Real Estate Investing Anatomy of a Deal
I just contracted on a 22 unit MH park, or horizontal apartment complex if you wish, and thought I'd share the ins and outs of the deal while the details are still fresh. This is and is not, depending on your outlook, a no money down deal. First of, the park holds 22 trailers from about the 1950's to probably 1965 being the newest. However they are all park owned and relatively well cared for. I was first approached 1 year ago and offered the great deal of 350k. The income is about $5650.00 per month. I ended up offering $200,000.00 and it stayed on the market. 2 weeks ago the agent approached me again, telling me that the owner was a little more motivated and was willing to take 275k and finance it at 9% 12 yr amortization and a 3 yr balloon. Upon a sit down with the agent and seller over Sunday coffee, I was told that or 250k cash. I went home and mulled it over. Upon doing the math, I discovered something. If I gave him 250k cash and he paid his capital gains in the bank at 2%, in 3 years it wouldn't be worth much. So I offered 250k @5% 10 year amort. 5 year balloon. He countered with 265k @7%.... about what my bank would charge. after 5 years the buyout would be 167k. I decided to counter with 265k @ 5% and he bit. That 2 % = $30,000.00 over the next 5 years. The park will be paid for in ten years. About the 0 down bit. He wanted 27500 down and we settled at 20k. I put it on a credit card that is 6.99% fixed until it's paid in full. Thus no money down. Creative, you bet ya! Fraudulent, deceptive, illegal? Not at all. If you learn to negotiate, and properly structure a deal, it gets easier every time you do it.
Good Luck,
Shawn J. Dostie
Coshocton, (OH)
That's a deal! In five years, the ballon will be the least of your problems. I also agree, there's not even an ethical problem with your transaction, much a legal problem. Unlike the guy who asked for the extra $1000 at the closing table. Nice deal, you'll be rich in 5 years...if your not already
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Sounds like a goody, the only thing I worry about is the five year exploder. I would have dug in a little and tried for holding at 10 year due date.
Is there a vacancy factor? Are you on Septic tanks? What are their condition and are they equiped with leach lines and what is there condition. Yes you can tell these farm boys from Beverly Hills always concerned with the disposal of waste.
Your mobiles are a little elderly, but are in good shape. Whats the maintenance heavy or light?
Your rental rates are they in keeping with the area around. Do other property owners ever do raiding for tenants?
Will you live there or lay it off on a manager?
How close to shops, markets etc.?
Very interested in it as there is a nice man with a car with horns on it. Trying to sell similar properties to the local Theatricaly Challenged Marks.
Calculating Lucius
Finace is my specialty, my art. I'll get er' financed. Balance will only be 133k
Vacancy factor 10% more or less. Not a lot of rentals even in my area $300.00 or under.
City sewer and water
maintenance man gets a free rental.
rates are low but adequate considering the homes
I will not live there, but it is 2 minutes from my car lot
cab fare across town $2.00 yes two dollars
Thanks Lufos,
Shawn(OH)
Is the $67,800 "income" net of all operating expenses, including mgmt., collections, vacancy and contingencies? Does this deal give fee ownership of all 22 pads & personal propt? Since the national lending practices for FHA have kicked in a lot has changed in TX on MH deals...thanks for your input and good luck.