’ve got a great relationship with, in Lapeer. I think it was a 16 x 73 two, right in our sweet spot. For $4,500, that’s a pretty good deal. The only problem was that I fell in love with getting this home renovated. I put in the carpet. “Well, if I paint the place, it will look a little better.” “Well, a carpet would look great in here.” Before you know it, it escalated into a $10,000 investment, and we held onto that thing for 230 some days. Not only did it cause issues for our capital getting tied up, what do you think the park was going through? Because that’s a relationship that we created, and we had flipped homes in that park. I think the longest one we bought and sold was maybe 60 days. And a park can deal with that. But 230 some days. Man, that park manager, when I came and looked at her, she had a big circle on her board saying, “Oh my gosh, what’s going on with this place.” I eventually had to sell it back to the park, made a hundred and eleven dollars on it, I know a big deal. But that was one I should have paid a thousand bucks for or two thousand bucks and not done anything and flipped it right where it’s at for maybe seven. We would have got out of that looking like heroes.
Dan Paton: That’s one situation where if the situation had allowed us to wholesale a home and have it moved, we probably would have sold that home in a day.
Dan Leighton: That’s right, we would have.
Dan Paton: But we have a relationship with that community, and we limited our buying opportunities.
Dan Leighton: Well, exit strategy.
Dan Paton: Our exit strategy was tied up.
Dan Leighton: All right, so that was our three most costly mistakes to avoid in buying mobile homes. We hope they were helpful, and we’ll see you next time. Thanks so much for watching EZ Homes University.
Dan Paton: Make sure you like this video and subscribe to see our future episodes.