All Forum Posts by: Edward B.

@Phillip Tamez, didn't realize you had a follow up question until you just voted on my post. To answer your question, though, I used my VA to purchase my first property in 2001. Then less than two years later I was able to refinance into a conventional mortgage, take out a HELOC on the property and use my VA to purchase another property. I still have that 2nd VA Loan. That, of course, was back in the wild wild west of lending when home prices were skyrocketing and loans were easy to come by. I have not used my VA again since then and I saved my wife's VA to purchase our home after I retired.

@Neddie Smith, I know people who do stuff like this with trusts, but it is complicated and I am wary of it. 

So to answer your question, it is possible because I know people who do it. Trusts are even more location specific than LLCs, though, so you would need to find someone who really knows their stuff. Even then, make sure you are comfortable with it because I feel like a lot of these guys are really pushing the envelop and I don't know how well their stuff would stand up in a court of law or against the IRS.

@Bob Malecki, there are some strange rules governing reverse mortgages. We recently tried to buy one at auction (in Virginia) and the reserve was ridiculously high. I followed up with the REO broker and he said that they were required by FNMA, law(??), or something to list it for a certain percentage of the UPB for 6 months or so. The property is not worth nearly that much so they are going to have to sit on it. I didn't get into it too much, but the point is dig a little deeper because I believe you may be stuck holding the asset longer than you normally would want to until you can reduce the price. May still be worth it. You just need to understand the nuances...which I don't.

@Daniel E., I appreciate your desire to do the right thing and help this person out if possible, but it really boils down to whether or not they can afford to live here. Based off of what you have said, they cannot. I do not see any way that you can help this person short of charity.

@Andy Kelly,

@JC K. pretty much nailed it. As an investor I would look at it this way. When I evaluate a park, I value the land (MHP itself), park owned homes, and park owned notes (seller financed/rent to own) all separately. 

So, in your scenario. If you rented the lot for $200/mo and the overall expenses remained the same, then the LAND VALUE (or value of the MHP itself) would increase by $200*12= $4800/10% cap rate = $48000. All else being equal. Additionally, if the mobile home itself was worth $10k, I would consider paying for that minus my costs to sell it to an owner occupant.

@Jodi Gauthier, as pointed out, you can certainly go to the auction and bid on the property as well as anyone else. May not be a bad strategy since you will have way more information on the condition and value of the property than the foreclosure investors will. You just have to do the math and see if it is worth your while. You just can't set the auction price higher than what you are owed, though.

@Chad U., you are assuming that you get the property back at foreclosure, but that is not guaranteed. In fact, depending on the market, I'd say it may be unlikely. You are only entitled to what you are owed plus expenses and arrears and there are none with this property. Based on your own expense estimate, you would only be able to ask for $200k at auction and someone may think that a $260k property with only $200k reserve is a pretty good deal. If you paid $187k for the note then you may only make $8k...in 6-12 months.

@Jodi Gauthier, to somewhat answer your question, I think that you are better off foreclosing on the property because it is worth much more to you than an investor that comes in. NPN investors are looking for outsized returns and will demand a return on top of their purchase price and expenses. You on the other hand are not looking for a profit since you presumably already made it and just want to be made whole. You can generally roll your legal costs etc into the amount they owe you (location dependent) so you will come out unscathed in the end. Also, just filing the foreclosure is usually enough to get someone who just plopped down $65k to start paying again.

To sell it, I would figure at least a 20%-25% discount on the UPB minus whatever the buyer thinks their expenses would be. That's a pretty big bite. I assume that you were hoping that it would go for relatively close to UPB but that does not leave enough reward for an incoming investor who can go buy an already performing note that returns 10%-15% with none of the risk and effort associated with an NPN.

Of course, you could always throw it up on FCI at the UPB and see what happens. God knows I've seen crazier stuff than that offered there.

@Jamie Beltran, it sounds like you may be making a classic mistake and capitalizing the the rents from the park owned homes and rent to own homes at the same rate as the park itself. If you are doing that then selling off the POH might not work because you will probably not be able to sell them for nearly what you are paying for them. And rent to own should not be capitalized at all. Those should probably be valued as a note depending on the terms of the contract. It's hard to tell without knowing the exact breakdown of what value you are assigning to each component of these parks. 

Also, are these income and expense numbers yours or provided by the seller? The expenses on the one you provided looks a little low, but I have certainly seen a lot worse estimates from sellers/brokers.