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Question

Here is the next deal I am looking at.  My exit strategy for this property is to buy it, sell it, and carry the note.

Here's some info:

'85 2 bedroom 1 bath
12' x 60' 
black tile flooring 
newer appliances
in a Family Park (lot rent $350)

Owners bought a new home and want to get rid of it.  Currently listed at $4,500 it has been for sale 2 months, one of which it has been vacant.  So far it only needs some small cosmetic things (paint, a few switch covers, clean paint off a couple windows).  I was going to offer $1,000 and go up no more than $1,500 which is a little higher than I would like but I am still confident I can double my money.  I'm thinking terms of $500 down, $200/month.

Here are a few pics of the property

What do you think?

Rich Weese · Answer

Terry,
    My guess is the sellers will take a discount. That is a great strategy for owner carry back loans of all sizes. 
    I've even contacted a holder of a 60K note and offered them a partial pay off. They needed 20K, and I negotiated MUCH better terms and a discount on the remailing 40K! You don't do these  things without asking! Rich

Cole Haynes · Answer

Terry,

I think these mobile home note deals are so much more subjective than traditional investing. I think the numbers sound good if you can get it for $1k and will still work at $1,500.

You said you have worked these deals before so I think you and I would agree that these buyers are looking ONLY at monthly payment(99%).

I don't know your market or your experience with the area, so please dont take offense. But my basic qualifiers would be...

* Is $550/month (lot rent + home payment) a competitive price for my market for a 2/1 singlewide?

* Is $350/month lot rent competitive for the area and does it justify the cost of living in this park?

* What is the qualifying process of the park? Do they have an objective process? If so, what percentage of applicants get approved? You may need to adjust your holding costs accordingly or move on.

* Are the residents in the park long-term owners? 
This might be overlooked but it is important with these note deals in parks. The posts above touched on it, lot rents can eat your profit FAST. I have done deals before and lost site of the quality of the park and the stability of the residents. This will cost you in the long run, I have experienced it! lol. i have been so caught up on the "great" numbers of the deal I ignored the quality and stability of residents and my place was like a hotel.

This would be ok if we were able to charge a few thousand for a down payment upfront! But with these mobiles in parks we don't typically get more than $1k down (IMHO). So vacancies KILL you returns. Also, the park manager is your best friend on these deals. You mentioned your buyer would pay the lot rent directly to the park. Which is common, just make sure you have a good relationship with the manager so they let you know if the buyer is late on lot rent. You dont want to get a home back with 3+ months of unpaid lot rent. This should be spelled out in your contracts.

You said toward the end of your post that you "still think I could double my money". What are the terms? How many months are you financing your buyer? I would want to get my investment back in 6 months...at the LATEST 12 months. That looks like it would work here if details are in your favor. What does this home sell for HIGH retail? That is where I would be. You are offering an afforable way for someone to own a home who otherwise couldn't. You should get paid BIG money for this.

I am here in Florida with you..are you doing straight sales with a lein or a lease/option?

I hope you get this place and you make a nice return on it!! I am sure you will.

Cole

PS - I would like to suggest an author that I dont see mentioned on the site who has a GREAT book on this subject. Like I said I am new here and I don't know the rules.. Can I mention the book and author?

Cole Haynes · Answer

Terry,

It sounds like you have a good plan. I read Lonnie's third book and it was pretty good. To be honest I don't remember it very well I think it had to do with hard money lending and financial calculators. Financial stuff. Where book one and two were more "business in a book".

I will take you up on that offer if/when I am in the area. Same goes for you!

Cole

Terry Drake · Answer

Cole,  Yes,it is a very nice park with few vacancies and the lot rent is competitive with the area.  I plan on a straight sale, and carry the note for between  $145- $225/month depending on how much I'm out of pocket and what is affordable for them.
          
          I've read Lonnie's 'Deals on Wheels' and also his second book 'Making Money with Mobile Homes'.  What great books!  Has anyone read or have feedback on his book 'Taking the Mystery out of Money'?  Another good mobile home book I've read is 'Mobile Home Wealth' by Zalman Velvel
          
          If you're ever in the SW FL area give me a call and we can do lunch or put back a couple beers.

Cole Haynes · Answer

Nationwide,

Sorry but after I looked further I saw Lonnie is mentioned quite a bit in this forum. He's the man. Very funny guy in person too. lol.

Terry Drake · Answer

Yes I did.  We closed a few days ago.  One thing I was thinking about:  The note I am paying for this property (owner financed)  is $155.50/month.  I know the sellers weren't excited about a such a small payment over 6 years so I thought in a few months, offer them 5k cash.  I think they would be excited to get a lump sum now and not in 6 yrs. Especially since 155 / 3 sellers = roughly $50 a month per seller.

PS.  I have had my eyes open looking for acreage as like we discussed!

Thanks for the advice and following along!  Enjoy Cancun my friend.  :cool:

Terry Drake · Answer

I called and made an offer.  She wasn't very excited about it but I explained that I am not trying to pry it out from under her hands and that the main reason for my offer price was holding cost + fix up cost.  I used the example of the two months it has been vacant and she has made the payment already.

She wanted to take me to go look at it but I told her that we were too far apart on the price and I don't want to waste her time or mine if we're not even close to a deal and that if she changes her mind to give me a call and we can work out a deal to go look at it.   I know that she has dropped the price a few hundred bucks and is trying to sell it herself, but I also know that she will not accept owner financing, CASH only and the property needs some repairs so I don't think she is going to get the action on it she's hoping for.

Also, she has to make her 3rd lot rent payment on her vacant home in a week.  We will see what happens.  Whether she calls me in a week, or in a month, I would gladly buy it.

Rich Weese · Answer

Hi Terry,
    Good to see you're going for it. Did you get the other one we discussed at lunch?  You have a good program. Don't forget the  other suggestion I gave you about acreage!! Rich in Cancun for a few days.

Chris M. · Answer

That's the great thing about the investing in mobile homes is the owners move out, continue to pay lot rent, and become incredibly negotiable on the price.  Be firm on whatever price you decide to offer them.  They will sell it for cheaper than you may think.

When selling, be careful on quoting a specific amount for a down payment.  You definitely don't want to only ask for only $500 down if they have say, $1200 to put down.  Your main goal is to obviously get your ROI back as soon as possible.  When potential buyers ask what the down payment is, just tell them it's open for reasonable and negotiable consideration.  Find out what they can afford (within reason of course) and you may be surprised at what they may say.

Also, make sure to ask them what appliances will be left with the home. (ie. washer, dryer, fridge, stove)

I can recommend some good blogs and articles (mainly from within this site) from some investors that have some awesome tips for this exact thing.

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