Does this deal make sense?

Question

Found a foreclosure 1,800 SF Modular on 5 acres). May be able to purchase for 40K. I can get a private loan for 36K. I have a buyer that is willing to pay 60K for the house if I will finance for 30 yrs with 10% down. Does anybody finance deals for this length of time? Or is that type of financing best left to the banks? Tell me where the flaws are. MJ

Account Closed · Answer

Mike,

You used the term 'tenant' so I responded to the comment.

If all you are saying is the buyers of used MHs are more likely to default than some other groups then I would agree. DOW says as much. It also explains why this could be good. If people just read the book I am pretty confident they will get the full picture.

MHs can need repairs when you get them back. Some come back in move-in ready condition. Expect the worst but be prepared for the best. Some who have worked on a lot of MHs feel they are easier to deal with as the construction techniques are pretty standardized. Lets not debate that.

No one was suggesting that they close their eyes. Thanks for the heads up in any event.

John Corey

Account Closed · Answer

I second All Cash's recommendation for Lonnie Scruggs's book Deals On Wheels. Lonnie has 3 books out and each is worth the money. Figure about $30 for DOW and there are deals for the three. Send me a PM if you want a link to a site where you can order them new. I do expect that you can get a used copy on Ebay though I have not checked prior to posting this.

If you follow Lonnis'e advice you can earn 50% to 100% on your money each year (or more). All about cash flow without losing 45% to 50% in maintenance expenses.

I have had dinner with Lonnie a couple of times. He is a real class act. He started investing before most people here were born.

John Corey

Account Closed · Answer

There are many reasons that could apply.

1. Access and slope. Depending on the land it might not have worked with smaller lots.

2. Septic tank issues or drainage. There are limits to what can be done with certain soil types or other conditions. Or a limit on the amount of water that can be obtained on the property (well or municipal water feed).

3. View or ascetic reasons. I know a guy dividing a property. He is doing it to restrict the future development so it does not take away from his home. Hence the other lots are being mapped out to address an personal preference rather than just maximizing the lot count.

4. The development costs might have jumped a good bit if the lots were smaller. Roads, services, and other things being brought into the property.

5. There might have been prior use of the land (farm, etc) that dictated how the property was developed. A child is sold some land for a home while the parents keep the farm. Or the best fields for farming restricted where the plots would go.

6. Agreements with a neighbor not to develop the property in a specific way. A compromise to get approval for a development.

7. Traffic issues and the need to lessen the impact or avoid an enviromental survey process.

The above is not really specific to any one piece of property. I am presenting it to indicate to highlight that there can be very large differences in what is possible in theory vs. what actually makes sense to a specific landowner developing the land.

John Corey

Gary Johnson · Answer

This was a large parcel that was cut up into lots several years ago. The county requires at least 2 acres, even for a MH. I feel sure they could have divided it up into smaller lots, so I'm not sure why there are 3,4, and 5 acre lots. MJ

Mitchell Harter · Answer

does 'modular' mean 'manufactured'? i've been through some manufactured homes (in WA) and they're nice.

anyway, 5 acres? can you split the land up? even into 1 acre lots and toss some more modular homes on them. make your own park.

or chop the existing home out onto its own lot and keep the rest of the land.

i understand that they're not making any more land. However, I've seen new land in hawaii, but it will take some time for it to cool down and get utilities to it.

Jon Holdman · Answer

Belongs to the state, anyway.

Jon

Gary Johnson · Answer

As long as you're getting a nice down payment, getting the home back to re-sell again wouldn't be all bad. Depending on what kind of repairs are needed of course. Guess at least for now I need to start locating and making a list of all of the MH parks in the area. Which leads to another question. Hoe far from home are you willing to go for a deal.? At what point does the distance start to make the deal not worth it? I'm sure that, of course, depends on the deal! MJ

Michael Rossi · Answer

REI,

I know exactly what DOW is about and as I said earlier, I'm all for it.  However, if you think you are going to make loans to a bunch of low income mobile home buyers and not get a bunch of them back in various states of disrepair, you are sadly mistaken.  I realize they are not renters, but the will ACT like renters.  It is just like selling to low income people with owner financing or on land contract.  Expect to get a bunch of them back!

Again, I think it is a GOOD PLAN!  However, I would go into it with your eyes open!

Mike

Joshua Dorkin · Answer

I just wanted to let everyone know that we carry Lonnie's books in our store.  He's a great guy and a real class act.  In case you're interested, check out:

Deals on Wheels
Making Money with Mobile Homes

Enjoy!

Tom C · Answer

Folks are missing the point here. He said it was a modular on 5 acres. It is not a trailer sitting in a trailer park. Modular homes have come a long way since the old days. Sure they don't hold up as well as conventional housing, but banks are now willing to lend up to 30 years on a modular home, in the past the best they would go is 20 years. It also makes a huge difference if that modular is sitting on a slab or if it has a full basement under it as far marketability.