All Forum Posts by: Larry H.

I have a tenant in a D class neighborhood out of state. She’s been terrible from the start. I’m at fault for not screening very well due to the applicant pool and neighborhood. Everything out of her mouth has been lies. I had an inspection today and found out she has violated several terms of the lease. She has an unauthorized person living there, she has an unauthorized cat, and she’s been smoking weed inside the house (2 violations in 1). I called the city court and they aren’t accepting eviction petitions until June, and won’t be holding eviction hearings until August. (I am over this corona crap!)

I’m not waiting 3 months to get this trash out. I told the tenant she has a week to move out and I’m changing the locks. To my dismay, she knows that I can not legally do that, but in these times I’m willing to take the risk. She’s already talking about settling this in court. I have no problem with that, IF I COULD GET A COURT DATE.

Some alternatives I was thinking about to make her move were not changing the locks, but removing the refrigerator and kitchen sink and countertop (which I own). The kitchen sink and counter are a small one piece deal I got from Home Depot. It would not take much to remove it.

Any other suggestions or ideas? Anyone experience something similar?

@Jack Martin, excellent information. Thank you. I wasn’t even considering the fact that I would have to pay the lot rent in the event of default. 

@Mark Sewell, this is a property they chose. To me, it does not make sense to pay lot rent, but plenty of mobile home parks’ business model is collecting lot rents. 

We do owner financing. We typically own a home, then find an end buyer and provide the financing.

I am trying something different and told someone to go find the house they want, and I’ll buy it for them at a discounted price, and seller finance them at market value.

The home they found is a nice mobile home in a community that charges lot rent. If he were to not pay the lot rent, would I still have first lien position on the home?

I think my way around this is to require it to be paid into escrow and the service company pay it, but I’m still curious if anyone has any experience with this.

Thank you in advance.

Here is a story I wanted to share to show the importance of due diligence.

In June 2018 we bought a property from a friend of ours for $25,000. The property is an old mobile home that has an addition that makes it not mobile anymore. Our friends have owned it for a long time and have always done rent to own contracts. They explained to us how they have paid for the property three times by the amount of income they have collected over time, but now just want to liquidate everything.

So we buy it for $25,000 and there is a current tenant with 9 years left on his rent to own “contract” paying $500 per month. We did 0 due diligence on the property. My thought process was the tenant is going to own it eventually, he is responsible for all maintenance and repairs, so all I’m buying is a “contract” not a house. All we were responsible for was tax and insurance, which is about $100 per month combined, so we were looking at a net income of $400 per month.

The “contract” we bought was hand written on a yellow pad piece of paper and signed by both parties. From my business school days in college, I specifically remember learning that a legal contract is anything two parties agree on, including a hand shake, so I wasn’t too worried about it. We close on the property and I send the tenant our lease modified to the terms that were already in place. The tenant never signed it. Then July comes and the tenant never pays rent.

We go to the eviction hearing and the judge denies the eviction because the “contract” is considered an executor contract and eviction court is not the correct avenue. Judge recommends I obtain an attorney to proceed with removing the tenant.

We get an attorney and the attorney tells us the “contract” is not legal, and the tenant could sue us for not having done what is required for that type of contract (ie IRS form 1098). We had 3 options: get him to move out voluntarily, get him to sign legit owner finance docs, or sue him. The law suit option came with the possibility of a counter-suit.

The tenant said he would leave voluntarily, but took his sweet time doing it. Before he got all the way into his new place, some issues arose and he actually contacted me and asked if he could do the owner finance option, which I agreed to, mainly to have his signature on a legal contract with some type of recourse.

So, we owner financed the property to him for $39,000, got a $1000 down payment, and financed all of the legal fees and closing costs into the loan. He is now responsible for the insurance and tax, which he pays into an escrow account managed by a servicing company. He is also paying the monthly service fee to the management company.

We went from looking at netting $400 per month to a net income of $520 per month.

Do not fall into the trap that the comps say the property is worth $200k.  Its only worth whatever the income it produces will support.  Comps don't matter on income property.

@Roschelle McCoy I believe your tax estimate and insurance estimates are too low.  $3600 per year based on current owner's purchase price of $155k is a 2.3% tax rate.  Once ownership changes hands, county will assess the property based on the value it traded at.  

Different areas will have different rates obviously, but I pay about $1800 a year for insurance on my $85,000 duplex in LA.

I wouldn't estimate any less than 10% vacancy, because you only have 2 units paying the bills.  If you have 2 months of vacancy (physical or economic) that is a 8% vacancy rate.  Plus the $1200 + that it will cost to turn over the unit(s).  During those vacancies, you will have utilities to pay for.  Don't forget to account for lawn care, legal fees for evictions, leases, etc.

I would need 0% owner financing for this deal to work for me.  Ask for lease option with $2000 down, 0%, 30 year amortization, and whatever balloon payment you feel comfortable with (or none at all).

@Roschelle McCoy you left out the most important information... the income and expenses.

I am doing my 1st owner finance deal where I am the seller, providing financing for the buyer. My intention was to pass on the loan servicing fee to the borrower. Is that the standard practice? If not, is it wrong to do?

I am doing my 1st owner finance deal where I am the seller, providing financing for the buyer. My intention was to pass on the loan servicing fee to the borrower. Is that the standard practice? If not, is it wrong to do?

@Sharon Powell please send me the info. Thank you so much!