Option to purchase? - Posted by Donna in AZ

Posted by Steve-WA on December 02, 2006 at 17:27:31:

exclusive or not - what do you want? What does the seller need? Figure it out - as I said, it aint gonna be filed anywhere, do whatever makes you and the seller happy. Ask for exclusive, or let them keep trying - it really doesnt matter - this aint rocket science.

Re: the insurance during the holding period, most of us just self-insure, which means we don’t. short period, shouldnt be a problem. but if something does happen, we eat it. I belive that you will have a tough time getting it insured empty . . . but you may consider geting a landlord policy - its not what you’re really doing, but its probably your best chance to get insured, if you are worried about the hold time.

Option to purchase? - Posted by Donna in AZ

Posted by Donna in AZ on December 01, 2006 at 16:29:21:

I found a 2/2 in a 55+ park with very motivated sellers. They have moved 150 miles away, had the home listed with a broker for 4 months and had it sold for 7K cash twice but both deals fell through. I’m pretty sure I could get minimum 4K cash out of it (don’t want to carry a note in a 55+ park), and the seller will sell to me for 2K.

I talked to the PM and I can’t buy it because I’m not 55, and and don’t have a dealer’s license. I mentioned finding a buyer that is 55 and then buying and reselling simultaneously, and the PM didn’t have a problem with that.

I then talked to the owner, and he’s fine with me buying and selling simultaneously - he just wants his problem solved.

At this point, should I do an option to purchase the property for 2K, with the right to show the property? If so, does anyone have any option forms they use?

This seems like a great opportunity, but I am a newbie and don’t trust my ideas, because not all of them are that great!

Any and all feedback is much appreciated -

Thank you -
Donna in AZ

Option notice - Posted by John Merchant

Posted by John Merchant on December 07, 2006 at 11:49:18:

Just understand that there’s really no place to record such an option that’s going to put the world on notice, like you’d get if you recorded an option on real estate.

When I’ve used an option for a MH in a MHP I’ve taken a copy right over to the manager so he/she is immediately aware I’ve got an option and nobody else should be showing up claiming to be “the buyer”.

option form - Posted by Steve-WA

Posted by Steve-WA on December 01, 2006 at 18:37:49:

ernesttew.com

left frame, click the “Free Download” button

scroll down right frame until you get to “Option Agreement - (for rental property)”

Tweak that; that’s what i use

Why not carry the note? - Posted by Dr. B.(OH)

Posted by Dr. B.(OH) on December 01, 2006 at 17:54:31:

Donna,
Your option-simultaneous sale sounds ok to me as long as you can get the keys to show it. If the PM ends up not approving any of your potential buyers because you are only short the option money.

-I’m not sure why you wouldn’t want to carry a note for 55+ folks. All my over 55 folks (not in a 55+ park) have been my best payors.

ps. Sorry, I don’t have an option form for you.

Happy Trail(er)s,
Steve

Carry the note in 55+ parks - Posted by Steve_AZ

Posted by Steve_AZ on December 01, 2006 at 23:16:29:

Hello Donna,
I work 55+ parks in the east valley. Although I prefer cash, I don’t have a problem carrying a note for buyers in my parks.
In the senior parks we have two different types of customers:

  1. Snowbirds-mainly pay all cash.
  2. Middle-age working people that need affordable housing.
    It’s the second type of customer that I mainly carry a note for. Many of them have some credit hiccups, mainly doctor bills, that generally doesn’t disqualify them from qualifying for the park or getting a new car loan, but they can’t get a loan on a mobile home. That’s where I come to their rescue by offering a “reasonable down payment and flexible terms”. I have even bought a home that the customer found and financed it for them, at a reasonably inflated price, of course.
    As many of the very knowledgable investors of this forum have stated, AZ RE is very unique, especially mobile homes. What I do is not a true Lonnie business model, but after looking at way too many crack houses in family parks, I decided that I was going to have succeed or fail in the senior parks.
    Your concern about a buyer just walking away from a home when summer arives is founded, that’s why I do a net lease on all homes sold on a note. Makes it much easier to take control of the home back. The majority of my customers that are paying a note are working people, so they live here year round. All they want is affordable housing that they can eventually call theirs. On every note I carry, I collect lot rent, taxes, insurance and note payment in one monthly payment from the buyer. Just to make sure everybody gets paid on time.
    I have had many managers ask me if I was old enough to live in their park, but when I told them what I do, most of them had no problem with investors and they then decided I didn’t have to be 55 because I wasn’t going to be living in the park. Many park managers don’t even require me to sign a lease the first time, just a rental agreement which is on a month to month basis.
    Remember we are looking for motivated sellers, which you have seemed to find, we are also looking for parks with management that is motivated to work with us. I hope this post has helped. If you have further quetions, just ask.
    Regards,
    Steve
    PS: If you work west and north Phx. I may be able to send you some leads.

Re: Why not carry the note? - Posted by Sailor

Posted by Sailor on December 01, 2006 at 18:49:28:

I would love to carry notes for the 55+ crowd. If you are worried
about a buyer dying before the note is paid (& remember, 55 is
only old to those who haven’t yet reached full bloom), then do a
L/O so you can get the MH back easily. In fact, getting it back is
the best thing that can happen, 'cause then you get to raise the
price & collect another down payment. Seniors take better care of
their homes than younger folks, & they often make improvements.

Tye (who can’t even remember 55)

Re: Carry the note in 55+ parks - Posted by Donna in AZ

Posted by Donna in AZ on December 02, 2006 at 11:22:17:

Steve, thank you - your post is extremely helpful. Thanks also for saying if I have additional questions, to ask. I do have a few -

  1. Regarding net lease - I don’t have a dealer’s license or LLC set up yet, so title would be in my name. If there are issues my assets could be targeted - is this a founded concern?

  2. Can the Lease & Option forms be used directly from Ernest Tew’s website, or do they need to be modified for Arizona?

  3. Have you been able to use Lonnie’s forms straight from the disk, or have modifications been needed for Arizona?

  4. Have you needed any of the documents notarized in your dealings?

  5. The PM for this particular deal is ‘by the book’ - seller said she likes her power - after meeting her I agree. She will only work with me if I buy and sell simultaneously. Since I’m not 55, she won’t let me buy and hold it. She’s not very motivated to work with me - said ‘I am in the business too’ - so my thoughts were to do this strictly as a learning experience and try to sell it for cash. Is this a good approach to working with this PM?

Thank you for the offer of leads - I am in North Phoenix, so am targeting the North part of Phoenix (including N east, N central and N west). With being a newbie, I might not work the leads as well as an experienced person, but I’d be happy to try!

Also, I have a lead for a family (not 55+) in Chandler/Apache Junction area that I’d be happy to send to you, if you are interested.

Thanks again -

Donna in AZ

Re: Why not carry the note? - Posted by Donna in AZ

Posted by Donna in AZ on December 01, 2006 at 19:01:35:

The reason I didn’t want to carry the note was due to reading the archives about 55+ parks in Arizona. The impression I got was that it’s very common for people to buy in the fall/winter and then when it gets too hot the next summer they leave, and it’s hard to resell until fall comes around again, and I’d need to plan on covering the lot rent for the summer months.

Maybe I’m worrying too much?

Thanks,
Donna in AZ

Get your dealer’s license - Posted by Dealer AZ

Posted by Dealer AZ on December 02, 2006 at 22:36:26:

Get your dealers license first. If not, you are violating state law. I had to get it, you need to get it.

Re: Carry the note in 55+ parks - Posted by Steve_AZ

Posted by Steve_AZ on December 02, 2006 at 20:58:48:

Hello Donna,

Regarding the net lease-Your assests can be a target in a lawsuit, always insure your mobiles. I use a local agency here in the valley. A LLC can help protect your assests, but you should ask someone knowledgable about LLC’s. There are many people here far more qualified than me. You don’t need a LLC to do this deal.

Lease & Option forms-I have modified Earnest’s forms to fit my situation. For instance:

Triple-Net Lease: Lessee is responsible for all taxes, insurance, lot rent, maintenance and repair on the Mobile Home. When lot rent, taxes or insurance become due, such costs will be paid by the Lessor from the escrow collections. The amount collected each month may be adjusted periodically to meet the cost of taxes and insurance coverage and lot rent increase.

I also changed the late fee charges to reflect the “industry standard” for the valley. I have changed Lonnie’s forms to fit my situation also.

documents notarized in your dealings?
Just the title.

The PM for this particular deal is ‘by the book’
Sounds to me this PM is not going to be fun to work with, be wary of her. A cash deal would be the only way to structure this in my opinion. I’ve never done a simultaneous close, no help there.

As to trading leads, I’ll email you my phone number so we can do that via the phone.
Regards,
Steve

LLC et al - Posted by Steve-WA

Posted by Steve-WA on December 02, 2006 at 11:32:51:

looks to me like you can do the LLC pretty easy - forms all online, just fill 'em out & expedite em in - $85

http://www.azcc.gov/corp/filings/forms/packets.htm#llcs

as to the rest - just make the forms fit, and GOTC. An option form is simply an agreement between two parties - you really dont need Ernest’s form, but gin up something that does what you want it to - use Ernest’s Option form for ideas as to owhat to include, i.e., advertising, signage, length of time, etc.

Notarization - if you’re really bugged about it, then get it notarized - its not a big deal, and usually not required if the doc is not getting filed somewhere official. BUT since this PM is so “by the book”, she will probably pee all over herself if she sees that you get stuff notarized - so just do it.

Remember, this is more of a people business, than a forms business.

Re: Why not carry the note? - Posted by Sailor

Posted by Sailor on December 01, 2006 at 19:12:50:

If you get a large enough down payment, that should cover lot
rent. I’d also try to negotiate that w/the PM.

Tye

Re: Why not carry the note? - Posted by Steve-WA

Posted by Steve-WA on December 01, 2006 at 19:10:26:

you’re probably worrying just enough - sounds like a good thing to take caution against.

The AZ market is unlike other markets, just like the CA market, FL, and a few others. AZ is unique. I’d get my info from fellow AZ investors, and take with a grain of sale anyone’s advice who doesn’t work in that market. It’s not to put anyone down, but it’s just THAT different. I certainly wouldn’t want you to take MY advice -

Re: LLC et al - Posted by Donna in AZ

Posted by Donna in AZ on December 02, 2006 at 12:35:17:

Steve, thanks for the info - I’ll get started on the LLC right away.

I apologize for so many questions, but I want to keep going so I will ask them anyway:

Regarding the option - is it supposed to be an exclusive option, or do the sellers normally also have the option to try and sell it themselves?

This one relates to a MH I’m looking at in a family park, and will probably buy if the price is right:

When I buy a MH, during the time I hold it and am trying to resell it, how is insurance handled? Can the seller’s insurance be transferred to me? I know I want my buyer to get insurance, but I’m not sure what I need to do during the holding period.

Thanks again for your help - I can’t tell you how much getting help from experienced people enables me to keep moving forward -

Donna in AZ

Re: Why not carry the note? - Posted by Sailor

Posted by Sailor on December 01, 2006 at 22:15:18:

You are correct, Steve. I used to own AZ property, & it was very
different from any other RE I’ve owned. I made as much renting
for 3 winter months as for a 12 month lease. It’s been a long
time, but thinking on it, all the rentals were furnished. I bet
snowbird buyers would want a place furnished, too. Amenities
were important. I haven’t even been to AZ in more than a decade,
so I don’t know how it has changed. Any AZ folks who can give us
some insight?

Tye