First Mobile Home Purchase for Investment

[CashCow]

Hello All, going tomorrow to look at a package deal for two mobile homes, wanted to get some ideas on what I need to ask for and look for.

I purchased Lonnie's book, Deals on Wheels but it won't be here till next week!

Here is the deal, let me know your thoughts:

First One:

2 bed/1 bath, , Single Wide, 10x52, asking price $6,500

Second (next door to other one):

1 bed/1 bath, Signle Wide, asking price, $4,000


Seller is motivated, been vacant for two months, so I was thinking of offering 4,000 total for the two units

Dues/space rent total is $360 per month on EACH unit



So what do I need to ask/check for?

My goal is to buy them and seller finance as a lot of you (Jim) have talked about on here. I need to figure out the terms of that and how I even write that up (contracts?)

I was thinking seller finance at zero down, $400 a month for 7 years on the 2 bed and $350 a month for year years on the 1 bedroom


Who pays for insurance?

I realize once the seller buyer this place, they are responsible for the space dues, however who is responsible for the space dues if the new owner doesn't pay them one month?

Is there a place you could refer me to where I could find the way I would write this up for the seller contract once I go to sell it owner financed?


I appreciate your help everyone, I am excited about the possibility of this!

[Jim Johnson]

In my neck of the woods... if I were advising you... I would say to not buy those homes. There is no way I would EVER buy a 10 wide. As a rule you really want at least a 14 wide, 3 bed home. In senior parks the market is somewhat different but a 1/1? I would say sit tight and hold out for a 3/1 or 3/2 single wide. There is so much more I could post on this topic but... it is late and I need sleep...


Hello All, going tomorrow to look at a package deal for two mobile homes, wanted to get some ideas on what I need to ask for and look for.

I purchased Lonnie's book, Deals on Wheels but it won't be here till next week!

Here is the deal, let me know your thoughts:

First One:

2 bed/1 bath, , Single Wide, 10x52, asking price $6,500

Second (next door to other one):

1 bed/1 bath, Signle Wide, asking price, $4,000


Seller is motivated, been vacant for two months, so I was thinking of offering 4,000 total for the two units

Dues/space rent total is $360 per month on EACH unit



So what do I need to ask/check for?

My goal is to buy them and seller finance as a lot of you (Jim) have talked about on here. I need to figure out the terms of that and how I even write that up (contracts?)

I was thinking seller finance at zero down, $400 a month for 7 years on the 2 bed and $350 a month for year years on the 1 bedroom


Who pays for insurance?

I realize once the seller buyer this place, they are responsible for the space dues, however who is responsible for the space dues if the new owner doesn't pay them one month?

Is there a place you could refer me to where I could find the way I would write this up for the seller contract once I go to sell it owner financed?


I appreciate your help everyone, I am excited about the possibility of this!

[dhappy-fl]

I agree with Jim on the 1/1, they are much harder to sell or rent. No way would I do one. Now every area is not the same ,but I have no problem with 2/1. If it is 10 wide then it is small and old. I have sold some 10 wides that I bought for a song( real cheap) For your first deal it is much harder to sell a 10 wide then a bigger newer one, unless you can pick it up for 1k or less I would pass. Wait for the book and look for better deals.

[CashCow]

Thanks guys for the replies, I know a 1/1 is not very desirable your right, the prob is in this area (Northern California) the majority of the mobiles I see they want anywhere from 20k-50k, very expensive.

I don't want to get stuck with paying 360 a month for each of those and not being able to rent, that would blow.

What if I was to be able to get it for next to nothing, would you still pass?

[Jim Johnson]

Thanks guys for the replies, I know a 1/1 is not very desirable your right, the prob is in this area (Northern California) the majority of the mobiles I see they want anywhere from 20k-50k, very expensive.

I don't want to get stuck with paying 360 a month for each of those and not being able to rent, that would blow.

What if I was to be able to get it for next to nothing, would you still pass?

At that point it really depends on the market. Are you selling the home, if so what is the payment you would expect. If your renting, how much per month, what do you expect in repairs, are you sure the park will allow rentals etc... I guess what I am looking for is some market research to support some sort of yield number. I have found, rental mobiles can be very costly. Downtime and repairs after people move out can put you upside down in a heartbeat. You also are at the whim of the park manager for who is accepted. If your competing with another investor that is in better with the management your units might sit longer than expected. That relationship between investor and manager will have a huge bearing on your success in a park.

So have you met with the management? Do they have requirements for the home to remain in the park? If so, what do those cost and how long will it take to get them done? Will they show your home? What are their requirements for someone to rent a space? Who is on the hook for space rent, you or the tenant? Lets say you are on the hook for space rent and they are sub leasing from you. If there is a problem you need to be clear on what happens. You get evicted because you are the one with the legal link tot he park. It might ruin your whole day to find a eviction on your public records for some thing a tenant did in your mobile home...


all just food for thought. Bottom line... how well do you really understand the whole process and the market...

[CashCow]

I am plaining on basically doing the same thing you have mentioned in your previous posts, that is where I got the idea....I want to buy them, then sell for a higher price on seller financing. I do not want to rent due to the costly repairs that could come with that over a long period of time.

I posted some number in my first thread on how I thought it would break down using seller financing

I am going down to the park (20 min drive) to meet with the park manager today. From talking to the realtor, she said he also has a key and was motivated to get it sold, so I would think he would help show the place.

I was wondering that about who would be on the hook for the space rent, how do you determine that? I would imagine if I SOLD (with seller financing) the mobile to the new owners, they would be the ones responsible for the space rent correct? How do you ensure that?

I am still learning this whole process, most of it I have learned from reading your posts on here Jim, I have printed them and read them, going through them a second time now.

Thanks again for your time and help, let me know what you think of those numbers

[Former MB Member]

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[Jim Johnson]

If I was you, I'd have the buyer or renter pay you the combined payment including the lot rent. Then you pay the park their lot rent. That way, you know EXACTLY what is going on. What you don't want to have happen is the people to not pay lot rent for 4 months and then move out in the middle of the night. Make them pay you, then you're on top of the situation.
If you were tracking a couple of homes in a park and selling them you might try to track the space rent and payment together... but that is too much tracking after you are doing quite a few of them. Just posting payments that you get, making the deposits and entering the information into your accounting program is time consuming after about 50 notes... imagine tracking 100 or so. 100 checks come in... some on time.. some not. If you are paying the space rent... well I would think you would pay it weather the payment comes in or not. Well if you wanted a good relationship with the park you sure would. That sounds like a cash flow and time nightmare to me.

Oh.... one more thought... if your like me... and maybe take several weeks at a crack for vacation... you would really have to plan around NOT being gone during certain times of the month... or you would have a stack of 100 checks your sending off... weather you have deposited the payments or not.... in my market 100 space rent checks would amount to about $50,000.

OK... I have talked myself into being able to say... have the person living in the home deal with the park. If your relationship is good with the park they will let you know if the person in the home is behind...

[Jim Johnson]

I am plaining on basically doing the same thing you have mentioned in your previous posts, that is where I got the idea....I want to buy them, then sell for a higher price on seller financing. I do not want to rent due to the costly repairs that could come with that over a long period of time.

I posted some number in my first thread on how I thought it would break down using seller financing

I am going down to the park (20 min drive) to meet with the park manager today. From talking to the realtor, she said he also has a key and was motivated to get it sold, so I would think he would help show the place.

I was wondering that about who would be on the hook for the space rent, how do you determine that? I would imagine if I SOLD (with seller financing) the mobile to the new owners, they would be the ones responsible for the space rent correct? How do you ensure that?

I am still learning this whole process, most of it I have learned from reading your posts on here Jim, I have printed them and read them, going through them a second time now.

Thanks again for your time and help, let me know what you think of those numbers
OK... numbers. Here is my BASIC rule. I look at a cash on cash return for my seed money, and then a full blend on the investment. To figure this we only look at the monthly NET payment to you the lender. So...

I just got a call on a doublewide in a park I do much business in...
I know these things..
The home will support a payment to me of $420 per month NET (465 gross)
The home will sell for 25,000 to 30,000 on terms
My interest rate is 15%

So I take the payment x 18 to figure my maximum seed. This money will include everything.

so 420 x 18 = $7,560.00

I know going in, after I make repairs, pay space rent, back taxes etc I do not want to spend more than this. I really want to spend less... but this is the MOST I will spend.

I bought the home for $3,000 and it needs $1,500 for repairs. i will pay one month of space rent of which probably 1/2 will be paid by a new buyer. So my seed money is about $4,500... a 112% return the first year... I am ahead of the game on this home...

OH... the rest of the numbers...
after 110 payments they will have paid about $51,000 for the home...
$21,000 in interest, $25,000 principal

I know the numbers are off by a few dollars... but they are close enough for this example...

Space rent... the answer to this question lies in your relationship with the park... every park is different...

[JSAUNDERS]

Jim- looking at your numbers- it looks like park rent is $45 per month:praise: That is awsome if true. Correct me if wrong.

10 wide mobile is very skinny- some parks also don't allow renters- usually have alot of by-laws.

[Jim Johnson]

Jim- looking at your numbers- it looks like park rent is $45 per month:praise: That is awsome if true. Correct me if wrong.

10 wide mobile is very skinny- some parks also don't allow renters- usually have alot of by-laws.

That $45 has nothing to do with park rent. Space rent in my neck of the woods runs from $520 on the high end to about $200 in the sticks.
The $45 is...
1) A note service fee of $15 per month- the fee charged by the loan service companies to collect payments, send 1098s and notices if the payments are late. They send accounting sheets to break the payments into the two principal payments, interest, note service fee, insurance and late fees. The principal is broken into the part that is basis reduction and the other which is taxable with each payment as earned income. That should confuse a whole bunch of people... LOL
2) we escrow $30 per month for insurance

A little disclaimer... I am NOT a CPA and I am in no way shape or form giving accounting advise. You must consult a CPA as to how this accounting works. If your CPA is not able to teach you how this accounting is done, I recommend you find a new accountant.

Now the plug... I use John Hyre and his KISS guide to book keeping. he is a mobile home investor and understands the business of mobile home investing from a tax basis. www.realestatetaxlaw.com

[CashCow]

K guys, I am back, thanks for all the replies, I have been busy with work so haven't had as much time as I have wanted to get back on and respond.

Anyway, there was a used mobile listed for 16k in a NICE park near the lake in a 55+ park in a very desirable area of town.

The listing expired and the owner got a hold of me through the park manager, said he was at a point where he just watned to give the park away basically, just wanted to get something out of it.

I am going to offer him $1,500 for the purch of the mobile. It is a 2 bed, 1.5 bath place in pretty good shape. I don't have all the specs but can get them soon if anyone wants to know them

The only rough thing is the space rent, which is $500. My worst fear is not being able to get it sold on owner financing and having to pay the space rent for a long period. Does that freak anyone else out?

Anyhow, my big question to you guys is, once I get it, how do I write up a contract to sell on payments (I will hold the note like Jim explains)?

How do I put this in writting, how to I make sure they are responsible for the space rent and not me and how do I make sure I am not responsible for any repairs for the place?

Anyone have a contract they would be willing to share that they use?

I was figuring $300 a month for 5 years, which would be a GREAT return if I get in for $1,500

Any other thoughts on how to go about this or other things i need to check for?

Thanks again, I am excited about this!!! :SM101:

[Jim Johnson]

K guys, I am back, thanks for all the replies, I have been busy with work so haven't had as much time as I have wanted to get back on and respond.

Anyway, there was a used mobile listed for 16k in a NICE park near the lake in a 55+ park in a very desirable area of town.

The listing expired and the owner got a hold of me through the park manager, said he was at a point where he just watned to give the park away basically, just wanted to get something out of it.

I am going to offer him $1,500 for the purch of the mobile. It is a 2 bed, 1.5 bath place in pretty good shape. I don't have all the specs but can get them soon if anyone wants to know them

The only rough thing is the space rent, which is $500. My worst fear is not being able to get it sold on owner financing and having to pay the space rent for a long period. Does that freak anyone else out?

Anyhow, my big question to you guys is, once I get it, how do I write up a contract to sell on payments (I will hold the note like Jim explains)?

How do I put this in writting, how to I make sure they are responsible for the space rent and not me and how do I make sure I am not responsible for any repairs for the place?

Anyone have a contract they would be willing to share that they use?

I was figuring $300 a month for 5 years, which would be a GREAT return if I get in for $1,500

Any other thoughts on how to go about this or other things i need to check for?

Thanks again, I am excited about this!!! :SM101:
Sounds like you are on the right track. you can always ask the park to forgive the space rent when the home is being sold. It sucks to have a bunch of space rent due... it sure keeps you motivated to get it sold... as for the contracts, I have a list of them I use:

Contract to buy and sell- lets me sell and them buy... or someone sell and me finance...
Closing Costs- breaks down all the costs
Promissory note- The promise to pay- enforceable in court
Security Agreement- liens the title
Deposit money release- (releases deposit to me if they default)
Limited Power Of Attorney- (lets me deposit the check that was released)

The challenge is they are state specific forms so unless your located in Colorado they will not match your state laws regarding lending or repossession.

If I were looking for a set of documents... I would try to buy a home that had assumable financing, as to see the financing, copy it... you get the drift... I would not use it without an attorney reviewing the language and I would not plagiarize the document but would use it as a solid template... so to speak...