I mentioned a week or two ago that we purchased Mobile Home #4…and as of today, it’s sold…
Basically, all we did in terms of rehab was to clean out all the trash, remove the disgusting refrigerator, and bring in someone to scrub the place down. In total, we spent $130.
One of my partners put an ad on Craigslist to sell it for $6350, with the expectation that someone would negotiate it down a bit, and we’d sell it for about $5000. Instead, we found a guy from Virginia who is in the process of moving down here, and — after getting his girlfriend to check out the home — was eager to buy it for full-price.
Today, he filled out an application with the mobile home park, and gave us a $500 deposit. If everything goes through, we’ll likely finance the home over about 24-28 months; given that we only have $1800 invested in the home and the fact that we received a $500 down payment from the buyer, we should have our investment in the home paid off in about 5 months, with another 20 or so payments that are pure profit.
In all, we would make about $5000 in profit between the sale and the interest on the loan. All for a $1500 investment and about 4 hours worth of work. Not bad! 🙂
The average time to buy and then re-sell on the 4 MH’s thus far has been around 15 days. I think it’s fair to say that there is demand for affordable housing with financing! Or maybe we are selling them too cheap:)
Btw, M Wilson is one of the hard working partners I often mention… 🙂
J, another great example of planning your work and working your plan. I hope you don’t mind my .02 on the poor house. If you keep this guy in your head, it will take up valuable space that belongs to bigger ideas. Let it go and count it as a good deed. That works out as a two-fer…
J, How are you collecting your payments each month from all of these deals? Are you physically going to the park to collect? Also, what happens if they miss payments for a deal like this? Do you foreclose on the Mobile Home? Sorry for all of the questions but your return with these are awesome and we have started to consider as well! Keep them rolling in – No pun intended ;-)!
Hey Gary –
Our buyers send their payments directly to a post office box we have dedicated to the business. They have until the 5th of each month to pay, and if they’re late, they pay a $35 late payment fee, plus $2 per day. So far, none of our buyers have missed a payment (it’s early in the game, though :)), and the one buyer who is continually late on payments always includes the late payment penalties.
If and when a buyer doesn’t pay, we will start repossession on the 15th of the month. Basically, mobile homes in parks are not treated like real estate, but instead are treated like an automobile. Registration is similar to an automobile, and if the lien-holder doesn’t get paid, there is a repossession, not a foreclosure.
This makes it pretty easy to legally get the home back if a buyer misses a payment.
Keep the questions coming…happy to share!
J,
These Lonnie Deals seem pretty interesting to me. Over the weekend I combed the dozen parks in my area to check out the situation they were in cosmetically. I obtained addresses and phone numbers of the parks in order to contact the park managers when I feel like I understand this market a little better.
This could be a great opportunity, yet I am uncertain about a few things. Would the park owners not already have a hold of this untapped type of market in some areas. It seems to me that a few parks that I drove through were more in that direction. One of the parks had a flyer at the entrance that was listing homes for sale. You needed to cantact the office for the information. They did however have a sale price and a monthly payment on each one. Seems to me like they may have a hold there, but maybe I am wrong. What has been your experience in dealing with these managers. Is there a way to better get them on your side and let you purchase and re-sell in their parks? I understand that if an owner of a home in the park wants to sell their home to you that is their right, so why is there a need to get approval from the park management, if not only to get the approval of the tennant. I am very new and might possibly need to read Lonnies book. Would you recommend the reading? Thanks for the time J. Keep up the good work.
Jason Ballesteros
Hey Jason –
Some park owners are smart enough to realize that doing Lonnie Deals themselves is a great way to make extra cash AND keep their parks full. With those park owners, it may be tough to get a foot in the door because they’re doing the same thing themselves and they don’t really need you.
That said, most park owners aren’t involved with their parks day-to-day. They have managers for that. And those park managers certainly don’t have the cash (or the motivation) to be doing Lonnie Deals themselves. Their job is to collect rent checks, deal with issues, talk to prospective tenants, etc. In those parks, the managers are going to be thrilled to work with you, because you are able to help them keep their parks filled, which makes them look good to their boss (the owner).
Also, while many parks sell homes directly to buyers, the owners/managers don’t want to finance it — they’d rather just get cash for it. But, most mobile home buyers don’t have cash to buy the homes, so having a middle-man (you!) to finance the deals is a win/win for everyone. In fact, many times the park owner/manager will sell you the home at a discount, allowing you to turn around and resell it with owner financing to another buyer for a big markup. Again, win/win all around.
So, the quick answer is, there are some parks that do this themselves, and those will be difficult to get your foot in the door. But, in my experience, most parks DO NOT do this, and they’ll be thrilled to work with someone like you who does.
J-
Thanks for the response. Makes sense what your saying. I think I am trying to overanalyze the situation before I can even talk to a park manager. I just assumed the owner would be the manager as well, but this may not be the case in most situations. I did purchase Deals on Wheels last night and will be reading some this evening. There will be a local REIA meeting tonight in our area (my first meeting). A real estate attorney is going to be answering questions there this evening. I am excited to get some great information and try to meet some people.
Appreciate the time,
Jason