In early July 2014, I found this deal on Craigslist. Here are the details provided in the ad and researched using the tax records:
3 bedroom singlewide in good condition
1 acre lot in a fairly rural area that we had purchased in before
Asking price: $15k and willing to provide owner financing with $5k down
I immediately called the seller and asked to check out the home right away.
The home needed some minor cosmetic updates as well as a new window and exterior door but was indeed in good condition otherwise. The seller informed me that he had planned to start a new job several hundred miles away within a week. With this kind of motivation, I could have made a low ball offer and still probably had it accepted, but I felt that his asking price of $15k payable as $5k down at closing and $350 a month for 28 months (0% interest!) was still a great deal for us.
After both parties signing the contract, we just needed to get this deal closed. However, it was Tuesday and the seller was planning to be several hundred miles away by next Monday. The attorneys I had worked with needed a minimum of 5 or 6 business days to prepare the title work for closing. The seller had mentioned that the attorney he had worked with to purchase the property closed the deal in just a couple of days.
We decided to give this attorney a try and I was shocked that she was prepared for closing by Thursday afternoon. Her costs were comparable to the other attorneys we had worked with, but the speed at which she can close will make her an asset to our team for future property closings.
The closing went smoothly. Just a few days later, the seller wanted us to pay him off early for the $10k that he had financed to us. His moving costs were higher than he had anticipated and combined with a car that was unreliable, he became motivated to deal again.
He asked if we would pay him $7k to cancel the $10k note. I countered back at $3,250. He countered back at $6k. I said no. He countered back a few hours later at $5k. I said no. He then came back a day later and asked for $4k. I agreed to this.
We weren’t looking to pay him off early especially this quickly as we were trying to preserve capital, but we knew that this was a good deal for us and knew that the seller clearly needed the money and wanted to help him.
At this point in our business, we had several contractors that did specialty work for us (HVAC or well pump work, for example), but one general contractor that did pretty much everything else. The general contractor does solid work but tends to overimprove and can be slow when he has other projects going on.
On this deal, he took 3 weeks making repairs (in which he probably should have taken 1 week) and did more repairs than what our tenant-buyers would have expected.
This is just something that we need to continue to improve. By reinforcing our expectations and working with other general contractors who can fill in when our main guy gets busy, our business will improve.
Finding A Tenant-Buyer
I knew that we would be a little slower than normal finding a tenant-buyer, but I was still a little surprised how slow this was.
The property is in the next county over from a county we typically buy in but just by a couple of miles. I knew that the schools are worse but felt like the land was desirable for those looking for a quiet area and was still close to the interstate.
However, the several people that saw it all said that it was too far away. A few weeks later we found a family who met our qualifications and had $8k to put down but felt that they would be paying too much for the rent-to-own. So after some negotiation back and forth, here’s what we settled on.
$29,000 purchase price payable as $8,000 down and 48 monthly payments of $550.00 per month
Closer to owner financing using a land contract instead of our typical rent-to-own contract
We won’t make nearly as much as we would have with our rent-to-own contract, but with having a smaller pool of potential buyers and little capital in the property, we felt that this was a good deal for everybody.