Land Contract...Newbie Qns...
Howdy all,
I am curious about the art of "Land Contracts"... What I want to do is purchase low cost older (Pre-1980) manufactured single wides that site on lots in my area, and then sell these homes to buyers on land contract terms after I clean them up, for a profit... I know that people will buy most land contract notes, but want to know if there are people that will buy these notes shortly after they are created?
Let's use a scenerio that I am tossing around.
Purchase 1968 single wide on a private lake access lot for $25,000...
Sell home on land contract for $29,900, w/$3,000 down @ 9% interest...
What kind of a market is their for me on to sell this note? How much can I expect to get from it?
Try to be gentle with your answers, I am a stark naked newbie on this subject, but have some cash, a couple properties ready to be purchased, and think I can lure in some suckers, I mean buyers on properties like this, using these terms...
would love to hear from people out there that have done this, or are doing this currently...
Thanks in Advance,
Irelands dark prince
A few points to start...
Are you paying cash for the property when you buy? In other words will the note/land contract you are creating be in first position?
A 1968 unit is pretty old. Some note buyers will have a problem with this.
You are looking at about 10% down. As we are talking about a manufactured home there could be an issue as that is not much of a cash position for the borrower. Ignoring this for a second...
What is the legal status of the property? In Oregon if a manufactured home is installed on a foundation and the wheel/axle is removed then the structure is consider real property and not personal property. You no longer need a license from the motor vehicle folks and lenders will look at the land and structure as a normal property. What are we talking about here?
What do you expect the land is worth? This is less of an issue but I am curious to see what is the split between the structure and the land.
John
Quote:
I am a stark naked newbie on this subject, but have some cash, a couple properties ready to be purchased, and think I can lure in some suckers, I mean buyers on properties like this, Thanks in Advance,
Irelands dark prince
I forgot one other thing.
Why are you thinking buyers of this deal would be suckers? I know you were partially joking. I also sense that the joke is only partial. If the deal really is not that good you might be wasting your time.
To broaden up the conversation a bit, if you have some cash and want to make some money in property have you consider other ways to make money? Something that might be more solid and less complex. In this deal you appear to be dependent on buyers who are not getting such a great deal and lenders who will cash out your paper when the security is less than optimal.
Many folks on the board can come up with other ideas for ways you could invest. Maybe this is something close by or low hanging fruit but I thought I would ask. To me it just does not smell right and the numbers imply limited profits.
John
Notes like this will be worth 40-50 cents on the dollar in my opinion. And it will be hard to find a buyer.
On an old mobile home note, the least I would charge would be 12.75%. Any less and you are giving it away....
Usually you should try to get 100% profit going into this kind of deal. So buy your home for 12,000 or be able to sell it for 50,000.
Get a book called "Deals of Wheels" by Lonnie Scruggs. Read it over and over until you know how to do this. Save yourself some money and read it before you do your first deal.
Good luck
Ireland,
The single-wide is virtually worthless unless there are rules in place that prevent the placement of new homes. So what you are really selling is land, and the land should be worth at least $23,000 if you are to pay $25,000.
I don't agree with those who say you need to double your money. Why not see if you can get a bank to loan some money against the lot (80 percent), then clean it up and offer it for sale for about $38,000 with 12 percent interest and a fairly low down payment, less than $1,000. Pay the bank off over 12 or 15 years and have the customer pay you over 20 or 30 years.
Sell on a lease-purchase so that the customer is an immediate deadbeat you can get them off in a hurry. Since the trailer isn't worth much you aren't at risk of them ruining the property.
If you don't think you can get $37,500 for the property on credit then you should pay less for it.
Doubling your money is great, but I've found a 50-60 percent markup is fine for this type of property. The interest differential will quickly work its magic for you. Just make sure you are paying the value of the land and not of the junk trailer.
p.s. You'll need to let this note age for at least a year before you'll get a decent price on a sale. I hate to sell notes, since I am in effect paying an effective interest rate of about 18 percent. If you can possibly hang on to these notes (and service them properly, which is hard work) you won't live as well but you'll be worth a lot more in the long run.[ Edited by FHurdle on Date 05/03/2004 ]