How To Spot A Bad Deal Fast

A broker asks why we’re not interested in a mobile home park deal and then gets mad at the answer. That tension turns into a practical mini-masterclass on real estate underwriting, because the fastest way to avoid a bad investment isn’t more confidence, it’s better math.

We break down a 12-unit mobile home park listed around $975,000 that only brings in about $5,000 a month and has no clear value-add path: no extra land, no room to add units, and tenant-owned homes that limit upside. We translate that rent roll into annual income, apply a conservative expense assumption, and land on an estimated NOI that simply cannot justify the asking price. If you’ve ever wondered how investors size up a listing in minutes, you’ll hear the exact steps.

Then we pressure-test the deal using an amortization schedule, because “creative financing” doesn’t change the fact that debt service plus expenses can crush cash flow. We also share simple filters for mobile home park investing like cap rate targets, the 2% rule for smaller parks, and when a 1.5% rule can make sense with seller financing. The bigger takeaway is mindset: don’t argue, don’t force deals, and don’t pay sticker price when the numbers don’t pencil.

If you want a cleaner way to evaluate real estate deals, subscribe, share this with a friend who’s shopping listings, and leave an honest review so more people can learn to underwrite before they buy.

Transcript

When A Broker Gets Defensive

SPEAKER_00 0:00

So yesterday a broker asked me why I wasn't interested in this deal. All right. And I just said, honestly, it should be listed at a third of the price. And he kind of blew up on me. Or he did blow up on me, and he told me all these strategies like all these strategies for financing that didn't make any sense. But that's not here or there. I'm not going to sit here bashing brokers or anything like that. Because there's good people and there's knowledgeable people in every industry, and there's people that aren't knowledgeable. They're just full of crap. That's why it's important that you know what you're doing. You know how to underwrite. And they don't mean to, but like, you know, they don't know what they're doing. So obviously they're going to sell the deal like they don't know what they're doing. If you don't know what you're doing, well, roll the dice. You're probably getting a bad deal. Happens all the time. Anyways.

The 12-Unit Deal Breakdown

SPEAKER_00 0:48

Um, so I'm gonna give you the the details on this particular deal. That way you can understand how I knew it was a bad deal in like five seconds. And we'll go from there. Alright, so they were asking $975,000. It was a 12-unit uh mobile home park. No room for value ads, no room to excuse me, no room to add units, no extra land, nothing like that. Alright, is what it is. So they're bringing in $5,000 a month, and they have it listed at $975,000. Alright. So here's why I said it should be listed for a third. Alright, $5,000 a month, and then there's there's 12 months in a year, alright. So five times twelve, sixty. So, like if it's bringing in five thousand a month and there's twelve months in a year, it's bringing sixty thousand dollars in a year in income. Alright. So, expenses you want to just say that let's just estimate them at fifty percent. Although they could be thirty, they could be forty, you know, something like that, but just estimate them at fifty. That way you're not rose-colored glasses, all right. And I've gone over a lot of this underwriting in the past, but it doesn't hurt to revisit it. Alright, so now you have sixty thousand in income, divide that by two, let's just say you keep half of it, right? You're at thirty thousand dollars income a month. Alright, so I mean at a ten cap, divide that by ten percent, that's three hundred thousand. You know, divided by eight percent, you know, it it it goes up a little more, but like it's just not a deal, right? Like, it's crazy.

Cap Rate Math In Plain English

SPEAKER_00 2:32

But anyways, so you can look at it through that lens, or like I did it really simply because he said that it should trade at a like a six cap, right? Whatever. These anyway, people are crazy. So I was like, okay, well, let's just keep this simple. And I shouldn't even, I don't know why the hell I entertain people sometimes, but I'm just like, well, the good heartedness of me thinks. Well, maybe they'll understand that maybe they'll get better at their job, and then they'll send me good deals. Um, I haven't seen that yet. They usually just argue, which makes sense because people that want to get better listen and get better or have legitimate are like data to prove, you know, that why I'm wrong and I'll get better. Anyways, let's look at it like this. Uh I just Google amortization schedule and I put 900,000 in there, and I put like nine percent interest, and I send it to him, and it's like eight thousand something dollars. I'm like, this is why it's a bad deal. And he's like, Well, you can do all this stuff, and you'll still lose money, but you get closer, and I'm like, so there's no value add opportunity, they're all tenant-owned homes, but I'm up, I'm gonna spend this money to lose a lot of money and not ever gain any equity. He's like, Yeah, it's great. I'm like, wow. Anyways, so you can just look up an amortization schedule real quick. You can do either two of these things. I just told you. Look up an amortization schedule. Oh, 900,000, it's eight grand a month. This is bringing in five thousand a month, it's full. There's no way to add income, revenue, anything. So I'm gonna lose money, like three grand a month, and that's without expenses, so probably like five grand a month. I'm gonna be losing buying this at nine hundred thousand dollars. That doesn't make sense, right? So you just keep going down on the AMP schedule and see what you need to buy it for to make the amount of cash flow you want to make, all right. However, that takes longer than just saying it brings in five thousand dollars a month, that means it brings in sixty thousand dollars a year. That

The Amortization Reality Check

SPEAKER_00 4:32

means if I divide it by two, it's thirty thousand NOI pretty safe. All right, and at a 10 cap, I'm in 300,000. This deal sucks, and you keep moving it. You don't tell the broker that you don't do any of that like I did, because then you'll get an argument, but you just keep moving, all right. So you're gonna come across all these deals, all right. And if it if an old pencil and pencil, I'm gonna give you a couple more calculations. All right, these are just my own, right? Or not my own. I've obviously uh acquired them from other sources, not all of them, like one and a half percent rule. Nobody told me that, I just do it, right? So, like if it's under 40 units, real quick, you can run the two percent rule. All right, so they were bringing in five hundred thousand dollars. Uh, I mean five thousand dollars a month. What's two percent of that? Two hundred and fifty thousand dollars. That's all I would pay for that part because two hundred and fifty thousand dollars. Alright? Five thousand divided by two percent. All right, I think that's the right math. Anyway, I can't pull my calculator, but it's somewhere around there. So one and a half percent, all right. You could do five thousand dollars divided by one and a half percent. Yes, I divide that by gross, not net, if it's under 40 units. Quick math. Alright. Some might argue, some might think it's crazy at the end of the day. Everything I'll buy cash flows. All right, and I patiently call sellers wait, structure stuff until I get deals at cash flow. I don't force deals, I wait years, months, whatever to get the deals that I want. And if to be one-on-one level with me, cool. There's other deals, there's always other deals. That's what an abundant mindset is about to know. There are plenty of deals out there, you just need to find them. They they will meet your criteria, right? You just gotta stay like stringent. So when you talk to these brokers and they try to sell you the pie in the sky, be be weary. You talk to these wholesalers and they try to sell you the pie in the sky, be weary. And not just weary, know your stuff. Now you know how to underwrite. All right, if it's over 50 units, I buy it at a 10 cap. If it's under, I use a 2% rule. If they'll hold paper, I'll do one and a half percent on gross monthly. Pretty freaking simple.

Simple Rules To Filter Deals

SPEAKER_00 6:53

And the reason I have these rules is I can go through deals like this, right? I don't need to argue with anybody, anything like that. I can just run through deals. And here's the other thing that we have to cover the deals aren't gonna be deals listed on the sticker, okay? I know they want 975,000 for that part. I'm not even gonna make an offer because I'm gonna offend them when it's a third of the price. However, say they wanted 500,000 and I was at for some weird reason, let's just say they wanted 400,000 and I was at 300. I would not think twice about saying I'll do 300,000. Because who the hell pays sticker price for anything unless you're at the damn grocery store or you know, like a regular retailer shop, right? Like on the market, people expect to get offers. All right, so if they wanted 400, even 500, I'd probably make the offer. I mean, I I wouldn't make the offer on that one, it'd have to be steep because I would wholesale that one probably. Because I don't want a 12 in a park, there's not enough cash flow for anything there. Uh, for me at least. Like unless you get it stupid cheap. That's where people don't understand.

Why Sticker Price Is Fiction

SPEAKER_00 8:09

But, anyways, I hope this helps. Appreciate you hopping on as always, listening. Uh, feedback is welcome. Let me know if you agree, disagree with anything I've said. And uh, you can follow me on social media, message me on Facebook.

Coaching Offer And Closing Ask

SPEAKER_00 8:25

Someone messaged me from a podcast episode yesterday, asked me about my mobile home park program that's coming up. Uh, when I told them the price, which is 15 grand for 12 weeks, one-on-one. They were like, oh no, thank you. That's what it is. I'm I'm just like that with anything else. I'm not like trying to sell nobody anything, right? My I have a client right now that's getting his first park in 12 weeks, and it's a badass deal, right? I want people like that. I'm only gonna take like four people though. I think max. I almost did two, but uh four max. And we're starting like four weeks. Um, YouTube, we got that going, all the socials, and then just just uh subscribe. There's a button below if you're watching this on YouTube or on uh any of the Spotify or Spotify, Apple Podcasts, any of those channels, leave a review, an honest review. I'd love it. Anyways, till next time, my name's Travis Wells, this is the Property Profits Podcast. Appreciate the hell out of you listening to me, jibber jabber on, and I hope that you got something out of it.