Here's the details of Offer #10. Its a double wide mobile home in a decent part of town. The gal is not really motivated, she's still in school and wants to move soon. Her husband is in Texas. I don't know if they are getting divorced or not. The plan is to go under contract tomorrow and we will close in about a month. By understanding her needs, I helped seal the deal by offering to close when she's ready.
I hope this deal will be a text book Lonnie Scrugg's deal. He's made mobile home investing glamorous. Here's how it works. You buy a mobile home cheap and re-sell to a buyer that is looking for seller financing. Leverage is the key here, you can charge 10, 15, even 20 percent interest when you resell to these guys. When you run the numbers its apparent that yields can be pretty high. The buyer only really cares about monthly payment.
I don't know why the gal hasn't looked at the prices of other mobiles in this park. If she looked on the other side of the park, she would find that one is selling for $14k which is smaller than hers!!
Let's look at the numbers. Below, I ran two scenarios. The first is a simple fee sale which I would make $6100. The second is if I resold on seller financing which I would make $10,476. Not bad considering I would have only $7900 into it.
The monthly cash flow is $273 dollars a month. Shoot, I could buy a house for 100k and put way over 20% down and may not get that much cash flow. This is an important oberservation. I am not getting appreciation but I am getting cash flow.
With older mobiles, the depreciation has hit a threshold, so in 5 years, your mobile is still worth about the same.. So, I stay away from the new ones. They depreciate faster than a car.
There is a little concern on the total monthly payment to the buyer. This park has a lot rent of $307 so the buyers monthly payment will be close to $600 w/ utilities. This seems a little high, so I may need to be flexible.
Another interesting point is I got this one from a birddog. I am going to give him a $500 dollar commision. Unfortunately, he was not happy that he was getting his money only when I close the deal (the first week of September).
So a yield of 33% is not bad at all. If I did just 7 more of these, I would have over 2k in passive income for several years. That would be cool..
I decided to talk to the park manager about this transaction when I've got it under contract. I know some parks are catching on to this investing strategy, so I wanted to make sure the park did not make her an offer. The biggest unknown in this deal is the park manager. I hope I can do what I want and she will work with me. If I can't work with her, and need to back out, I will let the seller know in a week. I have a cancellation clause that takes care of this.