Building While Land is Cheap(er) in Murrieta, Temecula - California

Building While Land is Cheap(er) in Murrieta, Temecula - California

     Some homebuyers have cash, but not enough to cover a fully-built tract home, and their credit or income may not allow them to qualify for a loan under current "full-doc" guidelines.  This idea comes from an old neighbor of mine, a retired Marine who got into "flipping" manufactured homes.  The details are anecdotal (that is, they're his stories, not verified other than it showing in the MLS that his wife is credited with 9 sold manufactured homes in the time frame we're talking about: about 2 years from 2004 to 2006).  I'm telling the story in hopes it inspires thinking outside the box for success.

     Anyway, this neighbor got to know value in his local area: value of a vacant land lot in Wildomar (next door to Murrieta because land lot prices had run up in Murrieta), value of a land lot in Murrieta that had an old (un-lendable) manufactured home on it, and value of a manufactured home brand new off the lot for cash on the spot (not financed).  Also, he had to learn the value he added by having the knowledge and tools to do this (find the lot, buy it, pull off the old home, hook up the new one, get the permits, etc.).

     He learned that a land lot in Wildomar with an old manufactured home on it has several things going for it:

  1. It already has the permits with the City.
  2. It already has the utilities hookups at the lot.
  3. It also has a value in Mexico, but that's another story that I never got the details of by the time he moved.

     He had to gather the cash, though he had his own later after he did quite a few of these.  He had some old friends who did not get involved in the real estate side; they just invested cash (aka, equity from their home in Orange County, or - rarer these days! - cash in the bank).

     He watched the local MLS (home listing service) religiously, daily, and when a property hit the market, he was there that same day with an offer, ready to close on it within a week with cash.  He had the equipment to pull the old manufactured home off the site and pop the new one on the site on a 433 permanent foundation. 

     He then went to the manufacturer of homes (some in Hemet, he said, and Corona) and asked what they had available for cash that same day, and he was buying new manufactured homes for $40,000 to $55,000 cash on the barrelhead.

     Sometimes, the investor had gotten such a sweet deal - investment versus rents received - that they didn't sell the home, just kept it rented and collected rents from this "cash machine."  Our neighbor kept several of these himself.

     His wife got her real estate license and learned what it took to help a home-buyer buy one of these.  For awhile, when loans were stated income, zero down, they had a tough time helping people use an FHA loan with 3% (now 3.5%) down payments.  Our PRW Lending office does these FHA loans on manufactured homes, btw, with a few of the lenders to whom we broker loans; I recently had one that had so many issues, but we worked it through, and the buyer is thrilled as the land that came along was some 2 1/2 acres. 

     Back to my neighbor's story:  Then, for about a year, FHA started to be preferred, and it was easier.  When prices fell in 2007, the strategy no longer made sense, so he moved on to something else.

     The lesson for someone with cash now, though not enough to buy a tract home in Murrieta or Temecula, is that land lot prices have come back down to where a lot plus a manufactured home could make sense, though as I've been watching the market, the Sold comparable listings are not there yet to support a buyer's appraiser coming in a lot above current costs.  I believe at some point, the market will be ready (comps will exist) as the cycles repeat themselves.  And, of course, it pays to run the numbers, determine actual costs involved and being ready to accept plan B (renting out the home and collecting the rents, rather than flipping it).  Again, the importance to know value.

     Feel free to email me if you're interested in real estate investing, or financing manufactured homes using FHA financing, or with other questions.

 

Lisa Delzompo (951-704-4559)

"May your home always be too small ... to hold all your friends!"

Is your home getting too small?  Need a FREE Home Valuation?  Preparing to Sell a Home?  Click here to submit a form online, or Call Frank at 951-326-7330 for a free consultation.

CA Dept of Real Estate, Real Estate Broker License #01379811;

NMLS Identifer #331744

REAL ESTATE:  www.SandToSeaProperties.com.  Covering northern San Diego, Oceanside, Temecula, Murrieta, Riverside County and desert areas of Yucca Valley, Joshua Tree and Twentynine Palms, CA.

LOANS:  PRW Lending, Inc. Call direct 951-704-4559, or email me at lisa(@)sand2sea.us  

 

 

 

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Information is deemed reliable but is not guaranteed. Information is general and may not address your particular situation.  Do not rely solely on this or any information you find on the internet.  You should consult relevant professionals directly about your real estate, financial, etc., situation. 

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Comment balloon 0 commentsLisa Delzompo 951-704-4559 • December 29 2010 11:34AM
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