Have you ever looked at real estate as an investment vehicle that can take you from the current rat-race you are in, to the lazy boy chair lifestyle you want? I do. from the beginning I always had my eye on long-term wealth and long-term growth. I needed make sure I succeeded in real estate. As investors we all choose to focus on one or more methods to pursue real estate riches. It is for this reason that I am so happy to finally discuss “Buying and Holding” as a strategy for long-term wealth with mobile housing.
Below is an edu-taining story that is really all too typical in the mobile home investing world.
The seller of a 1996 clean double-wide mobile home attached to a half acre of land and I were in the last stages of the negotiation process for his home on the outskirts of Tampa Bay. The home needed no work and was practically vacant. If I could get the seller to agree to the owner financing terms I wanted there would be a pretty-penny to profit when I got a tenant-buyer into the home; the future tenant-buyer must put money down plus pay me hundreds in passive cash-flow each month in exchange for occupying and one day owning the property.
After a little silence the seller agreed to the terms I presented. The seller’s asked that I personally help him pack the rest of the family’s things into boxes, an unusual request but I agreed.
Knowing that I must purchase any real estate investment with my end user in mind I structured the mobile home deal as follows; Zero cash down, subject to the preexisting mortgage of $23,000 and a once-a-year payment of $1,700 for 6 years, Total purchase price was $33,200. The outgoing debt service, including the owner-financing monthly escrow came to $518.00 PITI a month.
My goal was to sell the property by accepting a cash-payment down today and allowing a qualified tenant-buyer to make me payments over time, plus an interest rate of course.
Marketing the home as “No Banks Required” helped sell the home in 12 days for $77,000 to a very excited family. The terms of the sale were $4,000 cash to be collected as a down payment and 180 monthly payments of $1,050.00 PITI. It was less than 2 weeks after I originally purchased the investment mobile home with no money down that I was now holding $5,050 profit as a non-refundable down payment and first month’s payment. Best part was that if the tenant-buyer fulfilled their side of the agreement I would be collecting $1,050 dollar paychecks every month for the next 15 years.
Sadly, the family did not get to stay 15 years. After two and a half years the “always on-time” family of four picked up and vanished. To this day I have no idea where they relocated. The vanishing tenant-buyers I had sold the home to left the mobile home relatively clean condition. A half-day cleaning and the home was ready to remarket.
I now had a vacant mobile home that I needed to resell to new tenant-buyers as soon as possible. The first time I resold this property I collected $3,500 down and $1,075 a month for a scheduled 20 years. Proper background checks and strict move-in requirements help to reassure that you are selling to qualified buyers with a high pride of ownership.
These new owners stayed for almost four years and then proceeded to give me a 30 day “move out” notice. I typically do not give any discounts to tenant-buyers leaving my investment properties; however I told the tenant-buyers because of almost perfect payment history I would reimburse their last month’s payment if they found a qualified tenant-buyer to buy the home after they leave. You bet money is a great motivating factor! They found new tenant-buyers and I had the home sold for the third time before the tenant-buyers even moved out.
The demand for mobile homes is huge. There are hungry people in your local area that are waiting for someone to offer them an attractive deal to own a piece of the American dream. If you have ever tried to sell a mobile home for all cash you know that it can seem a little tricky. Try accepting your sales price as “a comfortable amount down and monthly payments” for the balance; you will open your investment home up to a larger pool of qualified families looking for “win-win” purchase deals.
– J. Fed