I have been doing Lonnie Deals for about 8 months now and everything has been great. Thanks to everyone who has helped. Now for the current situation and my questions…
I am actively seeking to buy land in my area, preferably that zoned for mobile home use. I will sell the land via contract for deed. Here are my questions:
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When buying land or lots, would you rather own a property on its own or a lot in a park? What are the +'s and -'s for each?
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Besides looking for comps for small parcels in that area, what’s the best way to put a value on a lot assuming you know lot rent for that area?
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If I am selling and not renting the land for mobile home use, should I expect to basically net most of the gross income? Won’t the new owners have to pay for water, sewer service, etc.?
I do have my eyes on a few lots ranging from 10k to 15k in my area. Lot rent in that area is 300-340. Should I be looking for certain cap rates or how should I determine target prices/values?
Thanks!
Are you hoping someone will put a MoHo on your land/site or are you going to put one on there?
I honestly am hoping they put a home on there, but I guess it doesn’t matter as long as they pay. I am just using the typical Lonnie Deal structure to do a land deal. I have researched this a bit and found out there are investors who do this very thing on land only and never deal with the homes. They do it on Rec land, SFH lots, vacant acreage, wooded land, all types of stuff. Any one have experience with this?
The reason I am starting with MH lots and land that would allow a mobile home is because that is what is in demand in my area. I have run some test ads and the majority of people that respond to my “Land for sale, low down, affordable monthly payments” type ads ask for mobile home usage.
I was just looking or tips on valuations, offers, how to structure the deals, costs of repossessing (foreclosing?) on the land, and much more.
“- When buying land or lots, would you rather own a property on its own or a lot in a park? What are the +'s and -'s for each?”
-I think you must mean “mobile home subdivision” rather than “park”. Better to own outside of a mhs due to often crappy HOA’s and their drama, but that said i have a few rentals in mhs’s that cash flow very well even after paying the HOA dues and i would buy more at the right price.
“- Besides looking for comps for small parcels in
that area, what’s the best way to put a value on a lot assuming you know lot rent for that area?”
Use your own judgment as to your market and what return is good enuf for you.
’ - If I am selling and not renting the land for mobile home use, should I expect to basically net most of the gross income? Won’t the new owners have to pay for water, sewer service, etc.?"
Yes you will net most of the income. You will still need to remember to file the proper tax forms showing the interest received and that might mean an accounting bill. Also keep a reserve for any legal fees in case your buyer defaults.
It sounds like you have a pretty good handle on what you want to do already and are seeking confirmation. Are you saying you can buy developed lots that will rent for 300-340 for 10k? If so i would call that a “great” deal in my market.
Tracy
The lots vary in price from 10k-15k depending on how much development has been done. The ones I am eyeing are in communities and I will have to ask about restrictions, HOAs, etc.
I am also considering doing some mailings to find landowners who don’t have much use for small parcels of land, preferably those that are MH friendly. If I can buy at a discount and sell on terms, I think I can add another type of investment to my Lonnie Dealing. Just wanted to know if anyone has had experience or heard of this method.
Thanks for the answers so far guys. I might jump in and do a deal or two and report back.
Caution, HOA rules might get in way
Make sure if your lot/parcel is included in any HOA governed area because HOA rules might forbid rental or contain other restrictions unknown.
e.g. I once bought a house in a new sub-division that was, unknown to me because of my ignorance and naivetee, governed by HOA and its rules.
I tried to erect a fence closer to a street than HOA rules permitted and had to tear out some concrete gate-post foundations I’d poured.
This is just one of the reasons every RE buyer needs to clearly state in his RE P&S Agreement that the RE is not in a HOA or if so he’s agreeable to all its terms…and the title policy will state if HOA exists.
This is just one of the several reasons its wise for the newbie to use a “buyers agent” RE Agent when buying first house as that REA must, by law, know his local law and what a buyer should watch for…and if seller has a REA already, and your P&S Agreement so states, Seller’s RE commission must be shared with YOUR REA.
[QUOTE=widemanb;885665]I have been doing Lonnie Deals for about 8 months now and everything has been great. Thanks to everyone who has helped. Now for the current situation and my questions…
I am actively seeking to buy land in my area, preferably that zoned for mobile home use. I will sell the land via contract for deed. Here are my questions:
-
When buying land or lots, would you rather own a property on its own or a lot in a park? What are the +'s and -'s for each?
-
Besides looking for comps for small parcels in that area, what’s the best way to put a value on a lot assuming you know lot rent for that area?
-
If I am selling and not renting the land for mobile home use, should I expect to basically net most of the gross income? Won’t the new owners have to pay for water, sewer service, etc.?
I do have my eyes on a few lots ranging from 10k to 15k in my area. Lot rent in that area is 300-340. Should I be looking for certain cap rates or how should I determine target prices/values?
Thanks![/QUOTE]
Comparing single lots to multiple (income) lots is dangerous at best for the investor. It is a standard practice to not cap rate income on a single rental income stream such as a lot or home. Use other comparisons such as comps, tax assessments etc. to get a ball park idea what this property might sell for should you need to unload it quickly. From there you can work your numbers to make sure the deal will profit you.
Work your numbers backwards just like you would your paycheck. You know how much will come in each month. Then take out all your expenses (for the property) and see what is left.Would that amount be worth your time, risk and money? If so then negotiate to buy it at an even better price if possible and move forward.
You asked about the owner’s paying for water bills etc. and all of that would seem standard practice but be sure to protect yourself and your deal in the contract. You want to make certain you know what you are getting into and the risks involved, set aside some cash to rectify potential threats and have the mechanisms (attorney’s and system) in place to retake the property if/when things go wrong.
For instance, you might want to look further and find out (based upon your question) if electric and water bills go unpaid by your buyer, would you be required to pay them before having these utilities turned back on? Would liens like this attach to your property? In most cases maybe not but there are places and depending upon how you structure the deal, you could be stuck with these bills. Is it much to worry about? Probably not, providing you act quickly and it might be sufficient reason for you to re-take possession of the property to sell again.
You are probably on a good track with this idea. Just keep doing what you are doing and ask what problems you might face, adjust your risk (and thus your required reward), find the means to control and remedy those risks and get to work.
Tony
After a few offers and shopping around a bit, I think I have my first land deal. I am buying at 50% of what the owner paid 5 years ago and at 35% or so of the current comps in the area. I should be able to finance at 110-120% of market value, similar to a LD, just a new asset.
I guess my main question is the next step. I have the owner sending me a signed sales agreement. They have the deed and they want to meet me within a few days after I get it and review it. I have never bought a piece of land before, but given this one is pretty cheap I do not think spending much of any money on closing would be appropriate. I am comfortable with the risk as long as I get some guidance by someone who has closed some land deals on their own without the assistance of an attorney/title company.
Is it as simple as them giving me the deed and me filling out a new deed and recording it? Any help is appreciated as I don’t have lots of time left before I gotta close!
P.S. I can back out for ANY reason, and I made sure to put that in the contract just in case. 
I would still pay to have a lawyer or a title company handle the closing paperwork. Consider it the price of an education / training so you can more directly handle future deals.
If you get the paperwork wrong, the present owner will still appear to be the owner.
If you feel the deal is too cheap to be worth the legal work, is the deal too cheap to worry about losing what ever you pay and then expect to make when you sell?
Maybe the price you think you are paying is not the full price as there are costs you just have to add in. Maybe you can get the seller to pay some of the costs.
You may be ok with the risks as you know them, but this could be a case of not knowing what you don’t know.
There are all sorts of liens that could be recorded against the property, that only a full title search will reveal.
Do you have experince as a title searcher?
A title search and an atty can force the seller to pay off any liens at closing as well as allow you to get title insurance.
Oh I know the seller has probably told you he owns it free and clear, and that “he don’t owe nobody nothin”.
I have just sold a property that would not have been even “saleable” if it had not been for having a good title insurance policy that covered an encroachment issue.
Please dont bypass this step…Please…
Tracy aka Tarheel T, not an atty, and not giving legal advice
If you guys bought a small parcel for 500 bucks you would insure your 500 investment for 400-800 dollars? This seems insane to me. Say every 1 in 10 deals I can’t own/sell because something comes up. That means I am out 500 10% of the time, or a expected value of -50.
Other scenario I spend say… 500 on insurance EVERY time on a 500 investment. Now I never have a deal go bad BUT my basis is now 10k instead of 5k, a 5k difference. I know this is extreme, but I am talking dirt cheap little lake lots here.
How about a 99 buck online title search that covers like 50 points (judgments, liens, etc.). I think this could be feasible since it wouldn’t cut into my margins too bad.
The deal at hand is 1450 bucks. In my original post I said I was comfortable losing this amount, and I still am provided I save 500 bucks or so per deal on my basis AND only lose a property to crappy title or something 10% of the time or so. I know the 10% of the time is just a guess, but I really think my options are…
A. Perform a basic title search myself through the recorder of deeds for under 50 bucks.
B. Pay an online company 100 bucks per deal to do a basic search.
I don’t think I will need title insurance for this cheap of property, nor do I think my buyers will demand it either. Yes, some portion will, but I will let them pay for it at that time IF they really want it. For sale as is and I will quit claim it, not offer a warranty deed. Still looking into it, but that is what I have read so far as well as heard from an attorney.
I did talk to the people at… http://www.titlesearch.com/
Sounds like this might be worthwhile for 100 bucks/property.
I’d NEVER buy w/o T Ins. or info
When I buy I insist on T ins paid for by Seller.
And I make S swear in affidavit that title is clear.
Then when I sell it costs me just peanuts to have same T pol brought current so I can prove to my buyer that he’s getting clear title.
If S is unwilling I won’t pay as much and I’ll get enough title info to satisfy me that there’re no current liens.
I’d NEVER buy w/o T Ins. or info
When I buy I insist on T ins paid for by Seller.
And I make S swear in affidavit that title is clear.
Then when I sell it costs me just peanuts to have same T pol brought current so I can prove to my buyer that he’s getting clear title.
If S is unwilling I won’t pay as much and I’ll get enough title info to satisfy me that there’re no current liens.
