Rent, Owner Finance or Sell

12 Replies

Hello, picked up a nice single wide mobile home on almost two acres for $35K cash a couple of

months ago and after ~$5K in updating and minor repairs, I'm in at about ~$40K.  I could sell for $95-$110K and double my money; however, my main goal is cash flow and I'm really thinking of adding this property to my rentals, but also considering owner financing.  Thoughts??

In my opinion owner financing is a good idea for tax purposes and that will easily double or even triple your money depending on the interest you charge. Also, that takes out the PM experience.

@Dan Galvan what are your goals? If your goal is a steady stream of income, then renting or maybe owner financing would be worth it. What is your best case scenario for owner financing - 5% on your money? Think about what your goals are and go from there. If you could sell it, take that money and reinvest in something larger that could give you a 10% return, I would suggest doing that. 

I might be tempted to seller finance that one.  For me, I buy for appreciation and cash flow.  Since this is a manufactured home, you're not likely going to get the long term appreciation, you could get cash flow via seller financing and avoid some of the headache.  If you need the money and are okay with whatever tax impact of selling, you could, but you'd want to be sure you could replace it with an equally cash flowing asset.

Thank you all for your insights and recommendations!! All great points and food for thought.  I was concerned about the tax hit of selling since I’m closing on another similar property this week.  My main goal is to increase my passive cash flow to one day leave my Corp job.  I have a few other rentals but don’t want to deal with more tenants at this point since I do have a full time job and not looking to add management responsibilities to my plate right now.   Seller financing may be the way to go, just need to make sure I’m clear on the Dodd-Frank Act.  

Hey Dan - I have a very similar situation here in GA.  I just retired from the corporate world and have 10 SFH rented, but trying to add more cash flow since I just left a nice income.   It is nearly impossible to find a home to buy here at the moment, but I have found several mobile homes on property that could provide good cash flow.   This would be a much different model for me, and as mentioned I would be missing the appreciation that I have experienced with my current homes.   That said the numbers seem to work very well.  I am coming to the same conclusion that owner financing might be the way to go on this type of property.   Interested to see what more experienced users have to add here!

@Jim Glover I hear you and hoping to get where you're currently at soon.  Truthfully looking for more freedom to spend with my family.  I am a workaholic but would prefer to work hard for my own business and stop making other people richer.  I spent some time a couple of hours from you at Fort Gordon, GA. My quick story..  I have 6 rental properties right now and working on two mobile home flips, all free and clear, while still working my full time corporate job.  Also working on rehabbing a 1950s ranch home on some acreage my family and I plan on moving to by next summer.   Four of my rentals are mobile homes and in my area, they've actually appreciated well as a home/land package.  These properties are also in a more rural area, which more people are looking for down here in central/south Texas.    Both of my current flips are mobiles on land and I purchased them as foreclosures.  One of them I purchased for ~$80K + ~$10K rehab, and closing next week for $164K, after several weeks of the closing being pushed back. The other one, the subject of this thread, I purchased for ~$35K + $5 for rehab, and will be able to sell for ~$110K, per my realtor.  I was looking to owner finance the second, but am now considering other recommendations from this thread and may possibly sell.  Thought is to reinvest my profits, but truthfully I have not made a final decision.  I hate sitting on it as it is ready to go.  Meeting with my accountant next week, who is also a real estate investor, to discuss some strategies.  Guess this is a good problem to have.  I've been reading a lot on BiggerPockets and soaking up as much as I can.  @Naomie Moke @Dan Weber @Ryan Howell @Ken Rishel

@Dan Galvan sounds like you have a great model. You have gotten me a lot more interested in possibly pursuing a flip with a mobile home on land. I have been tracking some when I see them hit Zillow and they seem to get to contract pretty quickly. I think I have been setting my goals a bit too high and I have been a little hesitant since it is different than what I have done on the past. Let us know how your current deal works out and good luck!

Dan,

Sounds like you have a great deal!  As someone else mentioned, its all about your goals.  You have mentioned at least TWICE now your goal is CF and avoiding the capital gains tax hit on selling early.  

So, our discussion moves right to that the long-term buy and hold.  Your options are 1) Seller financing - this has been hashed out in previous posts in your stream here.. 2) Lease Option.  

Couple things here:  Seller financing.  Someone mentioned 5%.  Look, there are no rules on what rate you charge.  Frankly, if someone can't get a loan and you are willing to offer seller fi, you may be able to charge more.  After all, you are providing a service.  I encourage creativity here!

Lease Options.  I do a lot of these.  Great methodology.  Also allows you to retain some of the rental tax advantages.  Typically, you get more independent tenants who value the property as well.  This caters to your goal of reducing landlord burden

**disclaimer, I am not a lender or tax accountant.  Check with your local licensed pro's and state laws

Thank you all for your inputs and advice!  I'm still at a point in my RE investing journey where I'm still trying to figure things out.  Quick update, after much thought and strategizing, I've decided to move forward with selling the subject property of this post and invest my profits into a small/mid sized RV Park.  I recently sold one of my other Mobile Home/Land Flip Deals.  I had a great return on that property and this flip also assisted me in making a final decision on the subject/current property:

Recent property sold:

Purchase Price and fees: $83,500.86

Rehab Costs: $14,228.89

Sold Price: $164K

Profit after Closing Costs/Fees/Concessions: $44,677.54

Looking forward to planning and building out this RV park.  Thank you all once again for your inputs!

Dan

@Dan Galvan Just be careful if you decide to hold it and rent or owner finance especially in this climate. Many of the municipalities are still in eviction moratoriums due to COVID-19. The job market is unpredictable at this point. Good luck with the deal!