Fast tuning or flipping real estate for a hefty profit has been over glorified in recent years by the main stream media. In recent discussions with over a hundred newbie real estate investors I have learned that “flipping” residential real estate is often times taught to death. Many investors think they know all there is to know about fast-turn investing.
The typical scenario being something to the end effect of:
- Find a motivated seller of a property with equity
- Purchase and close on the property
- Make all necessary repairs
- Sell property for substantial profit
Below are two examples away from the norm. In both examples mobile homes were purchased and sold; no closing costs paid out, and no repairs were made. Yet, there was still easy profit to be found.
The Southern Mobile Estate:
I received a desperate call from a motivated mobile home owner that had to sell his property. The 1994 3/3 double-wide mobile home and land package were sold originally to the seller for $99,000. The seller brought money down when he originally bought the home and land 7 years prior; there was currently a preexisting mortgage on the property totaling $73,000. The seller’s motivation; over the past year he lost his job, car and eventually his wife. He desired to sell his property and make some profit before the bank eventually foreclosed on the home and land.
After driving 2 hours to get to the seller’s property, I pulled into the owner’s driveway and my mouth dropped in joyous shock. The property which included 4.5 acres of land resembled a southern plantation manor. The tree lined dirt driveway stretched over 200 feet to the front of the steps of an over-sized cream colored mobile with wrap around deck. It was not until I reached within throwing distance to the home that I could tell that the property was in fact a manufactured home.
The inside of the home was in far worse shape than the beautiful exterior. The smell of dog hair and urine lingered in the warm unconditioned air, bugs scurried around kitchen walls, and there was a four by four foot hole in the floor of the second bedroom.
I had only one goal in mind, to purchase the property subject to the preexisting mortgage and give the seller the least amount of cash to walk away. The seller and I settled on $2,000 now and $2,000 after I resold the home at a later date.
“No Seasoning” lender requirements at the time allowed for me to immediately resell the property to a qualified buyer that could be approved for a bank loan. I placed a piece of plywood over the hole in the floor to protect people from falling to the ground and I bathed the entire home in Febreeze and pesticide. Working with a local mortgage broker/Realtor I found a buyer within one month and had my investment property sold less than 30 days later. The purchase price: Subject to a $73,000 mortgage and $4,000 cash. My sales price: conventional loan at $115,000.
The Mobile Mushroom:
Early in my real estate career I knocked on the door of a FSBO. I found the mobile home, a 1961 twelve-foot wide mobile inside a local mobile home park, by purposefully driving through the park looking for FSBO signs and asking residents if they know of any homes for sale in the area.
The mobile home was currently being lived in and was in almost-fair condition, especially for the age of the home. Let me paint you an out-of-date picture of the home; fuses instead of circuit breakers, faded orange carpet, cigarette smoke covered wallpaper, lime green appliances, a handful of large mushrooms growing on and around the bathroom toilet from a contained stagnant water leak, etc. The seller was asking $2,000 for her home.
My classic response, “If I can purchase you property today, give you 2 weeks to move and pay for this current months lot rent, how close to $250 can you come to in total price?” After explaining to the seller what repairs will be needed, marketing, holding and closing costs, the seller agreed to the fast sale price of $450.
I made it a point to speak with the mobile home park manager before and after I bought the home. Working with the community manger I was able to hold a large open house where I basically held a very informal auction for the property I just bought (my first auction). I sold the home for $4,550 in less than a week; seller was still living in property when I resold it.
The allure to make fast-cash beyond that of a traditional nine-to-five work week has lead many investors successfully and unsuccessfully to real estate riches. Remember that time has a BIG value too; depending on your exit strategy, holding costs, current supplies and demands as well as other judgment factors, making and performing repairs may not be needed before you are able to resell the home to another investor or end-user for a significant profit. Take your profits and ride to the next deal.
– J. Fed