02-18-15 - tipsThis was an off-market property that an investor friend had contacted us about.  They invest solely in mobile homes and were not interested in the private land under the home but knew that we might be.

Here are the details:

  • Late 80’s 2 bedroom 2 bathroom mobile home in fair to good condition.  The home needed some floor work around the front and back doors but was in liveable condition.

  • 1.8 acre lot that previously had two mobile homes on the property.  The lot included one well, two septic tanks, and two power poles.

  • The property was located in a highly desirable area that we already had several homes nearby.

After talking with the seller, I found out that the land had an assumable loan with a balance of about $12k.  Even though the interest rate was around 11%, assuming the loan would allow us to preserve our capital and still make money.  The seller was willing to sell the land for $15k with our assuming of the land loan at $12k and paying her $3k at closing.

The investor who had contacted us about the deal was willing to sell the home to us for $6,000 on a rent-to-own with just $1,000 down.  (I don’t recommend buying on an unrecorded rent-to-own contract unless you have an existing relationship with the seller prior to the deal.)

If you’ve read our other deals, you know that we try to buy and rehab properties for less than $20k but we are willing to break that whenever we can preserve a significant chunk of our capital.

Before we get into the rehab and renting of the home, let’s talk about the loan assumption.

Loan Assumption

The land loan was held by a local real estate developer who had subdivided the property originally and then sold it on owner financing to a retail buyer.  What we discovered is that the company would assign its mortgages to a local bank that would lend money so that the company could continue buying more properties.

For our particular property, it was held in a $3 million loan package with 17 other properties.  So if the land developed defaulted on its payments, the bank would take back all 18 properties.

Since several years had passed since the bundle of mortgages were assigned to the local bank and the balance should have been paid down significantly, we knew that it would possible to release our property as collateral.  In order to convince the land developer to get the release, we offered to pay an extra $2,500 towards the loan’s principal at closing.  This satisfied the developer and they were successful in getting the release.

Finding A Tenant-Buyer

Closing went smoothly.  We knew that it was possibility that we would have to do some repairs, but due to the desirability of the area, we were able to sell it “as is” and collect $1,500 down and $600 per month.  We did pay a tenant-buyer who lives close by to clean up the home for a couple hundred dollars.

Moving a Second Home onto the Land

With having all of the utilities already on site for a second home, we approached our investor friend to see if they had an interest in moving another home onto the second site.  The investor would do all of the work in moving the home onto the land as well as finding a renter/buyer and we would simply owner finance the land or collect lot rent.  We also wouldn’t charge any lot rent to the investor when the home is vacant so long as attempts are being made to find a tenant-buyer.

Our plan was to subdivide the land and sell this smaller lot to the second tenant-buyer on a rent-to-own contract.  However, the county would not allow us to subdivide a flag lot.

We’ll actually make more money and have less capital in renting the land versus selling it on a rent-to-own contract, but it’s harder to find a tenant-buyer.


At this point (end of 2014), we’re collecting $800 in revenue on what has been about a $7,000 investment so far.  We’ve really enjoyed investing in these kind of deals where one main home makes the deal strong, but an additional revenue source (additional lot to rent or even another home) exists or can be created with minimal investment.

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