I'm a reasonably new investor(got one rental) and I have been offered to get in on a deal(s) through a trusted family member. His niche is very different from what I am familiar with, so I'm having some trouble running the numbers and I thought I'd turn to you guys.
So he(my relative) has been doing this exact strategy for a few years and has done a good number of deals(~40) so I'm confident he knows what he's doing, but his strategy is as follows:
Buys a distressed trailer(mobile/manufactured home) repairs it, and then sells it to a tenant that either can't qualify for a normal loan, or doesn't have the money to purchase a normal home.
So for this particular deal, the numbers are as follows.
Purchase price of $5750.
Rehab of $8000.
Rehab should take roughly 3-5 days.
Selling we are assuming a month, but he says typically less.
Taxes are around 600/yr(which the new owner will pay) but accounting for the month we have it, $50.
The lot rent for the trailer is $350.
Closing costs would be maybe ~$100.
We'd sell it for ~22k, with a down payment of 2k at 14% interest for 75 months.
So our purchase and rehab would be ~$13850, plus a month of holding for $14250.
We'd get 2k back bringing our investment back down to $12250.
We'd bring in 400/mo from the mortgage payment.
As far as I can tell, this would be about 35-40% cash on cash return.
Please go over these numbers and tell me if I'm missing anything.
@Thomas Shaw hey! Did you end up going through with this? I’m in a similar situation, I have one triplex. The mobile homes are so cheap! Seems like it would be so much easier to get started with much less capital.