First deal almost done - Is it really this easy!?

Question

Hey Everyone,

Just got back from going out to see a mobile home earlier.  It is a 1975 Skyline that has been completely renovated top to bottom.  The asking price was $7900

I actually found this home when a buyer responded to an add I placed on CL.  She said she had visited this home a couple weeks ago and would have given the seller a check on the spot if she had the money.  After speaking with her for awhile I explained what I do and that I could buy the home and then resell it to her on terms.  She was very excited about the idea.  I explained that in order for me to make it work there needed to be a spread between what I paid and what I sold it to her for.  We agreed that she would pay 10k.

So today I went to see the home.  As the buyer told me, it is in great condition.  I asked explained to the seller how I am an investor and so I need to be able to make a spread on the purchase and sales price.  I asked him with a cash purchase what the best he could do on price.  After about 3 mins of silence (very uncomfortable) he said he could take 6900.  7k was really my max, but I said I wasn't sure at that number and told him I needed to talk to the buyer quick and see what she was willing to do.

I talked to the buyer and she came up another 1000 to 11000 total.  Then I went back tot he seller and said she came up a little and that I really wanted to make this work for all of us.  I said with a signed agreement right now, can he do any better than 6900.  After some silence he said 6500.  I told him the number I really came here looking for was 6000, but I would meet him in the middle at 6250.  He wanted to think over night so I said ok and packed up my things.  On the way out the door I turned and said I really don't want to drive back our here (over an hr drive), lets say 6400 and call it a day, and he said ok.

Total profit with interest $6100.  Total work, 2 hrs!  I love mobile home investing!

Philip Bourdon · Answer

Lance, Eduardo asked what seems like an easy yes or no answer. However, the reason why I have hesitated going further in my Mobile Home investing is because of the SAFE Act (Google that). Basically, unless it's your own home, you CANNOT offer owner financing unless you are a Loan Originator or you hire one to do the paper work (that is much harder to do than expected).

Many investors (including one in my local REIA) don't wish to bother with this, assuming that HUD as bigger fish to catch. If you're caught, say goodbye to your REI career.

But, you may say that mobile homes aren't considered property, but a vehicle; true! However, it is a residence; it's where people live and therefore is under the Safe Act. Though it's a national law now, it's administered a bit differently from state to state.

I know Lonnie has a Boot Camp coming up I believe in October. I wonder if he is going to address this issue. REI keeps changing and this Law stinks. However, if one chooses to ignore it and gets caught, he/she may never recover with the fines that are in the tens of thousands.

Wali Hamani · Answer

does anyone know anything about sellerside only Hud 1

Philip Bourdon · Answer

From Lance H:

Lance, do you know any Loan Originators in PA?  Ones who could work Lonnie Deals?

Eduardo A. · Answer

So who pays the 525 lot rent if she is only paying 250?  Please excuse my ignorance.

Tim Conway · Answer

Lance,
Don't take this as legal advice but as something to look into. In the Minnesota Statutes 327B.04, Subd. 5, there is an exemption to the MH dealer license requirements for licensed real estate salespersons/brokers.  If you're friendly with a local real estate agent, it might be worth talking to them to get their take on helping you out.

Lance H. · Answer

Thanks Charley, Ann, and Terry!

Terry, I have read pretty much all your posts and really appreciate the information you have contributed to BP.

As far as the terms go.  Purchase price is 6,400 with no work and no holding costs. Selling it for 11k.  The buyer is putting down 1500 and making 44 payments of 250 at 8%.  8% is the max allowable in MN.  I will have my downstroke out in 20 months which is longer than I would like, but lot rent is quite high here (525 average) so the monthly pmt needs to be low to keep the total monthly pmt reasonable.

It works out to be a profit of 7100 and a yearly return of 51.6%.  Can't get that in the stock market any time soon!

Terry Drake · Answer

Lance, great job on your first deal!  I wish mine went as well.  You said that it will probably get a lot harder from here on out but not really.  It's a pretty simple business and you seem to have a handle on it so I think you'll be surprised how well it goes.  Especially once you find a good handyman!

One thing I didn't see mentioned were the terms.  How much is she going to put down and what are the monthly payments?  Interest rate? Do you have any pictures of the home?

Ann Bellamy · Answer

The SAFE act is a killer.  In NH, our legislative liaison with NHREIA was instrumental in getting the state law amended.  It used to be that you could not even sell your own property on seller financing unless you lived in it.  Now you can sell 3 a year as an owner without occupying.  Not perfect, but works for most.  There is not much buying/selling of MH's in NH unless you own the park, so it mostly works with houses.  And 3 a year is a help.

Charley F. · Answer

Congratulations! This is something I am looking into, I hope it goes as smooth as yours!

Lance H. · Answer

Thanks everyone for the feedback!

Yes Eduardo I did owner financing with the buyer.

Hi Philip, thank you for the feedback.  I do know about the SAFE Act.  I actually work for a major bank and manage a group of loan officers who I helped through the registration process.  I do not plan to do much in the business until I figure out a solution.  I did this one deal just to get an idea if I like the business and want to pursue it further.

I have a few issues I have to figure out including the SAFE act as well as a Dealers license.  In my state you need 2 yrs experience working for a dealer, plus you need to own or have a lease on commercial property with at least 5 display lots in order to get a dealers license.  I'm working on a way around this by registering as a finance company and then selling my homes through a dealer.  I'm hoping that by registering as a finance company it will also enable me to register as a loan originator, but I have a lot of research to do!

First deal almost done - Is it really this easy!?

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