Deals on Wheels Page 2
However, I do have a mobile home dealership license, which is required in my state (and in most, if not all states) to buy and sell mobile homes. But still, most of our mobile home business is done with private parties, rather than dealers.
When we were in the rental business we did everything from plunging the toilets, to making repairs, to evicting bad tenants. You name anything about tenants and rental property, good or bad, (especially bad), and I’ll bet you we’ve experienced it. And believe it or not, there was a time that we actually thought we were having fun. At least it seemed like fun at the time. Funny how time has a way of changing your thinking. It’s hard to imagine now how dealing with tenants, and working on rental properties could have been fun.
Our entire company has always consisted of Joanne and me...we’re it. That’s the way it’s always been, and that’s the way it will always be. We purposely kept it that way in order to have full control of our lives. We have no office hours to keep, no employees to call in sick, and no one to complain to union officials about their rights being violated. And we’ve been able to keep the government involvement to a minimum.
We didn’t want the worry and problems that comes with running a company with employees and all the headaches that go with it. Maybe we could have made more money if we had, but I’m sure we would not have had the freedom, and the fun we’ve had by keeping it small and simple.
Staying in control of our lives, and business, has enabled us to do what most people can’t do. Since we didn’t have a “job,” we were able to stay home if we didn’t feel like working that day. If we decided to lock the doors and take a trip to the other side of the world, we did. So we’ve been able to enjoy not only financial security, but financial freedom. Financial security is a wonderful thing, but without the financial freedom to go along with it, life could be very boring and unfulfilled. If you’re smart enough to make a lot of money, you should be smart enough to spend part of it enjoying life.
So real estate has been very, very good to us, and I don’t know of anything I would have traded it for until I discovered the used mobile home business. But, it just so happened that one morning I woke up and discovered I had come down with a very bad illness...I was sick of tenants. It was then I realized that I had enjoyed as many tenants and rental properties as I could stand. I think the proper term is, “burned out.” I don’t know of any prescription, or pills you can take to get rid of this kind of sickness...you just have to eliminate the cause. And that’s what we started doing, by selling off our rental properties.
We sold most of our properties by offering to finance the sale, the same as we do with mobile homes. We got whatever down payment we were happy with and carried the balance on a note. The payments from the notes still provided us with a check from the property each month, but without the tenant and management problems that we had become sick of. When I discovered how nice it was to get a check with no tenants, no management, and no maintenance problems, I shouted, “Hey, this is all right, I think I’ve found a cure for my illness.”
This was about the time we started learning how to buy discounted notes and mortgages. So we used the money we got from the down payment on the properties we were selling, and started buying notes and mortgages. We soon learned that the note business was a fantastic way to invest our money. And it proved to be a lot better than managing rental property.
We continued buying notes and mortgages, but after awhile found it harder and harder to find good notes in the price range we wanted. It was then I started trying to figure out how I could create, or “make” my own notes. That’s when I stumbled onto my favorite way of making money--used and inexpensive mobile homes.
So, that’s what this book is all about...explaining how we’ve been buying and selling used, inexpensive mobile homes and creating “paper,” or promissory notes. These notes provide us with an excellent cash flow without having to work a job.
It’s our sincere hope that you will be able to benefit from the information in this book and be able to do the same. You are now reading the same book that has started many, many people throughout the country to making big profits in the mobile home business. The opportunities are everywhere if you will learn to look for them, recognize them, and then act on them. But beware, fear and procrastination can be two of your worst enemies. Don’t let them be yours. O.K., let’s get started!
Chapter 1
Why Used Mobile Homes?
When I first started out in this business, I didn’t really know what to expect. I was simply looking for a way to create some notes that would provide good cash flow each month. I had already bought a number of notes and mortgages and realized how nice it was to get a check each month without any additional work. And I had gotten spoiled.
Working on rental properties and putting up with tenants just didn’t seem like fun any more. So now the same question kept running through my mind, “How could I obligate somebody to send me a check each month with no tenants, no management and no maintenance problems?” It was my lucky day when I stumbled into the used mobile home business.
I usually get up around 7 o’clock, wake up around 8 o’clock, and get moving around 9 o’clock. One of the first things I do is to check the classified ads in the local papers. From force of habit I cover the business section and classified ads thoroughly. I’m especially interested in articles about investment opportunities and new business ideas. Even if I’m not really interested in a particular article, or business venture, I still like to read and learn about them in case it might be something I can get a new idea from, or a different technique that I could use.
For several weeks I kept seeing this column that listed mobile homes for sale. I kept looking at these ads until it finally hit me that hardly anyone was offering to finance the sale of the used homes. The only financing being offered was on the new homes being sold by dealers. And that usually meant that the buyer for that new home would have to qualify for a bank loan. So the dealer really wasn’t financing anything. The dealer only did the paper work and hoped that a bank would provide financing for their buyer. There was very little, or no financing being offered on the older homes.
BINGO! After several weeks of reading those ads, the light popped on! Did you ever wonder why it sometimes takes so long for some of us to find the switch and turn on the light? I think maybe we’re all born with a light bulb in our head, but most of us just need someone to show us where the switch is located so we can turn the light on.
It was then I started thinking, “I’ll just bet there are people who want to buy these older mobile homes, but don’t have the money and can’t get financing to buy them.” So I decided to run a test ad. My ad was worded like this, “If you need financing to buy or sell your used mobile home, call me.” And my phone number.
I had my ad placed in the same column that listed mobile homes for sale, because I wanted not only the people that had homes for sale to see my ad, but also the people wanting to buy homes. I figured that if I could reach the people that wanted to buy homes, but were having trouble getting financing, I could generate some business. My idea paid off.
My First Deal
On the third day I got a call from a woman that was trying to sell her mobile home. Her sales price was $6,000 and she had found a buyer. There was only one little problem...her buyer only had $1,000 for a down payment and couldn’t get financing for the balance of the purchase price. His credit history wasn’t bad and he ad a steady job that would support the payments, but the banks wouldn’t make him a loan. (So what else is new, huh?)
The seller was moving out of the state and needed all of her money to make the move. So even if she had wanted to take a note for the balance, she wasn’t in a position to do so. She needed someone to finance $5,000 for her buyer, and she asked me if I would.
Since I wasn’t interested in simply making a loan, I asked her if she would b
e willing to take a little less for the home if I could arrange to work out affordable financing for her buyer. After explaining several possibilities to her, this is what she agreed to do.
She would reduce her selling price by $250, which meant her sales price would be $5,750 instead of $6,000. I then asked her to contact her buyer and see if he would agree to pay $6,250 for the home instead of $6,000, if I agreed to finance the balance with affordable monthly payments .
Both buyer and seller agreed to this offer and we struck a deal. He paid $1,000 down and we took back a note for $5,250, payable $248.98 monthly, 24 months, 12.75% interest. If we look at our chart, we see this turned out to be a 23% yield.
How The Note Was Structured
N
I
PMT
PV
24
12.75
248.98
5,250
Amount Invested And Our Yield
N
I
PMT
PV
24
23.09
248.98
4,750
So when the smoke cleared, the seller had the $5,750 that she agreed to sell the home for, ($1,000 from the buyer and $4,750 from me), the buyer was able to buy the home with $1,000 down and affordable payments, and we had a note with a face amount of $5,250 that cost us $4,750 and a little of our time.
It was a simple little deal that turned out good for everybody involved, and I was surprised at how easy it all went together. But, it was enough to convince me that I had hit on a good way to create or “make” some notes. We were off and running and our life hasn’t been the same since.
We did several more of these type deals over the next couple of months, and after each one, we tried to think of ways to improve on the next. Then I wondered how it would work, if instead of offering to finance other people’s sales, I could just find a good used mobile home that I could buy below fair market value, then run an ad to sell that same home at fair market value, and offer to finance the sale. So we tried that idea and found out it worked much better. By using this technique, we were able to increase our profit and yield considerably.
Each morning I checked the ads for mobile homes priced in the $4,000-$6,000 range and started calling and talking with the sellers. In almost every case I found that the sellers were flexible on their price if they could get a quick cash sale. We were soon buying homes for $4,000-$5,000, and selling them for $6,000-$7,000. By offering easy financing with good terms, we found out there was no shortage of buyers. Business was so good we began to feel like we had the only well in the desert. Things were really starting to take off.
Before I go any further, I should explain that in my area just about all the mobile homes are in parks, on rented lots. It’s almost impossible to find a private lot for sale. There are two only parks in my area that have lots that are individually deeded, the same as a regular residential lot.
It’s very rare that one comes up for sale, and when they do the prices start around $18,000-$20,000 per lot. And I’m talking about a 50 X 100 foot lot at best, not an acre. We’ve now managed to buy a number of these lots which are providing us with a good rental income every month, and with very little time and management problems..
For the cost of just one lot we can do a lot of mobile home deals and build up cash flow much faster. And the best part of not having to buy the lot, is the fact that we only have to put out money for the mobile homes, not the dirt. For someone just starting out and not having a lot of money, this enables them to compound their investment much faster since they can keep their money working in high yield mobile home notes.
Working With Park Owners/Managers
At first I was a little concerned about financing a mobile home on a lot that belonged to someone else. I didn’t like the idea that the lot owner could order you to move it with just a thirty day notice. But after talking with several park owners and managers, and explaining what I wanted to do, I found there wouldn’t be a problem. After all, they needed rent from those lots and as long as we treated them fair, they were willing to work with us.
I explained to the park owner/manager that I would either send my potential buyer to them, or come into the office with them for their approval before I sold the home. Once they approved my buyers application to rent the lot, we would then finalize the sale of the home. And I also advised the manager that if they had any problem with the buyers and ever had to evict them, to notify me so I could arrange to keep the home on the lot.
If for any reason it became necessary for the park to evict my buyer, the manager knew in advance that I would be responsible for the lot rent from the time of eviction until I found another buyer that was approved by them. So they felt comfortable and it’s worked out good for everyone.
In a few cases we’ve met a manager/owner that was just too hard-nosed, or not easy to work with. When that happens, we just skip that park and find one that wants our business, and is willing to work with us. Don’t waste time on people that are greedy, or won’t work with you. There are many that will. And you only need two or three parks of any size to provide all the deals you want.
So now we were looking for homes that were in fair to good condition that we could buy at very reasonable prices. I checked the papers every day for such homes, but I also decided to run my own ads saying that I wanted to buy a home. My ads ran in the same column that listed mobile homes for sale, because I wanted to be sure that the people that had homes for sale would see my ad and call me, rather than me calling them.
How To Make 75%
My first ad read, “Private party can pay up to $5,000 for a clean, used mobile home in good condition.” I soon got a call from a man that had one for sale in a nice park about 30 minutes from my house. This home was 16 years old, single wide, already on a lot, and could stay on the lot. His mother had lived in this home and she had recently passed away. His asking price was $4,000, which included all the furniture and appliances, plus an air conditioner.
I don’t know yet why the seller didn’t ask $5,000 for the home, since my ad said that we would pay up to that amount. I might have paid $5,000 for it then, I was just learning the business. We bought that home for $4,000 (and I don’t know why I didn’t try to negotiate a better price either) and immediately ran an ad to sell. One week later it was sold to a newly wed couple for $7,000.
The honeymooners paid $1,000 down and signed a note for $6,000 payable over 30 months, 9% interest with monthly payments of $224.09. According to my calculator that’s a 75 % yield! Can that be right--did I make a mistake? Is it really possible to make that kind of yields?
I had never made that kind of returns on any kind of an investment in my life. But as I learned later, it’s not only possible to make 75% yields, but much more than that. That’s when I first realized that you can create or “make” much better notes than you can buy. I had bought some good notes before, but none that produced anywhere close to this kind of yield.
I didn’t include the few bucks for advertising, but it’s close enough. And by the way, we bought that home on Christmas Eve and sold it on New Years Eve. Can you imagine anyone dumb enough to buy an old mobile home on Christmas eve, knowing they have to find a buyer for it right away, or start paying lot rent?
Some folks would probably have said we couldn’t do that and volunteered all kinds of reasons why we shouldn’t have done it. But by the time we found out we couldn’t do it, we had already done it. Maybe the reason we didn’t have any competition was because everybody else was
out looking for Christmas toys to buy, and here we are buying an old mobile home. But I’ll just bet you that we got more benefit out of our Christmas shopping than most other people got from theirs. And we didn’t have to put it on a charge card, either.
Will Finance
Now, let me emphasize the reason we were able to sell so quickly at such an unlikely time of the year. The first line of our ad read “WILL FINANCE” in big bold letters. When that ad came out, our phone started jumping. I couldn’t believe there would be that many people interested in buying a mobile home at Christmas time. And I felt sure I could have sold at least two more from that same ad. This was beginning to be an exciting business. Maybe Virginia, there really is a Santa Claus.
After trying this concept for a while, we then discovered that we were able to find homes in fair to good condition at very reasonable prices. We were learning not only how to find homes and what to look for, but also how to do a better job of negotiating when we found one. We were soon buying homes for $1,500 to $2,500 and selling them for $4,000 to $5,000 and creating some excellent notes.
We also made another very nice discovery that we hadn’t considered, or even thought about. We found out that if the homes needed some work, they would still sell if we offered good financing and affordable terms. Our buyers were willing to buy in “as is” condition and make the repairs themselves, if we offered them easy and attractive financing with affordable monthly payments.