First Deal - Am I missing anything?

10 Replies

I'm in the process of closing on a propery in East Michigan. the property is as follows

- 1960 13X70 on it's on land

- Lot is 5,000 square feet

- It's on town water and sewer

- It currently rents out for $400/month

The asking price was $19,000 and I bargained it down to $13,000 to account for trailer, being a 1960 having no value.

I secured premise liablility insurance and I plan on having the property deeded under it's own LLC. The insurance is in my name, at least the quote is anyway. I'm not sure whether I need to have that refelct the LLC or not.

Other than the insurance/LLC question, I'm wondering if there are any other issues I should be looking to tie up.

Thanks in advance for any input,

D

Make sure title is in good order. No outstanding permits or violations with city or county depts

If anything, I would address some alternative exit strategies for the property other than 'rent it forever.'  Mobile homes don't have the same life expectancy as 'stick built' homes, and if you aren't familiar with them you could come across a tough issue in short order.  

So, if something goes wrong with the unit, what is your next strategy?  Purchase another trailer to put on the lot?  Sell the land?  It's a good idea to have those things in place, as it may affect your pricing strategy.  For instance, if the land itself is worth more than that, you may be in great shape.  But if not, it might be a tough sell if something goes wrong.

I would recommend talking to someone who works with MHs all the time, to find out what the common issues are with units built around that time.  Good luck!

Brandon, that is very good advice.  

Melissa

Sounds like it is land with improvements at the very least.  (Water/sewer lines can get spendy, so this is awesome, if the numbers click for you). We would love to have something like this to add to our collection! Rent it out as long as possible, and watch the land (probably) grow in value!

Originally posted by @Brandon Krieg :

If anything, I would address some alternative exit strategies for the property other than 'rent it forever.'  Mobile homes don't have the same life expectancy as 'stick built' homes, and if you aren't familiar with them you could come across a tough issue in short order.  

So, if something goes wrong with the unit, what is your next strategy?  Purchase another trailer to put on the lot?  Sell the land?  It's a good idea to have those things in place, as it may affect your pricing strategy.  For instance, if the land itself is worth more than that, you may be in great shape.  But if not, it might be a tough sell if something goes wrong.

I would recommend talking to someone who works with MHs all the time, to find out what the common issues are with units built around that time.  Good luck!

 Brandon,

Thanks for the words of wisdom regarding alternative exit sstrategies. 

I have given some thought to the idea of replacing the existing MH with something more modern ( 1990 or newer). I estimate a resale value somewhere around $35k under such a scenario. 

What would be a reasonable guesstimate for the expenses related to removing the existing structure? 

     I don't know how property taxes are in michigan but here I once purchased 4 lots with a MH on them and come to find out taxes had been paid on land but never on trailer with penaltys it can be a surprise of several thousand. here trailer has a title like a car. And to get it transferred into my name had to pay back taxes (lesson I learned hard way)

   I had a scrapper haul off most of two I had some insulation and other scrap to take care of

Account Closed Why would you scrap a trailer that still grosses you $400/m? If you can afford a newer one, could you ADD it to the Land? (Or, rinse and repeat the first exercise, but maybe with a Lot that is NOT generating income yet)? Cheers...

Originally posted by @Brent Coombs :

@Dave C. Why would you scrap a trailer that still grosses you $400/m? If you can afford a newer one, could you ADD it to the Land? (Or, rinse and repeat the first exercise, but maybe with a Lot that is NOT generating income yet)? Cheers...

I'm mostly thinking resale. A 1990 or newer MH would make the property much more saleable. The only unknown is the cost of removing the current MH. 

Account Closed to your insurance question, I was just asking an insurance agent for a quote yesterday on a property that I haven't yet purchased (doing due diligence) and was told that if the property is held by my LLC, then the insurance policy will need to also be held by the LLC. In other words, whoever owns the property is who needs to hold the insurance policy. Hope that helps to answer your question on insurance.

Originally posted by Account Closed:
I'm mostly thinking resale. A 1990 or newer MH would make the property much more saleable. The only unknown is the cost of removing the current MH. 

@Dave C, Unless you got/get both the land AND the newer MH for a lot less than proper market value, I don't see your re-sale plan working. Big Risk. If you are calculating that the new-improved potential RENT return will get your Buyers lined up to give you a massive profit - good luck with that. What do I know?  Cheers...