Posted by Jennifer on January 22, 1999 at 14:23:11:
for $284?? $100 yes, but $284? If the electric co is requring such a large amount based on their credit then maybe the seller should rethink selling them the mobile.
Closing in on my first MH deal but… - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 09:47:21:
I was wondering how some of you veterans in this business handled the state sales tax scenario. The local DMV office is going to charge state sales tax at the time you transfer the title. The sales tax will need to be paid up front on the final price (say an additional $375 on your sale price of $6,000 plus any other paper work handling fees).
If you are trying to get someone into your home fairly cheap for them ( a low down payment), I would think these fees would work against that. Also, what is your experience with the lot rent situation? If the buyer passes the credit check for the park, will s/he have to prepay lot rent (like when you rent an apartment). If so, add up my required down payment, plus state sales tax (and other fees) in my mind it would appear that the prospective buyer would have to come up with a good sum of cash. Maybe I am overlooking something here (perhaps I should re-read some of Lonnie’s material)
Any input would be appreciated.
Thanks
my way or the highway. - Posted by David S
Posted by David S on January 22, 1999 at 19:37:10:
Hi Dean.
I don’t have a problem working with buyers on the downstroke, but I limit that help to 90 days. I also want a “note” on something other than the mh; car, boat, furnature, tv, vcr, etc. I have also taken post dated checks along with the additional note.
If they don’t like the idea, I don’t like taking the added risk, period.
David S
Re: Closing in on my first MH deal but… - Posted by John (KS)
Posted by John (KS) on January 22, 1999 at 14:19:59:
The parks I am dealing with don’t require a deposit really. They ask for $140 as a deposit, but they give the first month’s lot rent ($140) free. It works out fine. As for title transfer and sales tax, I don’t give them the title till they are paid in full. This way, if they default on the contract, it reverts to rent. It is easier to evict someone than to foreclose. On insurance, I suggest if they are strapped for cash to go get a 3 month policy which is cheaper that paying for a whole year up front. Hope this helps.
John (KS)
Re: Closing in on my first MH deal but… - Posted by Dirk Roach
Posted by Dirk Roach on January 22, 1999 at 14:06:46:
Hi Dean,
Jen and Tim are on the right track here. Just factor that in. Also what type of repairs are you planning on doing? And why?
Personally I would shy away from the free space rent for a month. There’s such a thing as being a nice guy/gal but you don’t want to set up a prescient. Even though as a lien holder I am responsible for any missed rent, I like to keep in the buyers mind and perspective that he/she is entering into an contractual agreement with the park to rent space. And that they need to fulfill that obligation or it will affect OUR obligation.
I also don’t like to be in the position of begging someone to buy my mobile home. I’M the one solving their problems, not them solving mine. Now don’t get the wrong idea, I’m not snooty about it, just confident.
Anyhow good luck, stick to Lonnie’s Books, and reread Tim’s post in this thread.
And keep us posted on your success,
Dirk
Re: Closing in on my first MH deal but… - Posted by lyal
Posted by lyal on January 22, 1999 at 13:14:08:
Verify that sales tax will be assessed first. In my area (MN) I was pleasantly surprised to find out that there is no sales tax charged on mobiles (whether in a park or on land…doesn’t matter).
Good topic - Posted by Tim (OH)
Posted by Tim (OH) on January 22, 1999 at 10:59:53:
This is the same thing I’m running into. Not that I cant’ handle the situation, but the first and last months lot rent, sales taxes, etc. weigh heavily on the transaction. The new owner needs $500 for first months lot rent and security deposit, $300 sales tax, title transfer fee, insurance, etc. The way I approach the situation it thus:
The $1,000+/- is necessary up front (thus a required $1,000 cash)for the lot, taxes and insurance.
The next month the regular lot rent is due along with the first MH payment.
The point is they either have to have $1,000 or I will finance about $500 of the additional costs and add more than that amount to the sales price.
You have to realize and explain that in order to get into a 2 bedroom apartment (that rents for $400 per month) it will require $800 in first months rent and security deposit. But, what will they have after three or four years, besides a lot of rent receipts which I pay $1.49 for?
I am willing to finance the additional costs because the additional months lot rent would severely impact my return, but financing the additional costs only enhance my returns. As Lonnie says “know your market”. Know what sells, how fast and what the people with the CASH down payment are buying. When you make an offer on a 2BR/1BA 12x60 you KNOW you are going to sit on it for a while and have to finance the additional costs, so you take that into account.
This is a good discussion and I would be interested in how other MH investors handle this matter.
Tim
An idea - Posted by Jen NE
Posted by Jen NE on January 22, 1999 at 10:28:00:
If it works out with your yields and time frames, how about fiancing some of those costs within the MH note? Raise the price for the appropriate amt, pay some or all the fees. The payment would only be slightly higher for this.
Also, Lonnie says that he sometimes throws in the insurance or a month’s lot rent to save the deal.
I am not an expert, but thought this idea may work for you.
Re: Closing in on my first MH deal but… - Posted by Rev. Jimmy Mack
Posted by Rev. Jimmy Mack on January 22, 1999 at 10:17:10:
I know what you mean. I have a deal working now where they will have to pay their $500 down plus $300 sales tax, $141 insurance, $135 lot rent deposit, $135 lot rent and $284 deposit to the electric company. It figures out to $1,495. I’m having a hard time selling this unit because of the fact that they have to come up with so much money. Maybe I ought to put in the paper $1500 down & $299 per month. I wouldn’t get as many calls but maybe the ones who do call would have the money. I’ve shown the MH 4 times already but nobody has had the full amount needed. I wonder how to handle this!
Re: Closing in on my first MH deal but… - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 14:29:36:
Now that’s something I didn’t consider!! So you are saying that if your intersted party can’t meet all of the upfront costs (namely paying the sales tax in order to get the title changed) that you will let them move in with an agreement that if they truly want to OWN it, this must be paid? What about liablity to you? If the MH is still in your name and they are living in it, is that exposure?
Just curious…(the lights are getting brighter!!)
Thanks for the input.
Thanks Dirk… - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 14:24:44:
No offense taken. About the repairs though, even Lonnie states that he’ll do some “minor” repairs (clean-up, repair soft spots in floors, etc.) but will avoid them if possible.
I was just trying to reconcile these “hidden” costs with how a prospective buyer may react. Just judging how this is going, I know that, as a prospective buyer having called on a mobile home where the owner was offering to finance it for me, I would probably feel frustrated knowing that paying JUST the down payment is not going to get me into the home.
I guess though, as long as these are discussed from the onset, it shouldn’t be a problem.
Thanks for the input…
P.S. - Posted by Tim (OH)
Posted by Tim (OH) on January 22, 1999 at 11:03:45:
I DON’T name the down payment amount (ala Lonnnie), but I want ALL THEY HAVE. One of the most important lessons I learned from Lonnie is “Never make statements, ask questions”. It seems to me that ensures the necessary committment for me to trust them with my asset.
Tim
Re: An idea - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 10:54:22:
Yes, I thought of that. But I am just getting started and I would be tapping my credit card for the purchase anyway. If I add this figure to any needed repairs and advertising, I’m spending more than I really want. Besides, if the owners don’t work out, I’ll have to repeat the scenario.
I’m not at all opposed to free lot rent for the first month. I think it is a good way to attract would-be buyers.
I just want to make sure that I know what its going to take to turn a deal.
Thanks for your input,
Re: Closing in on my first MH deal but… - Posted by Jennifer
Posted by Jennifer on January 22, 1999 at 13:22:56:
Why is there a $284 deposit to the electric company?
Just Curious,
Jennifer
Re: Closing in on my first MH deal but… - Posted by John (KS)
Posted by John (KS) on January 22, 1999 at 15:22:27:
My lawyer suggested that I treat it like a lease option. I am selling it to them, but it is not entirely theirs until I get that last payment. I have had to get some deadbeats out and they are easier, faster, and cheaper to evict than to foreclose. If the title was in their name I would have the hassle of getting it back also.
I have another situation that just arose. The first deal I did, I signed the title over to the new owner. She was very good about keeping her insurance paid and her payments always came in on time. then one day a payment didn’t come, her phone was disconnected, her insurance was cancelled for non-payment, and it was obvious that she was not living in the MH anymore. She disappeared. If I would have held the title I would have just gone in like my contract says. After 30 days of non-payment and the MH is vacant, the contract is default and I can take possession, but since I didn’t have the title, I couldn’t do anything about it. I finally found her yesterday and we have a meeting scheduled for tommorrow to get this resolved. She says she has a solution that will make everyone happy. I am very curious what may be on her mind.
For safety’s sake you could put the title in an escrow account and when the contract is met or defaulted on, the title will go to the appropriate owner. I checked on an escrow account, it is only around $8 per month in that situation.
Re: P.S. - Posted by MilNC
Posted by MilNC on January 24, 1999 at 09:59:54:
Please explain your reasoning when you say you want all that they have.
Good point… - Posted by Dean
Posted by Dean on January 22, 1999 at 11:07:41:
I forgot about that!! There is a saying (I think it Lonnie coined it), “The first person to name a figure loses”.
Thanks for the input…
Because… - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 14:16:57:
If the prospective buyer has credit that is less than stellar, most utility companies require a deposit.
Re: Closing in on my first MH deal but… - Posted by Freddy Wells(OK)
Posted by Freddy Wells(OK) on January 23, 1999 at 09:04:11:
On all of my deals, I put the title in their name and I am listed as lienholder. I also have the DMV to put my address on the title and the title is mailed directly to me wher I file it and give the title to them when the loan is paid in full. My contract also states that I hold the title until paid in full.
If I have a customer who I think is a safe risk, I will prepay the 1st years insurance and add it to the note. I figure it is another good way to get a good return on a little more money and if the home burns down, I KNOW it’s insured and not THINK it’s insured.
Insurance companies will also allow monthly payments and the type of people you are dealing with can usually swing a $40 to $50 a month insurance premium, but can’t come up with $500 or $600 in addition to the lot rent, your down and title transfers all in one chunk.
Hope this helps.
That’s interesting… - Posted by Dean (IL)
Posted by Dean (IL) on January 22, 1999 at 15:40:08:
but one thing I’m curious about (on the first deal you made where the “owner” disappeared), were you not the lienholder on the title?
If its true that MH’s have titles like cars, then if you are the principal lienholder on the title, it would come back to you after it makes its round to the DMV (or in my case the Secretary of State). Yes, the title will reflect that the buyer is the owner, but you have a claim on it.
At least, I know when I financed my car through the local bank, they hold the title (which is in my name) as the lienholder. I bet that if I skipped a few month’s payment, I would find my car repossessed and I nice blot on my credit report.
Thanks for the input John. You are teaching me alot about this.
DC