All Forum Posts by: Lee Schaeffer

Hi! I am trying to get all the wording right for a mobile home sales agreement where the buyer is going to be able to buy the mobile home after renting it for 12 years for the price of the security deposit. Does anyone have suggestions. Thanks for you reply!

In the KC area, there are mobile home parks that have lot rents of $290 to $400 monthly and offer to move the mobile home for free provided that the mobile home stays there 5 years or more. There are lots of three bedroom, two bathroom mobile homes that can be bought and remodeled for $5,000 to $15,000. The way I do the transaction is for the tenant to become the owner after renting for 12 years following the provisions of our Agreement.

This is an example of a current offering. The tenant pays the rent of $433 or more per month, the $145/mo. lot rent, the $20/mo. water fees, the $20/mo. sewer fees, and the trash fees which are included in the lot rent to me in advance so I can be sure that the tenant is current on all park fees. The tenant does all the repairs and maintenance. This is able to be negotiated because the tenant intends to rent the mobile home for 12 years to become the owner after the 12 years and accepts the responsibility now to keep the mobile home in good condition. Also, the mobile home is remodeled which gives the tenant a good comfort zone. My insurance is about $20 per month and my property taxes are about $20 per month. The end result is $433 X 12 X 12 = $62,352 income less $20 + $20 X 12 X 12 = $5,760 expected costs = $56,592 net before taxes. If the total remodel costs were $15,000, then, the gross profit would be $41,592. The time to return the $15,000 cash investment is 2.9 years.

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 Hi Kathy, Thanks for your post. I like the idea of having a small mobile home park and buying $5,000 mobile home to rent at $485 monthly. Please give me some tips on how to buy and set up a small mobile home park. I live in the KC area. Thanks! [email protected]

In the above comments, I was thinking about going to a mobile home park and have them move the mobile home at their expense. I would also, rent it to a tenant and have them pay the lot rent and all the increases as well as all utilities and all increase. I usually rent the mobile homes to a tenant and after renting it for 12 years, I deed it over to them. When I do this, I usually get a tenant that wants to become the owner and will usually keep the home in better condition than just a tenant. Also, the tenant wanting to become the owner, usually does not object to paying for the lot rent and the repairs and utilities. Best wishes Shane!

Hey Shane, If I were considering this deal, I would work back to get the offer-in price. If I were going to rent it long term to a tenant, I would check the rents on Zillow.com for similar properties in the area. If the fair market rent was $750 per month, and I wanted to get my cash back in three years, I would offer $750 X 12 X 3 = $27,000 less the cost of rehab and all other expenses. If during the three years the rehab cost was $15,000, and maintenance was $2,000 and taxes and insurance were $1200 per year X 3 = $3,600, my total expected cash out of pocket after being the owner would be $20,600. So, I would offer in at $27,000 - $20,600 = $6,400. In order to get this seller to accept my offer, I would show him these figures. If the seller does not go for the deal, I would move on.

If you rent it for $500 monthly plus the tenant pays the lot rent and increases thereof, and the utilities and increases thereof and the electricity, TV, phone and gas, you would make $60,000 at the end of ten years. If you paid $15,000, you would be ahead by $45,000.

I have found 3 bedroom, 2 bathroom mobile homes readily available at $1 to $10,000. After rehab, the mobile home is usually cost me about $15,000. I put in new electric furnace and heat pump and free standing stove and refrigerator. I put in new pad, carpet, linoleum, vinyI mini-blinds, new paint inside and outside. I insulate the attic space. I place R-19 batts underneath then covered by "aluminized belly-wrap." I only buy single wide mobile homes with a peaked roof. The age is not as important as the condition. I buy 14' to 16' wide and 70' to 80' long. 

I find parks that pay to  move the mobile home into their park for free and give concessions on lot rent. I am moving one mobile home into a park that pays for the complete move and gives lot rent concessions of 50% off the first 12 months from the current lot rent of $290. Then, 30% off the next 12 months from the $290 even it the market lot rent goes up. I make agreements with the renter that after they live in and pay the rent of $433, the lot rent, the trash fees, the water fees, and the sewer fees, the electricity, the TV, and the phone, then they become the owner at the end of the 12 years. This strategy avoids having to deal with the Dodd-Frank Act. A one year lease is signed in which the tenant pays for all the repairs and maintenance. After 12 years, I receive $62,352 on my investment of $15,000, which is a 415.68% cash on cash return. Where else can I find a cash on cash return like that?

Mobile home and mobile home park investing are great ways to get cash flow with minimum cash investment. On the other hand, sizable time investment is needed to maintain the cash flow, and the people who rent and own mobile homes often have little capital in the mobile homes. I invested in a mobile home and have learned lots over time. One strategy that got me interested was from an investor who bought used mobile homes for about $2,000 and rented them out for a positive cash flow from the start. 

Eric, Before buying subject to a loan, why not find out who the lender is? Then, contact the lender indicating that you are interested in buying the loan for cash. If the lender is willing to sell at a discount, you enter into an escrow to pay off the lender.  If you don't have the means to come up with the cash needed, obtain a new loan against the property that you are buying with a simultaneous close with the lender and the purchase of the property. These days, you must give full disclosure to avoid lawsuits. So, it is always better to come up with the cash and buy out the lender before the close of the buy escrow. One of the buying techniques that I use to buy fixers or vacant properties or distressed properties is to find who the private lender is and contact them to buy out the loan. Lenders usually know what is going on with the property. If it is in foreclosure, the private lender will usually take a steep discount to sell for cash now rather than to go thru foreclosure.

I have been a big fan of avoiding institutional lenders and their fees and requests for detailed information that I want to keep private. If you have any equity in real estate you can create a Secured Note against that equity. Then, you can use the Secured Note to purchase real estate. Property owners who want to retire are prime candidates for taking your Secured Note as payment for part or all of their equity. Also, several Secured Notes can be created against the same mortgage, allowing for a seller to give Secured Notes to heirs,  or to split up a partnership, or to split assets in the event of a divorce. The Secured Notes can be created now or at the time that you buy the property. This approach  allows for a real rapid sale. For those who are flippers, the Secured Notes allow you to conserve your cash to do the rehab. For properties that make real good investments, the Secured Notes can have a short term due date. For example, if you want to buy a $100,000 valued house for $70,000, and have equity in your residence of $35,000, you could offer in the $35,000 Secured Note against your property and ask the Seller to carry back $35,000 against the house you are buying. The term could be 12 months. The interest  could be 10%. THe payment could be one payment of $35,000 plus the $3,500 interest. This allows you as a flipper to use your cash to rehab the house. Hopefully, the house is rehabbed and sold before the due date. You could start out offering a Secured Note with 18 months or longer term. I have found that it is better to get as long of a term as you possibly can. When the dust settles, you have bought your fixer for nothing down, and hopefully made some income on the sale to the new buyer.