Posted by Donna in AZ on January 03, 2007 at 14:49:27:
What a nice post - that made my day!
Donna in AZ
MH on land - not sure how to proceed - Posted by Donna in AZ
Posted by Donna in AZ on January 03, 2007 at 06:15:11:
My first deal closed yesterday! Nice feeling - thanks again for everyone’s help.
I got a call yesterday from a motivated seller - has a DW 2000 MH 4 bd 2 bath on 1 1/4 acre of land about an hour from where I live - home is affixed. He’s moved to another state and has two mortgages now. He rented the MH for $1,250 a month but got bad renters and now the home needs some walls repaired and carpet redone. Current asking price for home and land is $175,000, but is negotiable. I believe he owes about $125,000 on it. Zillow has the property valued at close to $300K, but I don’t necessarily trust Zillow values.
I can do 80% financing for a purchase price of $125,000, but that will take all my available cash, so I could approach the seller about a carryback as well.
I’m not experienced enough to know how to go about valuing this deal. My sense of it is the value is in the land, especially if it is splittable. My idea would would be to rent the MH for two years, then move it off there, split the land, and sell it on notes. By then I would plan to have a piece of land closer to move the MH to.
How would I go about valuing this? Would my first step be contacting the zoning to see if the land is splittable? Any input would be appreciated - I’m a little overwhelmed but don’t want to throw a possible opportunity away.
Thanks in advance -
Donna in AZ
Re: MH on land - not sure how to proceed - Posted by Tony Colella
Posted by Tony Colella on January 03, 2007 at 09:44:56:
We explain in detail how we value land/home deals and how to approach them in our book, “Investing in Mobile Homes with Land” that is sold here.
While a simple post cannot cover everything in the book I hate to respond with “buy my book.”
Here is a couple of ideas to consider based upon your post.
At such a huge debt load will the property cash flow? Do you know that market well enough to be certain that this guy was not charging too much rent? What is a good, quick rent to good tenant rent rate?
You say that you would like to move the home in 2 years and split the land to sell on a note. If you are borrowing 80% LTV on this deal I highly doubt the lender is going to allow you this option. They are going to want the collateral to remain intact and include a due on sale clause.
Investors have tried skirting that clause using a variety of methods but usually only when they are buying from someone else (who’s name remains on the mortgage). Attempting to ignore the due on sale clause on a loan in your name is a terrible business plan. You want access to more deals and more cheap bank money. We gain that by building a track record and trust.
Even if you could split the land (be sure to check with the planning commission and private covenants before you buy) you have to wonder if raw land is going to sell at such a price that you not only cover your huge mortgage but also make a profit.
That moved double wide will run you quite a bit of money to move and set up somewhere else (between $8,000 and $10,000 in my area depending on how much work needs to be done at the site you move it to, how much decking etc. you put up).
If your 20% down will take all your cash as you posted then this deal is unsafe to begin with. We all need reserve funds for repairs, vacancies etc. Not too mention you live an hour away which means you will have to pay for repair folks to respond to calls for you which will cost you more. Even if you make repairs yourself there will be times you cannot respond in time from that distance (broken water lines).
Seller carry back financing is great but as a second position loan would likely require a higher interest, shorter term which mean higher payment in a deal that is already very skinny.
These are just a few of the concerns I see from what little I have read in your post. That’s why I do recommend the book if you decide to go further with this deal or other land/home deals. Please protect yourself going into the deal so that you can be here to grown with us all in this business.
Best Wishes,
Tony
Re: MH on land - thanks, Tony - Posted by Donna in AZ
Posted by Donna in AZ on January 03, 2007 at 11:08:13:
Tony, thanks so much for your response. My sweetie purchased the “Investing in Mobile Homes with Land” book and I have started reading it, but as with Lonnie’s books, I will read it front to back at least 3 times before even thinking about doing a land/home deal.
I almost didn’t post my question because I felt I didn’t know enough to determine whether it was a deal worth pursuing - and I was right! But, I am learning that a motivated seller does not always equal a good deal.
I’ll keep reading and learning, and hold on to my cash - I’d rather not make a bad deal.
Tony, again, thanks for your feedback - the help from this forum is truly a blessing.
Donna in AZ
I too think you are making the best… - Posted by Gary-Oregon
Posted by Gary-Oregon on January 03, 2007 at 14:08:59:
decision. I do admire your thinking process though. Don’t quit thinking like that, and soon we will all be listening to you instead of the other way around. LOL