This seems like a great deal - would love feedback - Posted by Donna in AZ

Real Estate Investing Real Estate Financing
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Posted by Donna in AZ on May 09, 2007 at 16:14:53:

Thanks, Tony and Tim, for such valuable feedback.

I had questioned the Park Sales Person about the ease of selling this home for all cash, and he said that most of the sales there are all cash and it would be no problem - but in retrospect I know that’s more of an exception than the rule. I need to plan on carrying the financing.

I will call the Park Sales Person tomorrow to determine whether it’s a deal I even want to pursue. I’ll find out what he and the handyman are looking for from the deal, with the idea that it will be my deal, not a 3-way split (find out what the handyman will charge for his work and the supplies, and what the salesperson is expecting to get for finding me the deal and working with the park on lot rent).

I’ll then total up the costs of doing the deal, compare it to the profit and how long I will have to carry the financing, and decide if it’s worthwhile. If it does seem worthwhile, I will probably post my estimates to see if there is anything I’ve overlooked.

I definitely have alot to learn!

Thanks again -
Donna in AZ

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This seems like a great deal - would love feedback - Posted by Donna in AZ

Posted by Donna in AZ on May 09, 2007 at 12:35:53:

Here’s a deal that seems great to me - but I wanted to get some feedback in case there are things I’m overlooking.

This is a 3-way deal with me, Park Sales Person, and Park handyman. The reason for my involvement - Park Sales Person can’t buy home since he works for the park (conflict of interest).

1970’s DW Mobile home - seller will sell for lot rent owed ($950). Park Sales Person is working with Regional Mgr to either get home taken off rent roll (no lot rent) until we resell it or get discounted lot rent to be due when home is resold (so no money out of my pocket for lot rent).

Cost of materials to rehab approx $5000 (probably less - need to get detailed estimates from handyman) - handyman will go to Mexico to get appliances much cheaper, and there is new carpet available from another home in Park that can be used. Handyman will do the work with payment for his time (portion of profit) payable when home sells.

Estimated resale price when completed - about $25,000. I will be meeting with Park Sales Person and Handyman next Monday at 3 pm to go over details. The plan we have been discussing is to sell it for cash, and after I receive my cash outlay ($950 for purchase of MH and cost of rehab materials, plus any lot rent to pay), split the profit 3 ways. In this case, costs $950 + $5000 + $600 (3 months lot rent approximate) + $200 (referral fees) works out to:
$25,000 - 6,750 = 18,250 / 3 = 6,083 each.

I guess I could ask for a bigger cut of the profit, but I want all three of us to win, and I’d love to do more deals like this with these two people if this one works out well, plus it gives them a great incentive to get this thing rehabbed and sold.

So, is this as good a deal as I think it is?

Donna in AZ

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Re: This seems like a great deal - Posted by Tony Colella

Posted by Tony Colella on May 09, 2007 at 15:15:50:

I am just curious about your market. Is there a strong demand for a home that old (1970’s doublewide)?

If so, where is the cash coming from?

If financing, have you lined up a lender who will finance the type of buyer your marketing to and for a home like this and in this area?

I too hope it is this easy for you but just want to be sure you are entering into this deal with eyes wide open. One of the biggest mistakes is assuming the one exit will work and basing our figures off of that.

Tony

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Re: This seems like a great deal - Posted by Tim

Posted by Tim on May 09, 2007 at 15:13:42:

I don’t think I would be too interested in this deal. You are putting up all the cash & therefore taking all the risk, but only getting 1/3 of the profit. The handyman is probably getting 3 to 4 times what he would normally charge just for waiting for his check. I’m not sure what the Park Sales Person is doing for their 1/3.

If you decide to do this deal you need to make it clear to both of the other parties that you will be giving them a 1099. Nothing worse than cutting 2 people in for 66% of the profit & giving the other 34% to Uncle Sam.