We get the same question time and time again: Can we wholesale mobile homes?
Of course we can. Wholesaling allows you to raise your capital up fast and get revenue, so that it makes it a lot easier for you to do those buy and hold deals down the line. And you’re not becoming cash strapped.
In this blog you’re going to learn what wholesaling is, and you’re going to really see the power of wholesaling mobile homes in general because they move so fast. We’ve had some great success with it.
The content for this blog is taken from one of our live Facebook trainings where we go into 3 different case studies of some of the deals we’ve done in the past.
- What is wholesaling and why is everyone so excited about it?
- Do we disclose our fee to the seller and to the buyer for that matter?
- The Pros. What are the benefits of wholesaling in this way?
- The Cons. What are the drawbacks of wholesaling in this way?
- Case Study 1: Land Buyer
- Case Study 2: Tenant Buyer
- Case Study 3: Investor Buyer
- How we decide when to wholesale and when to look for cashflow deals?
What is wholesaling? How does it work?
Wholesaling is where you have a seller on the front end. The seller is ideally someone who is highly motivated. They have to sell the home for some type of reason, whether it’s sickness, whether it’s moving away to a new job, moving in with a family member, there’s usually some sort of motivation there.
And then there’s us as the investor, or the wholesaler. We’re going in there and we’re solving their problem. We’re getting the property under contract.
And then as always, we’re going to find a buyer for us to get paid, right? So what we’re doing is assigning our interests in the contract to our end buyer.
Let’s say for example that there is a motivated seller. And they have a home that’s actually worth $20,000. But they’re motivated for some reason, maybe they have to move or maybe there’s a death in the family. There are all types of reasons they would be motivated.
They need to sell their home fast. They need to get rid of this problem. And so, they agree to sell it to you for $10,000.
You’ll be surprised. Sometimes you can find a home that’s worth $20,000 and you’ll end up getting it for $6000 or $7000. Motivation is key. Again, we’re going after sellers that have a ton of motivation.
So, they agree to sell you the property for $10,000. What do you do?
You get it under contract and then you go and you find a buyer that agrees to actually pay $15,000 for the home. Because they’ll be thinking, ‘Hey, this home is actually worth $20,000. I have $15,000 cash. This is a great deal. I’m willing to jump on this opportunity.’
So then what do you do? You put the deal together, and for being the middleman you charge a $5,000 fee where you’re taking the $15,000 that the buyer’s paying, you pay $10,000 to the seller and you keep $5,000 for yourself as a fee.
In a wholesale deal you’re not making any repairs or spending any additional money on the home. You’re simply connecting the buyers and sellers together.
These types of deals take under 30 days usually, with the final closing process taking about 30 minutes.
Do we disclose our fee to the seller and to the buyer?
Sometimes we do. There are situations where we’ll disclose. And those are more like brokering transactions where we have to disclose our fee.
Other than that we do disclose the fees sometimes to let them know, ‘Hey, we’re going to be listing it for this price.’ That way everyone’s in the loop. And they understand that you’re going to get paid for your services, for your time and effort of finding a buyer.
Depends on the fee though. If the fee is double or even as much as they’re getting then no. Because when it goes down you’re going to have some angry sellers.
Typically when you’re just starting out, you can easily expect to see somewhere between $2000 all the way up to maybe even $7000 on some of your first few wholesale deals.
What are the benefits of wholesaling in this way?
Pro #1 is these deals are very fast. We can get these deals done in 30 days or less.
Once you start doing these deals, you’ll start to see that you’re going to have a lot of buyers on your team and they’re going to be able to get these deals done extremely fast. We’re talking in minutes.
Pro #2 is that there is little, or no money required. So a lot of you guys are starting off and saying that you don’t have a bunch of money. That’s totally fine.
For those of you guys that maybe don’t have a ton of money to put into a property, pay for repairs, pay for Lot Rent, this is a great opportunity. You’re just playing the middleman.
Pro #3 is minimal risk. Because you’re just providing a service and connecting the people and you take the money in between. You’re not spending money on the property. You’re just connecting the buyers.
You’re getting the property under contract and you’re selling it before you ever have to buy it. You’re not on the hook for any type of repairs or any losses. The owner of the home is the one paying the Lot Rent in the majority of these cases.
Pro #4 is no tenant issues. We know a lot of you guys don’t want to be a landlord. None of our strategies involve being a landlord anyway.
You don’t have to deal with this because it’s just a one-time transaction. You’re connecting them. And then you’re out of the way. And out of the deal.
You’re not fixing the home. If the home needs repairs, you’re still selling it at a reasonable price that is still below market value so that someone would want to come in and fix up those repairs.
And again, no Lot Rent when we’re wholesaling homes. You’re not worried about putting a lease agreement under your name or a storage agreement. The owner of that home is on the hook until the home is sold out.
Pro #5 is no credit needed. You’re not signing any lease agreement or storage agreements. You’re not leveraging debt or anything to buy the home. It’s all based on contracts.
It’s all based on being the middleman and using that cash buyer’s money to purchase the property.
Pro #6 is the profits. You can expect profits ranging anywhere from $2000 all the way up to $20,000 from what we have seen.
That’s how we came to know about wholesaling. Because our mentor was wholesaling homes and then selling them to owners out in California and making $20,000 to $21,000 on the deals. Because they don’t know how to find homes out there for that cheap of a price. And that’s where we come into play.
$20,000 is not the cap either. We’ve seen people do more.
What are the drawbacks of wholesaling in this way?
Con #1 is showing occupied homes. Whenever someone is still living in the home you’re going to have to do showings. And that means you’re going to have to leverage more time.
If you guys are familiar with being a real estate agent, you’ll know that when you’re showing homes your time is dictated by when individuals can actually go and see the home.
Sometimes you might drive across town to go show a home and the buyer doesn’t show up. Or you’re working around the seller, you’re trying to keep them separate so they don’t know what your commissions is. Scheduling can be frustrating.
We have strategies for this. We also advise you on how to build trust with the seller in advance so that they don’t feel like you’re somebody creepy in their house, showing other people their home.
Con #2 is that the profits are typically less. So, if you were to make some of those repairs and bring it up to the full market value, you’re going to get more money for the home. With wholesaling you’re actually taking a discount on your commission, but you’re doing less work.
If you’re about trying to get those big wins and get bigger checks, just know that with wholesaling a lot of times you’re going to be taking a smaller cut of the deal just because you’re not doing the work and you’re not taking on so much risk.
Con #3 is getting buyers approved. Whenever you’re wholesaling and a buyer wants to actually live in the community, that’s perfectly fine. It’s just that it adds more time that you need to leverage for getting them approved, and going through that whole process with the park.
Just understand that some park managers take a while to approve buyers. We’ve had to wait almost 12 days for one of our buyers to get approved on a wholesale deal.
Con #4 is that it’s not the best strategy for long-term wealth. If you’re looking to get paid long-term for these properties that won’t be happening. You’re trying to make quick, fast cash. You’re going to get in and out.
So, you’re going to always be chasing that next deal. If this is all you’re focused on, you’re going to be looking for the next big win. And it just doesn’t last that long.
Con #5 is that some states consider this brokering. You’re going to have to check your state laws when it comes to mobile home investing. If they consider it brokering that means you just have to get your broker’s license. It’s typically easier than getting a real estate agent license.
Just make sure that you understand what the difference between brokering and wholesaling is. That way you’re not getting yourself stuck in any type of legal quagmire.
With brokering it’s not a bad thing. It’s just that you’re going to have more paperwork and more disclosures. You’re acting more as a realtor than an investor. So just keep that in mind.
Case Study 1: Land Buyer
This was a wholesale deal where we had a buyer who had land for this home.
So this was actually a 1986 model, 2 bedroom and 2 bathroom. It was in great condition. This home didn’t need any type of major repairs just light cosmetic work.
The owner of this home actually needed it moved off of his land. He was expanding his family and wanted to move a double wide onto the property in less than 30 days.
We agreed with the seller that we would actually purchase this home for $7000. Then we turned around and we found a buyer that needed a home like this, and we agreed to sell it to him for $12,500.
The buyer felt really good about the opportunity because we priced it well. We found similar homes at the time were going for somewhere around $16,000, all the way up to about $18,000. As soon as we put it on the market he came with cash in hand. We had to tell him, ‘Hold on, buddy. Let’s get a cashier’s cheque.’
He was looking to get multiple homes and rent them out to make long-term cash flow. So he was also happy about the fact that he didn’t have to do much work on it. It was easy to move and at a great price.
So we were able to create a $5,500 wholesale fee by connecting this motivated seller with this buyer that really wanted the home, that was getting a discount on the home. And this whole deal took us 3 days to get cash in hand from time we had an agreement with both the seller and the buyer.
With this particular deal we actually got the buyer hooked up with one of our movers, so he didn’t have to worry about anything. That’s another good thing to do. Network with the movers in your area. It adds more value to the deal.
Case Study 2: Tenant Buyer
This was a tenant buyer who actually wanted to live in the property and so the home stayed in the park.
The home was a 1986 3 bedroom, 2 bathroom. This one did need some work. It wasn’t really major, but there were a lot of cosmetic repairs. It wasn’t in the best condition.
The seller of the home was actually looking to move to Wisconsin with her daughter. Her health was declining and although she loved her home, she knew that she needed some help.
She was getting really stressed out though because her cash was dwindling, and she only had about 2 months left worth of Lot Rent. So she was highly motivated and needed to sell it fast.
Our buyer was actually in the market to buy a single-family home. But he got declined once and his rental lease was about to expire.
He was actually a contractor, so he was like, ‘Hey, this is a great starter home for me and my family. I don’t have much time either. I have to be out of my rental within 30 days and I can definitely fix this up. I can make this what I want to, it has the space I need and it’s in the location that I want too.’
Make a note here guys that we’re now bringing value to two people, the buyer and the seller, who are both in a stressful situation.
So we agreed with the seller to purchase her home for $12,500 and then the buyer agreed to purchase it for $16,500. We were able to create a $4,000 wholesale fee by putting this deal together. It took about 9 days to get everything wrapped up.
And again, the buyer was really happy because homes in a similar condition were going for $25,000 to $26,000. He was buying the home at a discount wholesale price.
Everybody walked away from the table happy. We actually disclosed how much we were going to make on this deal from the seller side and the buyer side. And they were perfectly happy with it because they both had a need. We even had them meet each other. They knew exactly what was going on.
Case Study 3: Investor Buyer
You’re going to run into times where investors need homes too. And you being an investor you’re able to not have that scarcity mindset and say ‘Hey let’s partner up together and just make some money.’
So this deal was a really cool one. It was 1996 model 3 bedroom, 2 bathroom, in pretty good condition. It just needed some minor cosmetic work.
The seller was actually moving to Las Vegas. He just got tired of Phoenix and wanted something new so it was really cool to be able to help him out.
The buyer came to us through another investor who had a good buyers list. They had access to the type of buyer who was looking for this type of home. So, they were willing to connect the dots with us on this seeing that we bring each other value.
We could have done it ourselves, but this park is in North Phoenix and they’re very strict about the credit score. They’re looking for people who have around a 675 credit score. And we knew our buyers list wasn’t that strong. So we could possibly get stuck with the home for at least a few months trying to sell it, and paying Lot Rent in the meantime.
So that’s why we partnered up with the investor because he caters to exactly those types of buyers.
We agreed to purchase the home from the seller for $9000. And he was happy because that could get him to Las Vegas, that could get him to where he needed to be. And it was a quick sale for him.
So the investor, who was our buyer in this situation, actually took out cash to make this deal happen. He paid us $17,000 for the home. So we were able to get an $8,000 wholesale fee and he was still able to make some money on top of that.
He made about $9000 or $10,000 we believe. We saw other single wides, same year, same condition going for easily $30,000 grand in that park. And he knew it didn’t need any repairs. He knew his buyers were ready to go. He even had some buyers who were already living in that community and were just looking to upgrade to a newer home.
You might be thinking ‘Why didn’t you guys just sell it for $27,000?’ or something like that. The reason is this took us 1 day. It was just literally 1 day we met them, got everything taken care of and made $8000.
How we decide when to wholesale and when
to look for cashflow deals
When you’re super clear on your goals, you won’t need to chase after the next deal or the next money grab.
For us we keep it simple. We were looking to have enough cashflow that we can leave our jobs. When cashflow deals come in we’ll continue to build cashflow deals. But in the meantime, we’ll use these other deals that we’re getting to still fund our life, as well as to do the things that we want to do, which is travel, spend time with each other, and spend time with our family.
And that’s why we tell everyone just be really clear on your goals because you don’t want to get into the mobile home game and get caught up in chasing money. Because after a while you’ll figure out that you just created another job.
We’re just trying to get you guys to understand that wholesaling is very powerful. And when you’re in an uncertain market like in Phoenix, it’s a market with buyers that have land that nobody’s even touching. We’ll put an ad for a home like any of the ones you’ve seen on the market right now and sell it within minutes because no one is serving this market.
It’s also a lot to do with your buyers list. If you have a very strong buyers list and a lot of them are willing to make repairs to the home, as long as they’re getting a good discount on it, that is the perfect recipe for a wholesale deal. Because that allows you to just connect them with other people that are looking to sell quickly.
And we’re not telling you guys you should be just wholesaling. We teach 5 different strategies in our course. This is just one of them. But we always say this is a great way for you guys to raise some capital on your own just by leveraging your time.
The worst thing to do would be to partner with someone just to use their money. And then you find yourself working for them. And they’re getting paid off of your labor.
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