but havent you had to pay a charge (interest on your mortgage) greater than this over the 10 years by borrowing the money from the bank?

you gain the equity in proportion to how much of the house you have paid.

i suppose the problem here is that the seller is now reliant on the buyer making good on his contract to pay the annual amount, so rather than the bank having to judge whether the buyer is eligible to make good on the payments, it is instead the seller. hence this system would not work.

oh well.

john

Yes, in the beginning. But at the end of the term the compounded inflation is greater than the premium you pay on the loan, I believe.

Anyway, this won't work because I'd like my equity.

Spex,

In your opinion, what is the most difficult part of buying/financing mobile homes? I would assume its either finding the right deals or finding someone to buy?

Maybe its time for a trip report?

This is in a 55+ community. Space is $318/mo in a nice part of town (ugly but old farts live there and really nobody else, plus golf). New laminated floors, new electrical panel with 2 extra 20 amp circuits, concrete and awnings on both sides. Includes stove, refrigerator, microwave, dishes, pots and pans, silverware, linen, couch, dinette with 4 chairs, desk, various small tables and shelves, patio furniture, bbq, etc. Park has shuffleboard, pool, hot tub, club house, yadda yadda yadda They are asking $2500 and need to sell so Im thinking $2k cash. What do you think?

In the US banks are not allowed to own RE outside of what it takes to conduct normal banking buisness. I'm not sure exactly how the laws works, but my understanding is that the government is trying to keep banks from gambling on RE investment.

I don't buy Mhs for resale. So I dont know the answer. However, I'd assume that the biggest problem is dealing with deadbeat buyers.

Definitely want to hear what spex thinks about this.

The home looks very nice compared to what I've seen in my parks. My first question is how much can you sell this MH for? That number will determine your offer more than anything else, so its important to know.

Second, I'm concerned that you'll have problems from the park. Have you spoken to the manager yet? They may not allow you to buy the home unless you are 55+.

Third, I'm concerned that the 55+ restriction will cause you to hold the home longer, which means that you'll have higher holding costs. The park does sound pretty nice though. This must be in AZ or FL, no?

Fourth, from the pics, this looks like a 12x60 or so. Its a smallish type of home. Most people - even if they live alone - like to have two bedrooms. So if its a one BR you might have even longer holding costs.

I'm not saying that its not a deal, I just want to be sure you've thought through all that the angles.

The 55+ thing has me worried too, Im going to speak with the management on Monday. I posted an ad on Craigslist last night for $7000 and woke up to four emails asking what the payments would be, if I had pictures, etc. I dont know how many beds or baths yet, Im going to find out soon. I think if the management will let me buy it Im going to. Yes its in Arizona, there are tons of 55+ communities here.

If you advertised for one day and got 4 responses, then I'd say buy it. Just be sure the manager knows that you are just like a bank. You won't be living in the home.

spex

I am in the process of buying a CO-OP on long island. I am putting in $9,000 as they require 10% downm and taking out an $86,000 mortage for 30 years. I figured since I am obviously never going to pay it off, that it is smartest to keep the monthly payments as low as possible. I need a place to live while I finish graduating college and since I can afford it, I didn't want to waste money renting. Once I graduate and get a good job, I will probably be looking to sell this. I know there is a ridiculously low ceiling on these as far as investments go, but I am not so concerned with making good money on it. I am more concerned with recouping the $500/month common charges when I sell it. I guess what I'm asking is, in your opinion, can/will the price of this go up ~6K/year and is what I am doing smarter then just renting an apartment while I finish school. If it would help in your analysis I could tell you my net worth, just PM if that is the case.

You forgot the huge transaction costs that you'll have to pay to buy and resell. You're looking at 3% to buy and 8% to sell under normal circumstances. So unless you plan to stay at least 5 years its normally not worth it to buy real estate.

Besides that, I doubt that 6% appreciation over the next few years is realistic. Obv it depends on your market. But lenders are wary right now and who knows how long that is going to last.

On top of that, consider that the vast majority of your first 60 payments goes almost entirely to interest. So you're not creating very much additional equity in your first 5 years. That means that your mortgage payments each month will be roughly break even as compared to rents. Its just that you're paying a bank rather than a landlord. Plus, who knows how the market will be in a few years. You don't want to end up holding a property that you don't use and can't rent out for months and months.

All in all, unless you can get a super good deal, I'd hold off buying anything until you are a little more settled.

ok thanks...two follow up questions

1.) would keeping it for five years pay off alot more then two years? is there any other benefits besides transaction costs

2.) what other alternatives do I have besides renting an apartment where I'll basically be pissing away at least $1,000 a month and never see it again


edit: also something to keep in mind, this is where I plan on living, its not just an investment so I don't think I can avoid a loss but if it was free to live people wouldn't be poor...i think my primary concern is to minimize losses for the next 2 years instead of trying to earn...unless you have some suggestions I am not aware of

$500 per month common charges? that's seems very high.

you might want to try to find a place where you could rent out a room to offset the mortgage payment like a small condo. I had friends who did that when just starting out.

just remember that when something breaks it's on you to fix it. sometimes renting isn't a terrible proposition until you are ready to commit to living in one place for awhile.

long island syndrome

Ive def been considering this...but I had trouble finding someone that I feel comfortable living with that could pay the rent consistently and I dont wanna just find some stranger to share it with

the whole commitment thing is whats getting me...I dont plan on having a wife/kids for a long time...so having a small co-op could suit me for longer then I am anticipating

Not necessarily. Over five years you hope for some appreciation and a little bit of principle pay-down. But there is no guarantee that the property will appreciate at all.

another consideration is that rents are likely to be cheaper than your monthly payments. And you'll have other costs, like taxes, insurance, and maintenance.


I dont' see any alternatives. If the chioce is either rent for 3 years or buy for 3 years and resell, IMO, renting is a better choice.

If all you're trying to do is minimize loss, then I'm not really sure what the best thing to do is. The mortgage interest is deductible. So are some of your closing costs. And you don't have to use a realtor to sell, which will save you a chunk of change. Run the numbers and see.

are you planning/hoping on staying in long island after school?

classmates? def be careful here. Friends are hard to evict.

You sound like you want a safe route and the safe answer sounds like renting.

As far as #2 you are looking at this wrong (and I think most people do) Everyone who rents thinks they are pissing money away to some rich person but thats not really true. You gotta do what will give you the best risk adjusted net worth total in a few years. If you are only going to live there 2-3 years you'll have bought a 95k condo, piss away $500 a month on common charges, $500 a month in mortgage (like said before that all goes to interest really in the first years), repairs and etc. Lose 8% of the total value when you sell on something that might or might not be worth more in 2-3 years. Expecting 6-7% yearly return on a CO-OP is high.

Steve

Yes, I agree with all the posters. I don't know what the obsession with buying home's is for a lot of people. I don't understand the 'pissing away money' argument either. You're pissing away money if you buy for 3 to 5 years.

They say they don't want to pay the landlord but they're fine paying the bank, contractors and the goverment but more.

I have done a deal sort of. I moving out of my house but instead of selling it I am renting it out.

Details:

Rent = $1000/mo.
House Value: 105,000 - 115,000
Mortgage: 72,000
MP: 430

If I sold it after fees I might have ~ 25,000

NOI = (1000 * .45) = 550
Cash Flow = 550 - 430 = 120/mo | 1440/yr
COCR = 1440/25,000 * 100 = 5.76%
Cap Rate = (550 * 12) / 72,000 * 100 = 9.2%

Some pluses to this deal for me. I have lived in this property for the last year and a half, so I am familiar with it. I will manage the property myself and gain some land lording experience. I know the COCR and Cap Rate are lower than suggested in this thread, but this seemed like an easy way to get into REI.

Any comments on my analysis are greatly appreciated.

The deal is fine. Its better to hold a property if you can rather then selling it in this market. Youll most likely have to sell it below FMV to get rid of it today.

Im not sure how you figured 45% of GOI for expenses. While this number is a good basic starting point you should really narrow it down to a more accurate number. You lived in the house so you know potential repairs that might come up, you have taxes, insurance info, water bills, garbage etc. Maybe you already did all of this and came up with 45% but a lot of times expenses maybe lower.

I agree with Giddy. This deal is fine. The most important thing is that the deal meets your guidelines and works toward your goals. I don't have any problem with your rationale for keeping it.

Where are you that you can buy a place for $115k that rents for $1000?

A lot fo places this is possible.
Most of Florida minus Orlando and South Florida I know for sure. Just wholesaled a 4 bed 2.5 bath 2000 sq ft home with pool , hot tub, big screened in porch, 2 blocks fromm the ocean in Merritt Island, FL for 100k. This property will easily rent out for $1000 month most like closer to $1500. (property needed 10k in work)

In South Florida this property would wholesale for 250k+ and retail for 400k+

Location, Location, Location

Talking about wholesale...

I was driving around looking for a potential deal at this area last weekend and found an empty house with paper on the door saying, "Not allowed for occupancy" or that nature. I sent a letter to the owner who lives more than an hour away, and he called me saying he wants to sell the house.

If I end up buying this house, I want to have an option of wholesale. My questions are...
1. What do I need to tell the seller, if anything?
2. Do I need to put some special clause to the contract?

Thanks