Investing in Real Estate for Long-Term Cash Flow
So you’ve decided to add more long-term cash flow passive properties to your portfolio for 2011. You want to get out of the rat race once and for all. His plan is to buy and hold a few properties with little or no debt and high monthly cash flow.
It’s time to get inspired!
He has just finished his meeting with the “June” salesman and starts going over all the facts as he walks away. The mobile home is a 2002 double-wide, attached to a third of an acre of land in a good part of town. The yard is fenced in, all appliances including central air are included and in excellent working order. The house is clean and apart from a slight dog smell in the air and a slight wear on the kitchen tiles, the house is in near mint condition.
You learn that June paid $50,000 cash for the house and land 4 years ago. This amount was her entire life savings, and June has since refinanced the house with a local lender in town. Monthly debt service for June was just $288.10; however, she is now $2,400 behind on her mortgage with the self-service loan company. She currently owes $24,700 of a total refinanced amount of $25,000.
Her goal is to avoid foreclosure and not be thrown out on the street, something she says the lender is threatening to do. He says that he would like to move to a nearby county if possible, but he is also very worried about moving somewhere and not being able to pay the monthly rent and moving expenses. Government aid and his son are the only sources of income he depends on.
Now, you are not the first investor to meet with June and look at her property. However, you are the first investor who really sits down and listens to her problems and wishes. He is also the only investor so far who actually sees a plan to solve both his and her goals.
June is not opposed to moving to a mobile home located in a clean family park in the county she wants. You agree to purchase your mobile home and land subject to the existing mortgage. In addition to this loan amount ($24,700), you will bring all past due amounts up to date. She will also find in June a free and clear mobile home acceptable to move her and her child. June agrees to all terms if you can find her a suitable home, she says she’s not too picky.
Make the solution a reality
You already invest in mobile homes in parks, so you know of a mobile home park with a low monthly lot rent in the county you want in June. Not only do you know of a nice, clean family park with a low lot rent, but you’re about to repossess a nice, clean, free, uncluttered 2 bed, 2 bath mobile home from a tenant-buyer who has been paying you for the last 2 years. Needless to say, you have already recovered all of your money plus many thousands of earnings from the target mobile home.
The story above is exactly how I bought a large mobile home attached to a third of an acre of land without taking any money out of my pocket. The mobile home started generating cash flow on the first day. The names in the following story have been changed to protect the innocent, but all the numbers are real and totally amazing.
Once my previous renter-buyers moved out of target mobile home 2/2, I ran a quick carpet cleaner through the house and turned it over to June. June is very happy with her new home and her neighbors. I also agreed to rent a transport truck and help her move, which I did.
After contacting June’s lender, they agreed to add $100 to her monthly payment of $288.10 until the delinquent balance is brought up to date.
In the same month, I quickly sold June’s previous house to a large tenant-buyer in the next 360 months’ payments with a $5,000 down payment at signing. Now that sounds like a retirement plan to me.
The moral of the story is to look beyond the price. Many other investors had tried to help June without success. The solution seemed so easy at the time. She is kind and discusses all possible solutions with her sellers.
Remember, “Use what you have to get what you want.”
-John Phaedrus