Thursday, March 25, 2010

Case Study: Taking A Mobile Home Back

In last week's post , I talked about having the long term (quality over quantity) in mind (versus the short term) when doing Lonnie deals.

As an example, here is a home (see pic above) that I recently had to take back.

It's in a well established, high end park with very strict qualifications - they really take the time to screen. This is in a very desirable park, they even have a waiting list. A lot of families want to live in this park. When a home comes up available, it is filled right away by a quality buyer. These are the types of parks I like to work in.

In any case, I bought the home 2 years ago. It's a mid 1990s, 2 bedroom/2 bath home, 16x70, in immaculate condition. I bought it from a grad student looking to move out of town - her parents bought it for her 9 years ago and she was finished with school. She wanted a quick sale and wanted to deal with someone who she knew would be serious (do what they say they would do).

The park manager told her about me, we met and after some negotiation - we settled on the deal. I bought it for 8k. (Note: Going into the deal, I already knew the market - I knew this could sell in the lower to mid 20k range (which it did), knew the down payment and monthly payment buyers in the market would be wiling to pay).

Soon after I closed, I found a family to fill the home. It took about a month's worth of marketing, then the screening of the buyers with me and the park, and the closing paperwork. The buyers put down $1500 (they also had to come up with a deposit and 1st month's lot rent on top of it), the cash flow was in the $400/month range for a period of 10 years.

These buyers were never late, they kept the home in great condition. The park manager even called me to tell me they re-built the deck and did some landscaping in the yard - it was very nice. They were true homeowners.

After 2 years, they informed me that they wanted to live out in the country and wanted to buy a new home on land. They told me this before they started looking and gave me plenty of notice before their closing. They left the home in great condition.

With the move-out, I worked with the park manager to coordinate things - they left the keys with the park manager. I had the park manager go through the home to make sure everything was in order - she told me it was even upgraded with new flooring on the inside.

Before I even had a sign on the home, a family that I've been working with for a couple years now (who also want to live in this park) called me asking about the home. I asked them how they knew it was available. They told me they've been going into the office asking the park manager what's available and found out that way. (These people were very serious about wanting to live in this park. They even filled out an application and paid the fee a year ago without even having a home to buy. They had already been approved - they just needed to find a home).

Now, this is the funny part. This same family saw the home 2 years ago and at that time told me it was too small for them. Well, I reminded this family this is the same home - they wanted to see it anyways. So, we met and immediately they wanted it. I asked them, "Are you sure? It's the same home you saw 2 years ago." They told me it looked much bigger and they really wanted it.

Remembering what the park manager told me about the upgrades made by the previous buyers, I noticed the home did look bigger. The previous buyers opened up the living room area a bit - there used to be a mini bar eating area, this was gone.

Here are the before pics:

And, here are the after pics:

In any case, this new family immediately filled out the paperwork they needed - they also had to re-apply with the park (as some things could have changed). They got approved, it took about a week. The terms were the same, another $1500 down (they also had to come up with a deposit and 1st month's lot rent on top of it), and again it cash flows in the $400/month range for 10 years.

Now, I've heard horror stories of Lonnie dealers having to take homes back. I'm glad this went smoothly. Looking back on it now, I can truly see it is the type of park that makes a difference in attracting the types of buyers I prefer to work with.

Happy investing!

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