00:00:00:01 - 00:00:08:14
Unknown
Flipping profits just hit their lowest point since 2008, and the average flip is taking 163 days to close.
00:00:08:16 - 00:00:18:02
Unknown
everybody knows that contractors are the variable that becomes unreliable for us. And the rehab profits and rehab surprises and change orders never
00:00:18:04 - 00:00:24:05
Unknown
And meanwhile, there's one strategy that is quietly moving product in days.
00:00:24:05 - 00:00:42:21
Unknown
And I've proven this over and over. It's not months and it has margins at most. Flippers would not believe. Most investors will never try it because of what it sounds like and what the asset is. And that's exactly why it works. Today I'm going to introduce to you the scrape and replace method that we've been doing in our business.
00:00:42:22 - 00:01:03:08
Unknown
It's not the full playbook. I'm covering that in a live workshop this week, but enough to understand why this is the most interesting and profitable investing opportunity I've seen in the last couple of years. So let's get into
00:01:03:10 - 00:01:25:01
Unknown
I want to start with where we actually are, because I think a lot of people in this space are either in denial or they're not paying close enough attention to their NLS. Flipping ROI is down 25% according to atom data. Not atom like me atom, but atom atom. And that's the lowest it's been since the crash in 2008.
00:01:25:02 - 00:01:51:22
Unknown
The average flip is sitting for about 163 days from purchase to close, and the contractors have never been more unreliable. And I think we're all just tired of the surprises, and none of it's really gotten any easier. Flipping has always been a great strategy. It remains a great strategy, but it's getting more challenging as the market contracts and you're working harder, honestly, for thinner margins, and you don't really have to.
00:01:51:23 - 00:02:18:17
Unknown
And I'm not telling you that to be pessimistic because I'm personally still flipping houses and it still works. But I'm telling you that there are deals I'll take $20,000 on instead of 30 or 40. And it's the hardest kind of version right now in the real estate game. So if I'm thinking of the different exit strategies, like wholesaling is hard because marketing is costing more, flipping can be a little harder because of all the things I mentioned.
00:02:18:19 - 00:02:40:07
Unknown
And if you're going to play this game, you should know what else is happening at the same time, what other opportunities are there? Because if you have any of these skills already, it only makes sense. And manufactured homes are actually up 5% in terms of production at the factories. Well, everything else is contracting. That means and that tells me there is demand.
00:02:40:12 - 00:03:04:05
Unknown
The affordable housing shortage in this country is incredibly real. The median home price and Florida is about $415,000. The buyers who can't touch that, and there are a lot of them want land. They want space. They don't want to be stuck in these cities where it's like the concrete jungle, and they really can't find a quality home under $300,000.
00:03:04:05 - 00:03:24:14
Unknown
Almost nobody's building at that price point because the metrics don't make sense. And this gap is the opportunity. And this one strategy sits right in the middle of it. And it's a little different than what most people are doing. And here's the other stat. I'll tell you that was eye opening to me to yesterday when I saw it.
00:03:24:16 - 00:03:51:14
Unknown
Is that to buy a medium priced house in Florida, your income needs to be at least $96,000. I don't know about you, but I don't think everybody is making six figures in today's economy. That's quite a bit of money for most people. So a normal family, you know, 27, 30, 33 years old, maybe a couple small kids, that's that's a stretch for a lot of people.
00:03:51:14 - 00:04:09:00
Unknown
So okay, let's talk about what the scraping replaces, because that to me is the big opportunity. Here's the concept. You're going to find a piece of land with an existing old mobile home on it, and you're going to buy that thing. It doesn't matter if it's older, if it's newer, if it's newer, you might be able to flip it.
00:04:09:00 - 00:04:27:13
Unknown
But if it's older where most people won't touch it, no big deal. We take it, we scrape it off. There we have it tore down, and then we put a brand new manufactured home on it, same land. It's already got the infrastructure and you sell it like a normal real property and that's it. At a high level, really.
00:04:27:14 - 00:04:50:22
Unknown
You find the land, you find the deal, you close it, you scrape the home and you install a new one, sell it, make the money. No drama, no contractor. Nonsense. Quick note on the language, though, because this matters more than you think. When I'm buying, it's a mobile home or a trailer. When I'm selling it, it's a manufactured home because it sounds better and I want to get more money for it.
00:04:50:22 - 00:05:14:05
Unknown
And that framing, honestly, to me, is shaping what the perceived value is of that property. Now, here's what makes this different, though from a standard flip on a traditional rehab, you're going to open up those walls. Sometimes you're going to find all these things that eat away at your profit. I had a deal in Fairhope, Alabama. I was doing a lot of marketing in Pensacola.
00:05:14:06 - 00:05:37:02
Unknown
I get a stray lead from just across the border, and I'm thinking, this is a quick flip, $40,000, you know, painting, painting, lipstick job. Get that thing sold. I thought it would be worth about 415. My agent thought for 60. Nothing was really selling under 500 at the time, but the market was kind of declining, so we hit some snags.
00:05:37:02 - 00:06:01:02
Unknown
Our rehab budget went from 40 to 85. The rehab wasn't that good. We ended up listing it at 460, which was overpriced, and then we spiraled down over 12 months to $360,000. We nicked the septic. We had to do more work. It was just a complete debacle, like the standard flip surprise that come out. And honestly, that's the risk you have to build into the flip model.
00:06:01:02 - 00:06:21:22
Unknown
A lot of structural stuff, a lot of surprises, and you can't really fully engineer it out. It's not a line item thing. We do our best to build a good scope of work, but we also have to every single time put in all this contingency stuff. And honestly, this the scrape and replace is totally different than that. The new manufacturer homes cost is a number.
00:06:21:22 - 00:06:46:08
Unknown
It's a literal number. You're getting a brand new home. This is exactly what it costs. You write the check, it shows up. It's ready to go to install for it. The land development for it is all a line item known cost number. So you have way less unknowns, known unknowns and unknown unknowns. In this. It eliminates a ton of risk and it's way more simple to do.
00:06:46:10 - 00:07:12:15
Unknown
Now I want you guys to write this down. July 15th, 1976. That is the date HUD established the national standards for manufactured homes. And it's the most important number in this particular strategy. And it's not just because of what happens with those older mobile homes, but it's where the opportunity is. Any manufactured home built before that specific date cannot be financed to a back end seller.
00:07:12:15 - 00:07:31:08
Unknown
So you can't listen on the market. And then they use a VA, FHA conditional on whatever it may be. And when you go to sell it, the buyer's financing door is closed, which means you have less buyers. So here's what every other investor does when they see these pre 1976 mobile homes on a piece of land, they just skip over it.
00:07:31:08 - 00:07:50:06
Unknown
And the mobile home flippers don't really want to touch them because they can't really sell them to a finance buyer on the back end. And the wholesalers pass because none of the mobile home flippers are buying them. So the traditional flippers aren't really even looking at the asset class and the builders. It doesn't make any sense from an economics perspective for them to build these.
00:07:50:06 - 00:08:17:19
Unknown
So the result is an entire property class with almost no competition. Now, I'm sure you've heard land home package, and that's where they're doing the raw land and putting a mobile home on it. But that's that's different than what we're talking about for scrape and replace. So if I'm thinking about scrape and replace and infrastructure existing like that's where I actually want to be, and I'm not trying to sell that old home, I'm just going to tear it down and put a brand new one on the land.
00:08:17:19 - 00:08:37:08
Unknown
And when I do that and I legally affix it to the property, and I do what's called retiring the title, it becomes real property, and the real property qualifies for the appropriate loans, which opens up my buyer pool. And the buyers can get these 30 year mortgages and it has way more demand. I can get higher prices for it and still be under that medium price point.
00:08:37:08 - 00:09:03:08
Unknown
The competition in this is like seriously almost zero because most investors are passing on these pre 1976 homes and they just don't even touch them. They stop at them. I see it and I go because it works for us and we're making great spreads on these. So what are the numbers actually look like. I'm going to give you a sense of the economics here without walking you through the full kind of underwriting model, because we don't have time for that.
00:09:03:09 - 00:09:28:06
Unknown
Obviously, that's what our workshop is for. So you should definitely come to that. On a typical deal. I'm all in somewhere between, say, 150 and 200 or 210, and that covers the land purchase, the new manufacturer, home delivery, site prep, installation and everything it takes to get this thing ready to close. I'm exiting in my market between 250 and 330 grand.
00:09:28:06 - 00:09:50:18
Unknown
Typically. Sometimes I see them go up to 350, sometimes we've got some cheaper ones, but that's about the range for the product. So we're looking honestly between like 3040 K on the low end of profit all the way up to $100,000, depending on how cheap we get these old mobile homes for. It's incredible. And the demand is super real on the back end.
00:09:50:19 - 00:10:13:10
Unknown
Affordable housing is like massively in need. I know if you guys are watching any kind of news at all, they've been talking about this for like three years now. So I know, like naturally you're thinking, if this is so good, why isn't anybody doing that? I got really for reasons for this. Okay. First off, most investors have only been trained to chase the stick or concrete built houses.
00:10:13:11 - 00:10:35:22
Unknown
And they have like a negative connotation, a negative gut reaction to the word mobile home because they would never live in it. But that doesn't mean there's not a massive section of the population who not only will live in it, but needs to live in it, right? So the investors who do flip the mobile homes don't like to touch them either, because the pre 1976 homes don't have financing on the back end.
00:10:35:23 - 00:10:55:01
Unknown
So they're clearly are not even thinking about this whole scrape and replace method. They don't understand the whole kind of tear down put new on because they don't have the blueprint. They don't understand what the process is. And wholesalers are definitely not marketing to this, not wasting marketing budget on it because there's no buyers on the back end.
00:10:55:02 - 00:11:14:12
Unknown
And then when we look at the builders, as I mentioned before, the builders, especially if you look at our Florida market, they want to tear down a 1960s, 1200 square foot house and build a 4000 square foot house. Because of their margins, there's not enough margin in the manufactured home space for a big builder to come in. So almost no capital is being put behind this.
00:11:14:13 - 00:11:33:02
Unknown
It's a it's a like a competition free marketplace. In reality, it's a moat around your business. So if you actually understand this strategy like this is a niche that is crushing at the moment, of course it won't crush forever. So that's why you got to get into it now. That's why you get to learn it now and start executing.
00:11:33:02 - 00:11:56:22
Unknown
So you're ahead of the curve. So here's what I want to leave you. The scrape and replace methods. Definitely not for everyone. And it's a learning curve. It's a nuanced thing. It's got some zoning, some financing, some site prep that's a little different. And if you don't know kind of that path and the right people to use and you don't select the right markets, you're going to probably get yourself in trouble.
00:11:56:22 - 00:12:15:08
Unknown
So you're going to want that blueprint, for sure. But if you're a flipper who's like, thinking, I'm tired of the rehab surprises, eating the margin, the investor who's sitting on the sidelines looking for a strategy that actually fits their market or like how don't want to go spend 800 grand on a house to do my first flip? This is great for you.
00:12:15:08 - 00:12:33:13
Unknown
So this week I'm actually running a live workshop where I go through the playbook, the by box, the deal math, the financing options, the deal killers to watch for and a real deal or to with the numbers so you can see what the actual looks like can get a sense for how you can do it right. And all this stuff is going to be actionable.
00:12:33:13 - 00:12:51:07
Unknown
Of course, I'll talk about you and your business and how to think about the problem, but I'm going to give you some very tactical stuff. So if you want to join us, the link to register, it's going to be in the description, wherever you're listening to this on Spotify or Apple or YouTube, wherever it may be. And the workshop is going to be this week.
00:12:51:12 - 00:13:13:02
Unknown
Spots are limited, so make sure you jump in, grab it. If you can't make the time, don't worry about it. Still sign up so you get the information because you'll still get it. Okay, I'll see you guys there. And if you found this episode useful, drop a comment. Tell me what market you're in. Tell me you're interested in manufactured homes and you like this opportunity, or you've been interested or thinking about it.
00:13:13:03 - 00:13:24:21
Unknown
Would love to know. And then do me one last favor. Leave me a five star review on Apple or Spotify, wherever you're listening to this at, so it helps more investors see the show. I appreciate you guys, and I'll see you on the next one.
