Real Estate Investor · Member since 2009 · 260 posts · 119 votes
I wanted to hear some feedback from those who have done or are doing lonnie deals and tell me if I'm on the right track. With all the action I have gotten on this thing I would have thought it would be sold already. I don't know if I'm jumping the gun or 1,000 lookie loo's is the norm for each deal. Am I being too hard on myself? Here are the details.
Well a week ago I saw a mobile on craig's list listed for $3,500. It had newer appliances, washer, dryer, countertop stove and pergo wood floors. I offered her 2k and got it under contract for $100 with a two week inspection period. Lot rent has been paid until March 1st (365/month). Right away I put a for sale sign in the yard, offering it for $189/month owner financing. I also put a sign at the intersection offering the same thing.
I have had a ton of phone calls, and a bunch of drivebys/showings. I've had a few people call back and were interested still but after that haven't heard from them again. If it wasn't getting so much action I wouldn't normally kick the can after not selling a place in a week but I thought with how much action it has gotten, the owner financing and new appliances/wood floors that it would be snapped up already.
I have seen other mobiles for sale that needed work for more then what I'm selling this one for so I thought this thing was going to pop in just a few days since it's ready to move in (there's one soft spot in teh floor.)
The terms that I have offered are 4k cash or 5k owner financed. 495/down and 189/month for 30 months.
What's the holding time for some of you guys on a 2/1? Is it normal to get that kind of action and not have it sold? I don't know if the mobile is at fault and that's why it hasn't sold or if it's a numbers game and there's usually a hundred lookie looks but it still takes a month to sell?
I don't know if I should drop my payment and make it MORE affordable or if I should sit tight and not worry about it. Thanks for any input :cool: I really don't have anyone around here to bounce ideas off of.
Hi Terry,
I haven't started investing yet, but will give my opinion from the viewpoint of someone who's bought several MHs in the past and lives in one now.
I think what is wrong with your advertising is that you are advertising it for $189 a month, but when they call they find out that they also have to pay lot rent, making the total monthly cost closer to $500 a month.
So the reason they're calling in the first place is they think they're going to get super cheap housing costs.
Maybe advertise the total monthly cost. Then the people that call will be the ones who can really afford to live in the home.
Congratulations on getting the super deal!! It's very nice and I'm sure it will go quickly.
Reid, thanks for the good advice! Do sellers often accept $50/month no payments for 6 months?
Yup! Many sellers are so stuck on the price of the home that they are willing to do terms than take a lower cash offer. I provide my sellers with a promissory note and require them to give me power of attorney. Then, I take the title and sign it over to my company. It's really easy and completely legal in Colorado. However, you should check with your attorney to verify you can do this in your state. Every state has different rules.
By the way, why don't you throw a lockbox on the home and then tell them the code. This way, they can see the home on their own and you save on gas money and time. Just make sure to have a couple spare keys made!
Terry,
The home looks really nice! Hope it sells quickly.
Reid,
Is there a reason why the title wouldn't just be placed in your name with the seller as the lienholder?
Do you hold the title until your buyer pays all their payments off?
Reid, thanks for the good advice! Do sellers often accept $50/month no payments for 6 months?
Yup! Many sellers are so stuck on the price of the home that they are willing to do terms than take a lower cash offer. I provide my sellers with a promissory note and require them to give me power of attorney. Then, I take the title and sign it over to my company. It's really easy and completely legal in Colorado. However, you should check with your attorney to verify you can do this in your state. Every state has different rules.
By the way, why don't you throw a lockbox on the home and then tell them the code. This way, they can see the home on their own and you save on gas money and time. Just make sure to have a couple spare keys made!
Great way to still get the deal if they are stubborn on selling price! I like the creative thinking there.
There has been a lock box on the door as long as there has been a contract on it. Works great! I give out the code during the week and Friday change it in case someone gets a bright idea for a weekend activity.(a trip to the scrapyard with all my appliances).
For those interested, you can get a new lock box on ebay for $20-30
Reid,
Is there a reason why the title wouldn't just be placed in your name with the seller as the lienholder?
Do you hold the title until your buyer pays all their payments off?
Yes, there certainly is a reason. What if I make the payments to them every month and then they never sign the title over to me once I've paid the home off? I like to mitigate as much risk as possible.
Well I got this property under contract Feb 1st and it took until March 1st to get it under contract. Although it took 30 days, in my mind it really took two weeks. The first two weeks I advertised the home for sale as is (kinda dumpy) and the price was too high. I like many people new to this thought if I made the home affordable enough, it would move. I did, and it didn't. So I took the home off the market, made the repairs I thought needed to be done. Put it back on the market fixed up with a reasonable price and it was under contract two weeks later!
Here are the numbers:
Original purchase price: $1,000
Lot rent : $ 364
SalesTax/Transfer Fees:$ 150
Total Repairs: $ 905
Total out of pocket: $2,419
Repair cost ($905) broken down:
Handy man labor 25hrs: $375
Materials from HomeDep.:$200
Carpet and installation: $330
Knowing what I know now, I feel that I could have had this all said and done around 2k.
I will post some before and after pics as soon as I can get them off my camera (hopefully tomorrow).
Next we'll talk about the buyer, sales price, the negotiation, and terms.
Last Friday I had 3 what seemed to be serious buyers. One buyer said he was going to apply Monday morning, and wanted to meet Monday at lunch to talk numbers. Well, it turns out he had a huge rap sheet including harboring a fugitive, battery with a weapon, drugs, ect ect.
Luckily Monday morning I got a call from a man who lived in the same park with his best friend but wanted to get out before it ruined their friendship. He liked the place but most importantly, his girlfriend loved the place. I told them $4,500 financed.
He walked around and told me my price was too high, and teh central AC doesn't work, yadda yadda yadda. I told him that if the central AC worked, it would have been sold already for $500-$1000 more than I have it listed. Then I reminded him of the $250/month electric bill with a central air VS the window unit which is far less (according to the neighbors and residents I have talked to).
Then he told me he needs to be around $3,500. I told him that I would be happy to play in the low 3k range for cash and I don't mind financing it if I'm going to make money, but it doesn't make ANY sense for me to tie up my money for 2 years just to break even.
We agreed on 4k (note worked out to be $500 down, and $190/month for 20 months) and he said he would apply to the park and get back to me. I told him if he wants this home that he needs to get it under contract because there were some other buyers on the line (there really was). So I wrote up the contract and when we got to the $495 down part, he told me only had $200 cash until next week.
I told him that I could take the $200 cash IF he paid the remaining $300 on Saturday PLUS $365 March's lot rent. I figured worse case scenario, he backed out and I get to apply the $200 towards lot rent and sell it to someone else + pro rate the rest of the rent.
He called today and told me that he will have the $665 cash on Saturday.
I wasn't able to sell for double my out of pocket but I have learned so much from this deal that it doesn't matter. I have used what I learned, found my second deal and have the ball rolling on a third.
I will update this thread with details as the deals progress, not to be pretentious or because I'm looking for a pat on the back but because before my first deal, it was extremely helpful to read about others first deal, the problems they encountered, and how they handled them in the real world and I hope that my story helps someone else jump in with both feet.
On that note I will finish with my lesson(s) learned.
-DON'T repair if you don't have to! Out of pocket money KILLS your return! Buy RIGHT so you can sell right. If it needs repairs, you should definitely hammer the sales price down so you can sell it as is.
-Don't take repairs lightly! You don't just 'slap down' some linoleum and you don't just 'throw down some plywood'. All that stuff took a lot longer then you would think, and cost more too!
Good to hear about your progress, Terry. When screening buyers, I find the most serious ones are the ones who take action - they do what they say they will do. Those that make promises but don't take any action, I've learned not to take seriously.
If this person you're working with does come through, it'll be a good indication of his seriousness. If Saturday rolls around and things fall through, he may just try to make another arrangement with you. If that's the case, you might want to just continue with the screening process (if you're not quite sure of his seriousness). I've found there are people out there who just will string people along which really don't result to much.
It's great to hear what you've learned on this one - the earlier deals are the most memorable with the amount learned. Each deal after tends to gets easier with more experience but I find with every deal there is something new learned from each experience.
Looking forward to hearing more on your progress, it's great to hear more stories!
We agreed on 4k (note worked out to be $500 down, and $190/month for 20 months) and he said he would apply to the park and get back to me. I told him if he wants this home that he needs to get it under contract because there were some other buyers on the line (there really was). So I wrote up the contract and when we got to the $495 down part, he told me only had $200 cash until next week.
I'm very glad you found a buyer!
However, why was the selling price so low? I've followed your posts, and I would assume the Fort Meyers, Florida area would be a good, high priced area for mobile homes.
I'm not trying to sound greedy, arrogant, or anything of the sort. But around here I see homes for sale for 15-20k all the time (between 10-20 years old, 3 bed 2 ba 16x80 or 70)
I've also spoke with many people in the business in the area saying cash talks on these and you can sell for the amounts listed.
Just worries me a bit, yes $1500 profit is great, and it's a great % on your return. But why is this home not a 15k home?
I really don't mean to sound rude or anything, I'm just somewhat worried as I'm about to start doing my own deals, and that kind of deal just won't cut it for me.
...
For those interested, you can get a new lock box on ebay for $20-30
You can buy them at Home Depot too, for about $30 - no need to deal with shipping and whether the ebay vendor is a rip-off, just take it home with you.
We agreed on 4k (note worked out to be $500 down, and $190/month for 20 months) and he said he would apply to the park and get back to me. I told him if he wants this home that he needs to get it under contract because there were some other buyers on the line (there really was). So I wrote up the contract and when we got to the $495 down part, he told me only had $200 cash until next week.
I'm very glad you found a buyer!
However, why was the selling price so low? I've followed your posts, and I would assume the Fort Meyers, Florida area would be a good, high priced area for mobile homes.
I'm not trying to sound greedy, arrogant, or anything of the sort. But around here I see homes for sale for 15-20k all the time (between 10-20 years old, 3 bed 2 ba 16x80 or 70)
I've also spoke with many people in the business in the area saying cash talks on these and you can sell for the amounts listed.
Just worries me a bit, yes $1500 profit is great, and it's a great % on your return. But why is this home not a 15k home?
I really don't mean to sound rude or anything, I'm just somewhat worried as I'm about to start doing my own deals, and that kind of deal just won't cut it for me.
I don't take it as rude, Jon! Those are good questions but felt that my last post was too long as it was but I'm happy to explain my reasoning.
In short, this was not a 15k home. I could have listed it for that much but these buyers know their market better then I do. Most of them have been in and out of mobiles their whole lives. This was not a 15k home for more than one reason.
-It is 40 yrs old
-Aluminum wiring
-No central air/no heat
-Evidence of water damage around most windows, and kitchen flooring
-I don't remember there being a hot water heater
-Last owners replaced some windows and did a shoddy job
-No car port/no storage shed
-The cabinets in the kitchen appear to be home made with plywood and white paint
-Soft walls
BUT mostly.. it's a 2/1 and they just don't move like the 3 bedrooms.
As far as why did I settle for only 4k? I had marketed this property so much that I went from 6 calls a day from craigslist to ZERO. It was old potatoes, especially since I had it over priced and under repaired for 2 weeks. If I were to do this deal over, I would have bought it for less then 1k, not repair a thing, and flipped it for 3k as is. Hardly any money out of pocket and it would have sold in a week or two.
I could have stuck to my guns and kept the price as 5k, but for one, the park had a nicer 3 bedroom unit for sale for 3k-3500 and two, if I stuck to my guns at 5k and held on to the property 2 months longer to do so, I would have been out of pocket another $750 and all of a sudden, I'm right back where I started around the 4k mark but by then all the excitement would be gone and I'd be left with a bad taste in my mouth after 2-3months of holding time. I didn't want my first deal to be a bad one and slow me down in anyway.
Honestly, I would have been just as happy if I broke even on this deal. The knowledge I have acquired on this deal is priceless!
BUT the BIGGEST reason I am just happy to let this go is because based on what I've learned through this one, I found two other deals that are highly profitable. I didn't want to screw around on this one so much that I missed out on bigger fish.
As I learned more about this business, the market, and whats out there I realized that I could do better on my next deal so I didn't want to get bogged down with this one. Price it low and let it go! I will make up for it on deals number 2, 3, 4 and so on.
Don't let the numbers on my first deal scare you away from the business. I'll tell you about deal number two I'm working on.. The park has a 3/1.5 vacant for about a year, and haven't been able to sell it for 3500 cash. She told me I could have it for 2k. I asked her if I could put a lock box on the property, show it, and buy it after I have a buyer. She said yes so I put a sign in the yard, lockbox on the door, and called down my buyers list. Less than 24 hrs later I have it under contract for $5500!! $500 down, 190/month for 30 months. (now I don't have to worry about competing with the park to sell homes!)
I almost feel bad that my post are so terribly long winded but I have learned so much from this and I want to pass on what I can to those sitting on the fence waiting to start!
Wow, that learning curve went amazingly well for you it looks!
I understand completely what you were saying now, way to go on that second deal, I'm betting it didn't take more than a couple hours worth of work for $3500 theoretical profit!
If you want to tell someone about the way things are going, you could always start a blog. I'd read it, I love hearing these stories, good, bad, and the ugly!
It's so cool that the mh park let you sell the home before you even bought it! I hope they come up with some more for you.
Don't feel that your posts are too long. I love hearing all the details and I'm sure other people do, too.
Glad things are going so well for you.
A quick update, yesterday was a good day! I met with the buyers for both homes, finalized the paperwork and handed over the keys!
Overall, the first one took a lot more of my time then I wanted, but the second one I only had a total of about 3 hrs (including drive time,sticking the sign in the ground, and phone calls). Deals like that motivate you to go get another like it!
I know insurance is a question that comes up a lot when financing these homes. In fact, I got a somewhat angry phone call from the buyers father in law, PO'd because insurance is mandatory on the note. Fortunately I had already been dealing with a good insurance company from a previous deal (mobile on real estate).
I explained to him that I have been dealing with an agent/company already and the cost involved were very reasonable but if for some reason it wasn't, we could work it out later. I also explained that there isn't a lender in the world that would lend money without some sort of asset protection.
I have also found out that for the buyer to get insurance on the home, it would cost $768/year but if I got the insurance for them (they pay for it of course) then I know that it's insured with me as the payee, and it only cost them $179/year!
I wanted to throw that out there to you guys in case you should run in to the same problems or high insurance quotes.
Interesting update Terry! It sounds like you are on the right track. Although, I'm surprised that your mortgage payment is so low. For me, my payments are at least $300 per month. Can the market not bear the higher payment?
By the way, I'm glad you finally sold that 2 bedroom / 1 bathroom home. I always go for the 3 bedroom / 2 bathroom homes. They are the gems! I used to include the insurance premium in the monthly payment, but now I just make them pay the insurance. They are required to send me proof of insurance every 6 months. This keeps my life simple.
The next home you buy...see if you can buy it on a promissory note with a power of attorney. :D
I have been following along with your posts and just wondering if you have any updates.
I am seriously considering doing some Lonnie Deals here in Tampa. Do you have any tips for me, besides looking for 3/2's? Would you recommend that I go to park office's in person to inquire as to homes that are for sale, or could I do it by phone? The problem is that most I have seen around here seem to be open only during business hours and that's when I am at work.
I have been following along with your posts and just wondering if you have any updates.
I am seriously considering doing some Lonnie Deals here in Tampa. Do you have any tips for me, besides looking for 3/2's? Would you recommend that I go to park office's in person to inquire as to homes that are for sale, or could I do it by phone? The problem is that most I have seen around here seem to be open only during business hours and that's when I am at work.
Thanks for the inspiration!!
Karen
Hi Karen,
If you want to build a strong relationship with anyone, the key is face to face. I would strongly suggest if you find a park you want to work in and grow that you meet the park manager. If you are short on time you can call and talk to the park manager, tell them what you would like to do in their park. A good park manager will appreciate someone who takes vacant or soon to be vacant homes and puts paying tenants in them.
If they are short with you, or close minded and say they don't allow that sort of thing then politely get off the phone, and find another park. It can't be emphasized enough how important a good relationship with the PM is to your success in the park. On the same note, if they aren't on board with you it can make your job much harder getting buyers approved to buy a home in their park.
I'll give you an example of a PM making our jobs easier. I got a phone call from a gentlemen who said 'I heard you buy mobile homes'. So I talked to him for a bit, got some information about him and his home for sale. He said his home was a '82 or '83, paid 5k for it and can't take less then $2,500.
So I went to see my favorite PM and asked her if she knew this David fellow and told her about our conversation. She said 'Oh really? Let me tell you about that home. It's a '79, not an '82 or '83 and we (the park) GAVE that home to him free and clear, fixed up and all. Now any time you are negotiating price with someone, it helps to know that it was free to them.
So I went to see him as I told him I would, walked the home with him. He told me again that he HAS to have 2500. I told him $2,500 is a fine RETAIL price but I have to buy at wholesale, so I can retail it and make money, otherwise it doesn't make sense to do all this work just to break even. I find that works great with people as I am not devaluing their HOME or telling them that's all their nicest home they have owned is worth. I am simply telling them where I need to be for the numbers to work on my end and leave it at that.
He told me maybe he can do $1,500 but he doesn't think his wife will do 1,000. I gave him my number again, politely told him to call me if he has any luck talking to his wife, shook his hand and left. Whether he calls me back or not remains to be seen. If he's motivated he will, and if he's not he won't. The good deals are to be found dealing with motivated sellers. The key is to make offers that work for YOU. You're not going to land every deal but the ones you do, will make you money. Throw offers on the wall, and see which ones stick!
Remember, they have to sell but you don't have to buy!
Thanks, Terry, for the info!! I'm going to drive around some parks today to get a feel for them and see what's for sale. Then I'll make some calls tomorrow.
One other thing - what about taxes? Will I have to pay tax when purchasing? Then how does it work when I sell, since I'll be technically selling this year but will be getting all the proceeds from the sale over the next couple of years?
Karen, the taxes/fees you can expect to pay when you buy is all done at the DMV when you buy.
Title transfer fee (has been around $70 for me)
Registration or the year (about $50) for the year
Sales tax (paid at the dmv same time title/reg fees are paid)
As far as income or capital gain taxes, I have read that if you are carrying a note for these homes, they will break up the income taxes over the term of the loan. That way you aren't paying more out of pocket in the first year then your bringing in. You would definitely want to talk to an account about it though and not take my word for it. :)
I have been reading posts on here regarding whether or not I would need a dealer license (I'm in Florida too), and I'm still confused. What have you been able to figure out on this?
In my opinion I wouldn't worry about the license. Close a few deals before you even worry about it. If someone approaches you about it, apologize and tell them you didn't know and ask what you need to do to be compliant.
I agree with Terry on the licensing. Even though, by law they "require" you have a license to sell more than one (I believe) manufactured home per year in Florida. But, I know of 100's of mobile homes bought and sold on paper in Florida by multiple investors and I have never heard of anyone being questioned.
I would atleast do a deal or two before you worried about it.
Also, In regards to the tax issue. When you sell manufactured homes "lonnie style" over and over. The IRS does treat your
sale as a sale. Even if you don't receive the full profit in full in the first year. There are ways to limit your tax exposure! You will want to get in touch with a good accountant.
Terry, I can see you have come a LONG way since your posts from a month ago or so. I feel I learned the most back when I did my first 2 or 3 deals!
Congrats Terry! Hope you have a lot of continued success!
I agree with Terry on the licensing. Even though, by law they "require" you have a license to sell more than one (I believe) manufactured home per year in Florida. But, I know of 100's of mobile homes bought and sold on paper in Florida by multiple investors and I have never heard of anyone being questioned.
I would atleast do a deal or two before you worried about it.
Also, In regards to the tax issue. When you sell manufactured homes "lonnie style" over and over. The IRS does treat your
sale as a sale. Even if you don't receive the full profit in full in the first year. There are ways to limit your tax exposure! You will want to get in touch with a good accountant.
Terry, I can see you have come a LONG way since your posts from a month ago or so. I feel I learned the most back when I did my first 2 or 3 deals!
Congrats Terry! Hope you have a lot of continued success!