Case Study: The Mobile Home with the Ghost Loan
Years ago, I came across an abandoned mobile home within close proximity of another mobile home I owned and was renting out. and sent a letter to the owner on record. A few weeks later, the owner’s daughter called me back and I spoke with them briefly about the property before making an offer. As it turns out, the mother had taken ill, so the daughter packed up her mom’s essentials and moved the mother to where the daughter lived. They left non-essential items in the trailer where, they had been several years. I asked them how much they wanted for the mobile home and the daughter said, “Give us $5,000 and you can take it.” Fine.
I immediately sent her one of my Option to Purchase contracts, loaded with conditions, while I investigated the title. You can download a copy of the Option to Purchase contract I sent by clicking here. If you notice, the contract is partially handwritten and I put very little down on the property. When I got the prelim back, there was an open loan for $34,000 included in the report that, from the looks of the report, had been active for 20 years.
What to do when things get sticky
I spoke to the owner, and she assured me the mortgage had been paid despite the fact that it was still showing on title. So I had to clear the title report and figure out a way to remove the cloud. If you don’t know how to clear a title and remove the cloud, you’re in the right place. These are just the types of things I will teach GIC members.
If you don’t know how to clear title, you will be forced to pass on deals that could end up being quite lucrative. The title company does not clear the title for you. It is your job as an investor to do that. If I had been unable to eliminate the $40,000 mortgage showing on title, the property would not have been worth a dime.
Once I was sure I could clear the title, I opened escrow, and immediately flipped the property in escrow to another buyer for $39,000. After paying the title, the tax lien, and closing cost, I walked away with about $20,000 without doing anything to the house besides putting a dumpster and clearing it out for about $500. I included a copy of the escrow instructions assigning my position in escrow to the new buyer for $20,000 profit. You can download the Assignment of Contract here.
Real estate is the only business in the world where you can make $20,000 from investing $1.44 (the cost of the stamp to send the letter, and $1.00 down payment).
You can do the same things I’ve done. You just need someone to coach you through the process. That’s why GICDealFinders.org exists. Once you are a member, you will be well on your way to building wealth.
Image Credit:Mobile home by Quinn Dombrowski