MH Deal....What Do You think? - Posted by D.Mills

Real Estate Investing
1

Posted by John (KS) on October 26, 1998 at 15:04:06:

Are you planning on renting or selling on contract each home? Are the homes worth on an average $4400 each? Sounds like they may be judging from the years of the homes, but have you looked at them? Figure out what they are worth if you wanted to sell them and still make a profit. Sounds like you would be paying to much, but I am fairly new to this, haven’t seen the homes, and I don’t know what homes sell for in your area.

Assuming she still owes the bank, here’s an idea. Figure out a way to give her some kind of down payment, take over her mortgage payments, pay her 1%/month on her equity at 9% interest. She will be paid off in about 15 years. And you could refinance the mortgage payments with the bank. This may reduce the money per month you are planning on paying out, which should result in more per month in your pocket.

2

MH Deal…What Do You think? - Posted by D.Mills

Posted by D.Mills on October 26, 1998 at 14:43:24:

I have located a possible deal in the Eastern part of North Carolina. The owner, the wife of the former owner who is now deceased, is selling 16 mobile homes on lots that she will maintain ownership in. The specifications are as follows:

Location: Eastern North Carolina

Units: 16 MH Units broken down below
7 on one piece of land
4 on one piece of land
2 on one piece of land
2 on one piece of land
1 on one piece of land

Price: $70,000-All Cash Sale
$75,000-All Cash Sale

Rents: Each Rent is currently $300

Lot Rent: $100/Although Current Owner will get this

Terms: Owner will finance 45K at 10% for 5 years
Remaining 30K yet to be determined

Taxes: Unsure, I estimated $800 per unit annually
in my pro-forma

Water: Tenants pay except for six units (appx.
$35/month/x 6 units x 12= $2520 Annually.

Trash: Tenants responsibility

Ext. Lights: Current owner will pay for 10 years

Septic: Current owner will pay to have pumped out for
10 years

Year Built: 85, 81, 85, 75, 75, 72, 73 -Lot 1
77, 78, 86, 73, -Lot 2
81, 84 -Lot 3
72, 73 -Lot 4
77 -Lot 5

Vacancy: Currently one unit vacant, but a potential
tenant is in the process of being qualified

I modeled appx. 1,800 in expenses per unit per year for five years (the length of the financing). With those numbers, the owner financing 45K at 10% for 5 years and the remaining balance at 8% for five years, I think this might be a good deal. My cash flow at the end of year one, assuming no catastrophes, will be somewhere in the range of $10,795, $13,442 in year five and approximately 29,568 annually once I have satisfied my debt. That is assuming a total annual payment of 11,473 on the 45K at 10% for Five Years and $7,300 for the remainder at 8% for five years. Total Annual Debt= $18,773.

My question is should I approach the owner about financing the entire 75K at a higher rate (so that it looks better to her)? I could point out the taxation on the 30K couldn’t I? This might make her more willing to finance the balance.

In closing, have I missed anything? I could use any advice out there on how to structure this deal to be better on my end, plus, I don’t want to have to locate an additional source of funds.

I am currently trying to finalize an Option to Purchase that the owner has agreed to give me for a small amount of money. Should anyone be interested in purchasing that Option, I could sure use the quick cash in exchange for a cash cow!

Thanks.