Posted by John Behle on May 06, 1999 at 24:33:40:
You finance the park for the amount of money needed to buy the discounted notes.
I would appreciate your ideas, input on funding MH (Park) - Posted by Mark P from Dallas
Posted by Mark P from Dallas on May 04, 1999 at 16:28:42:
I am negotiating the purchase of 26 Mobile Homes in a Park. I am buying the homes only, I rent the dirt for $50 a month. The purchase price is good and owner will carry financing for five years allowing a positive cash flow. They have good books, I am meeting with their CPA for a detailed review. THIS is my challenge.
They want $60,000 down. I can come up with part of it, and my IDEA was to create the note that they carry so that I can help them sell a portion which would be enough to provide the $60,000 down. CAN THIS WORK?
What might I be missing? Any better way of doing this?
Thank you so much for your help.
Create a first and a second - sell the second - Posted by John Behle
Posted by John Behle on May 04, 1999 at 18:31:31:
OPTION 1 - Create a first and a second. Create the first at the price and terms needed to generate the $60k needed for the seller. Seller keeps the second. You are in zero down.
OPTION 2 - Borrow $60k in a new first loan. Depending on your values, you may easily be able to do this. What is the property worth? The seller carries back a second.
OPTION 3 - Paper Trade - You find notes - even some mobile home notes - Lonnie deals or whatever that you can buy at a discount and trade (use as collateral - hypothecation) for your note to the seller. He has the notes as collateral and you have the park free and clear. You “crank” the park for the money needed to buy the notes. Again, zero down.
With the seller financing you structure, see if you can get a “Backsiding paper” deal together. This is a process used by land developers where they “pay paper with paper” as they sell lots off on seller financing, they trade it or “pay” it to the seller (the one that sold to them) for reduction on the note. You can do the same with mobiles and Lonnie deals. You could do this with a park and end up with half the park free.
What would be needed to “sell the second?” - Posted by bkarnes
Posted by bkarnes on May 05, 1999 at 17:40:52:
I like the idea of using option #1 for a deal I’m working on.
My question is: Other than the note itself, what would be requested of the Seller by a Notebuyer in order for the Notebuyer to close on this type of sale? I’m assuming the Seller has already closed with the Buyer; as opposed to the Notebuyer being involved from the pre-closing stages.
I’ve seen the documentation required by some Notebuyer’s programs when I’m the Seller in a double closing situation. They are a big part of the show from the pre-closing stages; i.e. loan docs, appraisals, etc.
In the example above, would a reliable set of comps do for the appraisal? Would a title update be requested. What would a Notebuyer typically ask for in order to buy a note after the closing took place?
Thanks.
“Crank??” - Posted by MarkHOUTX
Posted by MarkHOUTX on May 04, 1999 at 20:14:13:
John, What do you mean by " ‘crank’ the park for the money needed to buy the notes"?
Normal “Due-diligence” - Posted by John Behle
Posted by John Behle on May 06, 1999 at 17:31:59:
Each notebuyer is a little different. Some will shy away from “newly created” deals or Simultaneous Closings. Others may shy away from 100% financing deals where the owner carries a second. They work best if the first is at a low enough LTV that the notebuyer feels very secure. Local notebuyers (not necessarily brokers - buyers) can be one of the best sources. Another is actually working with or creating private investors to do these deals - withing the parameters I’ve discussed on working with private investors. To me that would look like actually forming a corporation to buy the note and having the investor loan money to the corp. against the note (hypothecated).
Now if you just create and sell the note to a third party, they will want to establish value (usually an appraisal), establish the “integrity of title” (Title insurance, and the desire and ability of the payor (you) to pay. That might look like a credit report and a 1003 loan application.
The process isn’t that much different than a loan except that if the loan to value ratio is low enough, they may have much less of a focus on the payor.