Deal Diary
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Mobile Home

Renovation of a Central Florida Mobile Home

Central Florida Mobile Home

 

Profile of the Project

Bottom line: We renovated a dilapidated mobile home and made $2,200 upon the sale and $5,100 in lot rent collection revenue the first year after renovations.

  • Location: Central Florida
  • Type of Real Estate: A ground lease mobile home community
  • Scope of project: Acquisition, renovation, and disposition
  • Renovation Cost: $7,766.75
  • Length of project: 2 weeks to renovate, 4 months to sell
  • Average Rent of Park: $375 per month

 

Before and After

We took the home back as a result of an eviction due to a non-payment of rent. Rather than turning around and reselling a dilapidated home, we chose to reinvest some money into it. Problem? They had a major bug problem (among other issues): german roaches, wasps, ants, and bedbugs.

If we had decided to handle this renovation project as a “handy-man” special—fixing the bare minimum just to resell it as quickly as possible—we would have attracted a different clientele. From my experience this would have created an even larger problem. Once rent increases, certain tenants will move out. If this happened to us, we would have had another vacancy to fill—on top of fixing up the home again! This is all wasting time that could have been spent on other investments, too.

We invested $7,766.75 into the home and sold it for $2,200 profit. Not only did we make money selling it, but we improved its value. In the end our investment accomplished at least three wins:

  • Made money on the sale of the home
  • Created a higher value home, so hopefully more consistent tenants will stay in the future
  • If we increase rent in the future, future tenants will be more likely to afford it

The result is that we not only got back our initial investment; we also made a profit on the sale! Moral of the story: Investing into this home, taking the risk, and spending the time on it was worth it—both in the short and long term.

 

Lessons Learned from the Project

This project reinforced what I preach all the time: If you have the capital, always reinvest back into the home instead of just flipping it. If you get a home back from a tenant, and you’re motivated only by lot rent, you’re not adding value to your tenants, just putting a bandaid on it.

To fix it the right way, spend the money to renovate the home. This doesn’t always guarantee a return on the investment; there’s always risk—but remember that it’s not wasting money if you’re correcting a potential issue for the future. It’s not capital going out the window. You’re adding value to surrounding homes, adding value to your tenant base, and you’re providing a better foundation for lot rate increases in the future. It’s a solid investment into the asset as a whole.

Then, consider if I hadn’t renovated! There would have been an even more intense bug problem, which is a major problem for the future. That’s why I included above a bug inspection report. If I had skipped the necessary renovation and paid a handyman to patch it up, ignoring the bugs for example, the next tenant would have lived in squalor. Even more, the property could potentially have been condemned by the county because of hazardous waste or mold!

Renovate and add value, and everyone will be better off—that’s what I learned!

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