Trucks and trailers

Trucks and trailers

 

We just did a land-home deal over in Adairsville. During the course of the purchase, the sellers found themselves in need of a truck. They were moving to Florida after the sale and were planning to live in a travel camper until they could decide where to buy and settle down.

 

They already owned a vehicle capable of pulling the camper, but something went wrong with it a week before closing. The vehicle was under warranty and would eventually be fixed, but the necessary part was on backorder from the dealership and it would be almost a month before it arrived. That time frame didn’t work for the sellers, so they decided to buy a brand-new truck.

 

Trucks and trailers

That thing was sharp! It was beautifully colored, had electric everything and even had that new car smell that people rave about.

 

Our sellers had great credit and were able to get a 6 percent interest rate on the truck for five years. They bought it for $28,500, which made the monthly payment be about $550.

 

Oftentimes, people buy new vehicles because they get the new car bug. The people in our story, however, purchased this truck out of necessity. They needed something they could depend on to move their family and home around without having to worry.

 

But, let’s look at things from a different perspective.

 

We purchased their doublewide for about the same price they paid for the new truck. Let’s set aside the fact that they planned to use the cash from this sale toward a down payment on the property they were to buy in Florida.

 

They owned their property free and clear. What if, instead of selling outright for cash, they had been willing sell it with owner financing? What if they found someone who had $5,000 to put down on the property and could pay $550 a month for the next 30 years?

 

With a sales price of $85,000, when you put those numbers into the financial calculator, mortgage rate comes out to 7.33 percent. (Note: remember to take the down payment away for the purchase price before you enter it into the PV button on your calculator.)

 

Instead of paying an out-of-pocket $550 a month for this new truck they needed, they would have a performing asset that would have bought the truck for them. In addition, that asset would pay them $550 a month for another 25 years after the truck was paid off. That’s an additional $165,000 of income. Or they could’ve used the $5,000 to rent a truck until their other vehicle was fixed and pocketed $550 a month for the next 30 years. That’s $198,000. Not too shabby.

 

Now, this is something that’s cool. Since they had lived in the house two out of the last five years, they could’ve taken advantage of Section 121 of the IRS tax code, which says that any gain on the sale of a personal property is tax-free up to $250,000 for a single person or $500,000 for a married couple.

 

That means all of that $165,000, plus the five years for the truck, would have been tax free!

 

And that’s a strategy you should really consider when selling your personal house.

 

Now, you may find yourself asking, “Can you really sale a trailer on land for that?” The answer is “yes.” Property values are up right now and a doublewide on a permanent foundation can be sold with an FHA mortgage for a similar value.

 

But if your house isn’t on a foundation, you’re going to have to either take a much lower price for cash or owner finance it so your buyer can get a mortgage.

 

Here’s what you do:

 

Offer the house as a rent-to-own home and sell your tenants an option to purchase the house for the same price as one with a foundation. They will pay you about $5,000 in non-refundable option consideration. Rent the house to them for a year. And if they make all their rental payments on time, sell them the house with owner financing.

 

If you were able to do all that, this little deal would have a return on investment of 24.43 percent. And that doesn’t account for the income you would receive for the first year that it’s a rental. (Which brings the return closer to 32 percent)

 

I’ve said it before and I’ll say it again, dollar for dollar, mobile homes are one of the best investments in real estate today.

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.

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One comment

  1. Good article Joey,
    My mobile home rentals are what pays for my retirement and the house I live in.
    I just went through a new set up which involved the county inspectors office (what a nightmare) so I will definitely buy the next one already in place.

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