Welcome back to the third installment of the case study series that describes our mobile home and land deals in detail.
We had found this REO on MobileHomesExpress.com, which lists mobile homes, land, and mobile home and land properties that are owned by Vanderbilt Mortgage.
Here are the numbers for the third deal:
Purchase Price: $17,100
‘08 model 16×76 home with 3 bedrooms and 2 bathrooms on 1 acre in the same town as property #2.
General cleaning and put a new floor down throughout the entire home that we did ourselves
The bank kept the outside central A/C unit in storage so we had to pay for the reconnection fee (much better than replacing one)
Besides the floor work (and the cat urine smell that was clearly the cause of having to put a new floor down) , the home was in great condition. The kitchen appliances were still there and were nicer than the ones in my own house. If they weren’t built in, I probably would have taken them for myself.
Finding A Tenant-Buyer
Because of the nicer home, we decided to ask for $2,500 down and $700 per month, a fairly steep increase from what we had received before.
The call volume was much less than before but we were able to find someone who wanted the home, met our qualifications, and agreed to the price.
The sale of this home looked closer to how we sell our homes today. We sold the home on a rent-to-own agreement while the tenant-buyer rented the land for 5 years. The buyer then had the option to pay for the land over a 3 year period.
The tenant-buyer paid on time every month for about 6 months and then he called in May 2013 to let us know that he had lost his job.
He wasn’t going to be able to pay the rent before our eviction date so we offered him cash for keys ($250 to leave the home in broom clean condition), which he accepted. The home was in excellent condition. It looked nearly brand new. Finding the next tenant-buyer wouldn’t be too challenging.
Finding Tenant-Buyer #2
There actually wasn’t a ton of interest this second time. We had dropped the price to $600 per month and $1,500 down while only getting a few people to go by over a couple week period in June 2013.
We eventually found an older couple who could just afford the monthly payment (we require that they make 3x the monthly rent) and needed to make the down payment in a few payments. These were some obvious red flags but we decided to take a chance on them, especially since most of their income came from a reliable source, Social Security.
We had several issues with this family with the worst being their refusal to switch the electricity into their name that led to this article:
They left 5 months later in November 2013 after not being able to afford the rent. We had offered them cash for keys, but kept delaying moving out. We started the eviction process and they finally took the hint.
They had left the home really dirty, but overall in good shape. We hired one of our tenant-buyers to clean up the home in exchange for one month of rent. This strategy of hiring out hard-working tenant-buyers to do general cleaning has worked well for us so far. It definitely beats us doing the cleaning ourselves.
After a week or so, we were ready to find the next tenant-buyer.
Finding Tenant-Buyer #3
This time, we decided to ask for $1,750 down and $625 per month. We had a few lookers and even one who stood us up at the closing (that’s the reason we schedule our closings at restaurants that are close to our personal homes.)
Just to show you that we still make plenty of dumb mistakes, our tenant-buyer showed up at closing with a personal check. (We require all of our tenant-buyers to bring cash or certified funds for their down payment, but I think we had forgotten to tell her). Everything seemed to go fine, but we got notification the next day that the check bounced!
She has since resolved the problem but this was an issue that could have been easily avoided. If we had been patient and rescheduled the closing to another day when she could get cash or certified funds, we would have been much better off.
Revenue as of January 2014:
1st Tenant-Buyer: ~$6,000
2nd Tenant-Buyer: ~$5,500
3rd Tenant-Buyer: ~$1,750
It’s been disappointing that we are on our third family in one year with this one property, but the property continues to cash flow well. Hopefully, the current family will stick around.