In this article I will be covering an advance mobile home buying technique. The idea is simple to understand and beneficial to both sellers and investor/buyer/you. The purchase strategy is called the Partnership Offer and it was developed from me losing money by passing up numerous deals that were good, but not great.
Let me paint you a picture. Very recently a real estate investor I am helping brought me a mobile home deal they were working on. The investor had spoken with the sellers, filled out a seller's Questionnaire, went to see the property, verified repairs, and now she was stuck at what to offer the seller.
Here is the catch, this investor had less than $500 to get started with.
The mobile home in question is a 3/2 1987 double-wide without any liens, inside a family style mobile home community with minor cosmetic repairs needed (less than $200 total), appliances are included plus 2 decks and a shed. The sellers are asking a sales price of $12,000, recently discounted from $14,000. Once purchased by an investor and correctly marketed this home can resell for over $25,000 with monthly cash-flow payments of approximately $450 for 60 months. The sellers have already moved into a nearby apartment building and are tired of making lot rent payments on a home they do not want. The sellers will take payments for their equity. The sellers are motivated but not desperate and do not want to betaken advantage of.
An overview of the Partnership Offer
The sellers and you have a meeting of the minds. The ultimate goal for the seller is to sell their property quickly, make the most amount of profit, and do both these things with ease. The partnership offer requires the seller to add you as co-owner to the Title(s) or preferably a Personal Property Trust. Once this process is completed at your expense you may begin cleaning and making any repairs to the home you deem are necessary for resale to a long-term tenant-buyer.
A long-term tenant-buyer can be defined as a low-risk owner that agrees to pay you a move-in fee and monthly payments for the equity of the home up to 120 months.
You will then use your expertise at locating tenant-buyers, pre-screening tenant-buyers, and management to sell this property to your end-buyer. You will be reimbursed your expenses (I.e. Lot rents while you owned the home, repairs, materials, water, electric, gas, etc) before the sellers sees profit, then split the remaining monthly profit 50/50 or whatever percent you negotiate with the seller.
Criteria for Partnering with Sellers on Real Estate Deals
Home requirements: The property can be a mobile home or traditional site built home. The property should have considerable equity (pull comps). This technique works best with more desirable homes. Perhaps the seller has not even marketed the home to properly attract buyers. The property may have cosmetic eye sores. Avoid homes that will require costly repairs, extensive curb appealing improvements, code violations, or other money pits. The property may or may not have a preexisting mortgage. Look for homes that you believe are just a few inexpensive fixes away from a retail sale.
Seller requirements: The sellers are very motivated to sell, but know the value of their home and demand a fair price. Sellers will not have the liquid cash to cover the repair costs needed for a fast sale. Owners may be living out of state. The preexisting mortgage(s) or late lot rents may be in default, this could be a reason for the fast sale. The sellers may NOT continue living in the property once you agree to help. Sellers must be willing to wait until you re-sell the property for their payday.
The Process: Once you have established that the seller and property are good candidates for partnering you must have a meeting of the minds. A specific contract should be created to explain which parties will be responsible for which costs, how profits will be divided and how you will be compensated for your time and experience. Due diligence should be performed before adding yourself to ANY property deed/title.
I advise using a Warranty Deed/Grantor's Deed to place the home into Land Trust or Personal Property Trust prior to adding yourself as equitable owner. Using a Trust will not cause seasoning issues later down the road when your buyer is attempting to locate conventional financing. It is important that you, or your trustee, are named on the deed before you place any money into the home or start marketing the home for sale.
At this point you should have only spent a minor amount of money adding yourself to the chain of title. The sellers should be moved out of the home by now. Bring the past due mortgage(s) current and/or past lot rent payments to insure the home does not slide into foreclosure while you are trying to sell it (try to split this cost with the sellers). Remove, replace, and repair any cosmetic damages that may detour a potential buyer to pass on this property. Spend a few hundred dollars increasing curb appeal, hire a Realtor, and start marketing the property for sale by yourself.
One important thing to remember is, by adding yourself as part owner you are not mistaking yourself as a Real Estate Agent and practicing without a license.