Modular home

[Fortuneinvesting]

Hey guys,

I`m considering this place here:
http://www.realtor.ca/PropertyDetails.aspx...pertyID=8043611

How much less than a house can I expect for rental and how to banks view modular homes?
Anything else to consider?

Cheers

 

[MikeMcCrae]

Modular homes are harder to finance. I have usually found that once you factor in the lot rent you can usually by a real house for about the same monthly payment. Owning the land is where the value is.

 

[Fortuneinvesting]

QUOTE (MikeMcCrae @ Jun 22 2009, 10:31 AM) Modular homes are harder to finance. I have usually found that once you factor in the lot rent you can usually by a real house for about the same monthly payment. Owning the land is where the value is.

Thank you Mike! I was unaware of the lot rent. That makes more sense now.

EDIT: Just called and asked what the lot rent was, the Realtor said that the land was owned and a part of the listing.
If I can get financing I should be able to cash flow on this property. Is it worthwhile looking further?

 

[PeterKinchMortgageTeam]

QUOTE (Fortuneinvesting @ Jun 22 2009, 12:18 PM) Thank you Mike! I was unaware of the lot rent. That makes more sense now.

EDIT: Just called and asked what the lot rent was, the Realtor said that the land was owned and a part of the listing.
If I can get financing I should be able to cash flow on this property. Is it worthwhile looking further?

If the lot is owned, not part of a park, and the home is affixed to a permanent foundation - you may be able to get financing through a conventional lender though they may require it to be insured. Getting approval from CMHC may be another story, as it would not only have to be a fully qualified file, but CMHC is getting tougher with respect to properties in general.......

Talk to your banker or broker first and let them review the listing - you may be surprised.

Thanks

 

[Fortuneinvesting]

Thanks Peter. I`ve sent it off to my broker now. Appreciate the help you guys.

 

[invst4profit]

How much rent are you likely able to get on a home that size in your area?
What are the taxes like?

 

[Fortuneinvesting]

QUOTE (invst4profit @ Jun 22 2009, 02:00 PM) How much rent are you likely able to get on a home that size in your area?
What are the taxes like?

It`s a fairly hot market right now, population just grew 11.6% (Calgary Herald, City & Region, B1, June 22, 2009).
I`ve been watching the housing rentals and the median is around 1600. Most of the ones in the 1400-1500 range go quickly.

I figure I could get 1100 a month plus utilities. Taxes are $79/month.

It`s been on the market at least 2 months so I probably have some room to negotiate too.
Here`s my worksheet

http://cid-35942ef82cbd9aeb.skydrive.live.....aspx/Documents

 

[mortgageman]

CMHC may reduce the maximum allowable amortization, depending on the age of the home. I just ran into a ridiculous situation last week on a mobile home. CMHC wanted a maximum amortization of 15 years. Bridgewater Bank, the bank the clients were trying to get financing through has a minimum amortization policy of 16 years. Alas, the deal died a quick death.

 

[invst4profit]

With a potential rent of only $1100/month you will have to get it for a lot less if you hope for positive cash flow. Your expense estimates are far too low. They will more than likely be in the range of $400-$500/ month long term plus dept repayment.
Depending on the banks policies financing may be difficult. In Ontario, on a mobile home not a manufactured home, without a basement/foundation a mortgage is out of the question. The best one can hope for is a 10-15 year loan at about 8-10% interest.

Realistically this may be a poor choice as a rental due to size, rent, and price.

 

[Fortuneinvesting]

QUOTE (invst4profit @ Jun 23 2009, 07:03 AM) With a potential rent of only $1100/month you will have to get it for a lot less if you hope for positive cash flow. Your expense estimates are far too low. They will more than likely be in the range of $400-$500/ month long term plus dept repayment.
Depending on the banks policies financing may be difficult. In Ontario, on a mobile home not a manufactured home, without a basement/foundation a mortgage is out of the question. The best one can hope for is a 10-15 year loan at about 8-10% interest.

Realistically this may be a poor choice as a rental due to size, rent, and price.

Thanks for the analysis. I don`t see an expense being as high as $500 in the long run. That equates to $30,000 over a 5 year term. Surely anyone expecting $30K in expenses should walk away?

I am admittedly young and inexperienced but want to stress I`m here to learn not argue and expose my lack of experience. I am just saying $30,000 seems a bit high over 5 years?

 

[invst4profit]

Expenses generally consume 40-50% of your monthly rental income.
Expenses are by far the least understood and a primary contributing factor in the demise of novice investors.
Expenses include items such as legal, accounting, advertising, taxes, evictions, vacancies, utilities while vacant, rehab between tenants, major and minor repairs, capitol expenses etc. etc. etc.

On average, according to long term studies in the U.S., it is generally safe to assume expenses will average around 50% depending on the type of property, quality of tenants and owner maintenance.

This is a ball park figure that may vary from as low as 30% to as high as 60-70%. Keep in mind this has nothing to do with what expenses were last month or last year it is a projected amount based on holding a property long term.
http://www.biggerpockets.com/forums/52-ren...dlording-issues
http://www.biggerpockets.com/forums/48/top...date-the-5-rule


This discussion on a popular American forum may assist in understanding the reasoning behind the
"50% rule".

 

[Fortuneinvesting]

QUOTE (invst4profit @ Jun 24 2009, 07:51 AM) Expenses generally consume 40-50% of your monthly rental income.
Expenses are by far the least understood and a primary contributing factor in the demise of novice investors.
Expenses include items such as legal, accounting, advertising, taxes, evictions, vacancies, utilities while vacant, rehab between tenants, major and minor repairs, capitol expenses etc. etc. etc.

On average, according to long term studies in the U.S., it is generally safe to assume expenses will average around 50% depending on the type of property, quality of tenants and owner maintenance.

This is a ball park figure that may vary from as low as 30% to as high as 60-70%. Keep in mind this has nothing to do with what expenses were last month or last year it is a projected amount based on holding a property long term.
http://www.biggerpockets.com/forums/52-ren...dlording-issues
http://www.biggerpockets.com/forums/48/top...date-the-5-rule


This discussion on a popular American forum may assist in understanding the reasoning behind the
"50% rule".

Thanks Greg,

I alway appreciate your posts!

 

[DWenger]

Hey,

I am a novice myself, but also have some interest in mobiles (as of today

. To add to the cost, I was looking at land lease costs for a community in the Edmonton area. In this community I noticed the land lease values were pretty flat from 2002 up until 2006 and at around $320 to 340/month. Between 2006 and 2009 though there was a bit of a jump with the average being around $395 and for newer properties up to $450. On average thats about a 20% increase in costs for three years. Although it should be noted that the increases occurred during the real estate boom and I assumed labour costs increased a bit for the company running the manufactured community.

Just an idea, but looking at the history of how much it is to lease land in your community, and maybe asking people that have lived there for a while how much it has increased over time. It may be a way of planning for what your costs could be in the future. Again, Im a novice as well so if anyone can correct me or build upon that it would be appreciated. It seems that the land lease is one of the more substantial costs in terms of your total costs.