I mentioned in yesterday’s post that we were planning to try our hand at investing in some mobile homes (MH) via “Lonnie Deals”…
Well, it appears we’ve done our first deal already! One of our partners found a MH listed for sale on the website of a local bank. The MH was a foreclosure and the bank was asking $5000. My partner looked at it, and while we still have very little idea of what constitutes a good deal, his gut told him that we could probably resell it for more than we could buy it for.
We made an offer to the bank for $1700 in cash. The bank let us know that they had multiple offers already, but that we were the only one’s to offer cash (the rest needed financing). Given that, they were willing to settle for $2500. My partner kept negotiating, and ultimately we were able to get them to agree to a $2000 purchase price if we brought them a check within 48 hours.
Unlike typical real estate, MHs don’t generally sell with the underlying land, so a typical MH sale is more like buying/selling a car than it is like buying/selling a house. In fact, it’s almost exactly like buying/selling a car — you sign a Bill of Sale, exchange money for the Title, and then register the Title at the DMV or local courthouse (depending on your state).
As soon as the bank told us they had accepted our offer, I threw an ad up on Craigslist to see if I could get some interest. The home needed some work, so we decided to try to sell it as-is (to someone with some handyman skills) at a relatively low price; if that didn’t work, we’d do some rehab and list it a little bit higher. I offered the home in AS-IS condition for $4600, with $500 down and $250 per month.
Within a few hours we received several calls from interested buyers. We sent them to the property (there was no lock on the door), and told them to take a look and let us know if they were interested. Just in case it was necessary, we called a few handymen and had them meet us at the property to give us bids on the rehab work (some plumbing, roof repair, subfloor repair, etc). The estimates on the rehab were in the $400-600 range, and likely could have been done in a day or two. Luckily, that wasn’t necessary.
By the next morning, we had three seriously interested buyers. One was out of state, and the logistics of getting him approved by the park manager and getting the paperwork signed would have been difficult. The next buyer offered full price, but needed to get his wife to agree to the purchase before he would commit to moving forward. And the third buyer offered $4100, with a $500 down-payment ($200 today and the other $300 next week when we signed the papers). And they were perfectly okay with the condition of the property, as they were willing to put in the work to fix it up themselves.
Since we didn’t yet own the MH (we hadn’t wired the funds yet), we were perfectly happy to hold off on the second half of the deposit, as we couldn’t let them move in yet anyway. So, we collected the $200, had them fill out an application with the mobile home park, and signed some preliminary agreements. We’ll meet next week (after we have the Title) to collect the rest of the down-payment, sign the contracts, and let them move in.
If the deal goes through as expected, we will have purchased the home for $2000, sold it for $4100 with $500 down and financing the other $3600 @ $250 per month for 16 months. This will give us our principle back in 6 months, a total profit of about $2500 and a yield of over 175%.
Not bad for a first deal that took about 2 hours worth of work…