Posted by Robin (OR) on November 07, 2005 at 22:19:03:
that I wish I had read before I closed my deal, just this past week. It was also my first, and I learned alot, so I don’t feel too bad, but I didn’t do as well as I’d hoped, and it was mainly because I quoted an asking price. I didn’t list a price in my ads, and intended to “follow the script” of letting the potential buyer tell me what they could pay, but everytime someone called the first question they’d ask is what’s the price. I thought if I skirted around the question they wouldn’t trust me. Bottom line - we invested a total of $5550 ($4k purchase, $900 lot rent and utilities, $150 newspaper ads, $200 taxes and title, and $300 fix up) and sold for $8000, $900 down and $206/month for 40 months. The yield isn’t “good enough” by Lonnie standards, but still better than I’d get in the stock market. But I learned a lot. And I made some mistakes. I paid too much to start with - I was so hungry for a deal I became a motivated buyer. I should have walked and waited for the seller to call me. I didn’t negotiate with the park for a reduction in lot rent (the previous owner wasn’t behind, so they weren’t hurting). I spent too much on newspaper ads and didn’t employ some of the other, less expensive marketing strategies. I ended up paying 2 months lot rent because I bought late in September and sold early in November (just after lot rent was paid), and I didn’t ask the buyer to reimburse me for November lot rent (actually, that one was my husband fault - he spoke to her first and told her the rent was paid for the month). Anyway, if any of you can see where else I went wrong, I promise I won’t be offended if you tell me! I still made a profit, so I’m not crying in my beer, but I am determined to do better next time. The bottom line is I bought too high and sold too low. Next time, I won’t be so hungry, and I will wait until the price is what I want to pay. And I definitely want to try your method to get the profit when I sell.
Well, things have gotten a bit better. I sold one of the 2 properties that I?ve been dealing with yesterday. The buyer has been approved by the park, but they made her pay a $1000 security deposit. $200 is standard, but since her credit was suspect they made her pay more. I didn?t really make any money off of it, but I learned a lot. Here are the details:
Bought for $900 ($300 to owner and $600 in back lot rents to park), I put $1500 into it (I?ll never do that again) and paid $900 in lot rents, for a total of $3200. I sold it for $3500, payable over 2 years.
I credit this sale to the advice that you guys gave me after my last post. Instead of advertising the price, I advertised the home at $400 / month including lot rent. This got me more calls than I could handle. In the past my ads were getting me 5 callers a week, this ad got me 5-10 a day. I also made sure I met with people during park business hours. After the purchase agreement was signed, I took my buyer directly to the park office to get her approval started. I hate to say it, but you really have to treat these people like children and hold their hand every step of the way. That?s something that took me 4 months to learn.
I have 3 people coming to see my other one tomorrow (at the same time), so hopefully I can get that one sold too.
I?m once again convinced that I can make this business work. I?m also convinced that I need to find a new park to work. This one seems to do everything they can to not sell their homes. I think they have good intentions in that they want to make sure only good people move in, but they seem to take it a bit far. The $1000 security deposit was a bit much, IMO.
I am reminded of a car salesman when I read your post,
He always wants to know how much a month do you want to pay! now with that established he can can go any direction he would like.
I worked my last deal something like this, How much can you afford, (200.00) How much can you put down (400.00)Whats your credit like (Hmmm 14.99%). Then I explained the difficulty of the deal (low down, low monthly payment) The best I could do to make the deal work is 84 months, “yes I know they wont be there long, but buyers are hard to find right now and I dont want to pay lot rent”.
So play with the numbers because it has thus far been my experience (limited) that people care less about the price than they do the monthly payment, So 24,36,48 months ETC @ 9.9%,10.9%,11.9% ETC.
What is best for me 207.00 per month for 72 months or 200.00 per month for 84 months, Hmm I think I will take the 84 months and add a little verbal side deal that says you pay me on time every month for 72 months and I will forgive the remaining 12 months.
Good luck with your next one and thanks to those of this board, thanks to you, I now have 4 units with a fifth that will hopefully sell soon and I will have 28k invested for a projected monthly return of $1500.00. I am sure I will do better in the future.
The first deals always include a learning cost. Then the deals start to get better as you know what to look for and what to ask, and when to run away.
Do you think you could do deals in a higher price bracket? Or is that all your market will handle. If you take $5000 homes and sell them for $12000, that nets much more money than taking $900 homes and selling them for $3500. There is just more leeway to absorb unforseen expenses like that extra month of lot rent, or those extra classified ad costs… Also, you don’t have to do as many to make the same amount of money.
Congratulations and glad to see you got it sold. I would add one comment though. You said that you got a great response from the ad listing monthly payment and not price but still broke even at best. I would suggest if this is the type of buyer you are selling to then you shouldn’t have put the note at just 2 years.
I had this same hang up when I started out and have since changed my thinking. I would suggest that you get as many years out of the note as you are comfortable with. You will need to weigh the risks of having to take the home back but it should still be worth it.
I read a post in the archives that made me come around to this way of thinking (pretty sure it was Dr. Whislers). If new MH dealers can get away with 20 to 30 year notes on homes why can’t you get away with 5-15 year notes.
For me the monthly payment is pretty static as most everyone I deal with can afford about $250 a month plus lot rent. I usually can’t get more than $500 down (occasionally more) so that leaves the only variable the number of years. Since I haven’t been at this long enough to know the rate at which I will have repos I am having to go by feel but why not go for the somewhat longer term.
Based off of what you posted I would think you could have at least made the note for 3 years instead of 2 and made some profit.
Not trying to criticize just trying to give some helpful advice since I have been in your situation.
Re: A disaster so far ? Updated - Posted by Sailor
Posted by Sailor on November 02, 2005 at 16:08:05:
Congrats–not just for selling, but for learning so quickly! Yes, you DO have to hold everyone’s hand, & you’ll have to do it continuously if you want to keep getting your $$$ every month.
Bet if you add up all your costs again, including ads, phone & transportation, you’ll actually come up w/a bit of a tax deduction (loss). Do try to negotiate on the back & holding time rents next time. That can make your future deals much more profitable. Actually, you might still end up making $$$ on your 1st deal, 'cause you’ll probably get it back & be able to re-sell. Good luck!