possible deal?

[Arcinio Arauz]

I'm a newbie here so please bear with me... I have a nice 1800sft 2001 double wide 3 bd 2 bath mobile home under contract. The title is clean and the owner wants to sell asap. The space rent is $650...located in a very nice park in the Imperial Valley of Los Angeles. Owner says she paid 75K and now it comps at 58K. It needs no work whatsoever, very clean. I got it under contract for 28K and would like to sell for $29,500. Owner also says she will carry paper with a decent down on a 4 or 5 year term. I just wanted to ask.... how do I market this one? I live 6 hours away from the area. Is this a possible good deal for me?
Thanks in advance for your advice.

[Sam Parkins]

Ned Carey makes a great point about the value. I commend you for only marking up the value by $1500 for your wholesale. Yes the values show that you could mark it up more, but at the end of the day as Ned mentions making $1500 is better than nothing. And that's the point here, even at $29,500 you'll be hard pressed to find a buyer with that amount of cash that wants to live in a park. As you probably know, most park tenants don't mind a mobile home but their "dream" would be to have that same home on it's own land. Now I understand based on your lot rent of $650 (mine are all under $300) that land is a commodity there in L.A., but at least in my experience here someone COULD use that $29,500 cash as a down payment for a home with some land...though I don't know the area.

Fred Ramos makes a great point in that it sounds with such high lot rents that the park will be rather selective in their approval process for residency. A talk with the park as to their criteria is probably important here.

To throw in my two cents and answer the question straight out, I would market this way:

"1/2 off big double wide mobile home" or "wholesale double wide mobile home" or "CHEAP DW mobile home for sale" as your title. In your ad, give two prices:
Cash Price (you get this discounted price by paying all cash): $29,500
Owner Financed Price (or lease to own, rent to own, lease/option - something that allows payments to be made based on your level of experience collecting payments...more later): $650/month plus lot rent.

Now, I don't know your market and that might price you right out of the going rate for homes. The $650/month is represented by the following note held by the seller in order for you to be able to make money and save your cash (you don't have to buy at $28,000 in this scenario):
Principal: $28,000
Interest: 7.5%
Term: 5 years
Payment/month: $561.07

That's what YOU would owe the seller each month. You bring a tenant/buyer in there at $650/month and you keep the spread. It can be less, it can be more, it's all deal dependent and the market rate dependent. Obviously you've got to set this up and let the seller know what you're doing, have the correct contracts in place, and do everything the right way, but it's a way for you to sandwich yourself between the buyer and the seller and make a profit each month without the use of your cash, in fact with no cash invested. If the seller needs money down, ask for that amount down from your buyer. The above did not reflect anything down from anyone.

Now, with lot rent so high take into consideration the total payment made by the buyer each month. It's around $1200 or so. Would that amount stack up in that market? I try to keep my sales amounts just BELOW the local rental rates...that way my buyer's qualify themselves because they come to you and say "why would I keep renting for $1300/month when I can own with you for $100 less and own the home in 5 years", and that's your perfect buyer. But make sure that $1200 amount doesn't go above the rental rate. I don't have enough info to make that call, but if it does, your only option is to negotiate with the seller to take a longer term or buy the thing yourself and use a longer term, thus lowering that payment.

This scenario also assumes you tie the home up under contract for at least a few weeks to get your marketing out there. Tie it up for as long as you can get the seller to agree.

Hope that helps!

Blue Ridge Mobile Homes

P.S. Be careful with all your contracts here and your exit strategy. There are laws in place regarding taking over financing, owner financing, and many more. Make sure to stay compliant and ALWAYS do things the right way! The "sandwich" payments above can be tricky and I did not attempt until I had a very good understanding of the business. You don't need an attorney to close the deal (at least in my state), but you may want to consult one to make sure all your ducks are in a row...I did many a time!
P.P.S. Don't offer the seller any interest at all. A GREAT way to do this that I learned early on and has worked EVERY time...when negotiating that seller financing, give the seller the principal and then say that is $XXX/month UNTIL PAID, which here is 5 years. The UNTIL PAID is a way of saying 0% interest without actually saying 0% interest!