Default percentages? - Posted by Mike

Posted by Marty (MO) on May 15, 2007 at 11:37:38:

there’s always southwest airlines… a couple hundred bucks and a few
hours later, you’ll be dealing with a couple of true experts!

are you having a party June 1st, Michael!!!

Default percentages? - Posted by Mike

Posted by Mike on May 10, 2007 at 03:17:20:

I would like an estimate of the percent of people in your MH deals that default and have to be moved out of the MH…
I’ve been involved in a few MH deals and my experience is 20% default. A friend of mine has a much less default number; but he requires a credit check and background check. Any feedback or discussion would be appreciated!
Mike in Louisiana

As Mark Twain said… - Posted by Anne_ND

Posted by Anne_ND on May 11, 2007 at 07:49:25:

there are three kinds of lies: lies, dam* lies and statistics.

That being said, none of us likely has enough data to give an answer with any statistical accuracy.

If someone has done 10 LDs, and they have one ‘default’, that’s ten percent. But if someone has done 10 LDs and had no ‘defaults’ that’s zero percent- a big difference statistically, but not a big difference in reality.

I also question the use of ‘default’. In my mind, being given the house back in good shape by someone who wants to move up or move on isn’t a default. A default is when you have to start serving people.

In over 55 LDs and MH notes, I’ve had to force out 3 people- one left after we negotiated, two required service, and only one of those two (doing it right now) will have gone to full eviction.

But in the same time frame I’ve taken back… maybe 12 MHs? Maybe 14? But it was a smooth transition in each case.

So is my default rate 17/55 or is it 3/55? You need to define your terms.


assuming regular 4-6 year loans - Posted by Adam (IN)

Posted by Adam (IN) on May 10, 2007 at 21:54:57:

id say you would need at least that long maybe even 8-10 years before you could get an accurate percentage on it…how else would you know if that 4-6 year loan will mature if you’ve only been in business a year or two?

i like the business but im not sure i will still be chasing Lonnie deals in 8-10 years as i plan on being on to bigger things and im not sure there are many people out there doing this business that long without either getting out or moving up so to speak

plus, everyone has different criteria as to who they accept, down PMT, terms, area statisics, and on and on…if you could compile info from hundreds or even thousands of Lonnie dealers who kepts clear records im sure there is a computer program that could show the default percentage given the above variables

now THAT i would pay some $$$ for! who’s gonna get it started? :slight_smile:

Re: Default percentages? - Posted by JeffB (MI)

Posted by JeffB (MI) on May 10, 2007 at 10:30:58:

My overall default rate is around 40%. Of these, probably 90%+ are returned to me in good condition, with plenty of notice, and in a friendly manner. I’ve only had two homes that did not come back easily and only one of those was trashed.

I think how you interact with people plays a big part in their sense of obligation not to screw you over. This is a general rule and certainly there are exceptions. Most times I’m happy to get a home back and sell it all over again.


pardon my abruptness, but - Posted by Steve-WA

Posted by Steve-WA on May 11, 2007 at 10:13:50:

but would you expect anything else from me??? ;-)3

Adam, who cares?

Aside from academic and statistical curiousity, I think the idea here is just to understand that you can make good cashflow, for a limited period, and there will be a certain percentage that you will start over.

Why does it make a difference? Will it affect whether you get into the business or not? For YOU, I don;'t think so. For a lot of people reading this and wanting to test the waters, this is just another reason for them to chicken out. . . most people inherently think that getting a property back is a bad thing - it takes some real cultural adjustment in ones mind to overvcome that and actually see that it CAN be a good thing.

I think you’re bored - you need something to do.

40%?! Good night! - Posted by Michael(KCMO)

Posted by Michael(KCMO) on May 10, 2007 at 22:42:11:

That seems astronomical to me, Jeff. Why do you think you get such a large percentage back? How long are your notes? What is your screening criteria? Of those 40%, at what time frame do they generally give it back to you?

I understand the concept of “perpetual money machine”. I’m not saying it’s bad that you’re getting so many back . . . especially if they’re in good condition and ready to sell again . . . I’m just shocked at how high a percentage that is. Seriously, I’ll bet mine is right around 20% or slightly less. I was thinking about it on the drive home tonight, but haven’t sat down, gone through the files and done the math.

Is everyone else’s that high?


40% also! - Posted by Glen (OH0

Posted by Glen (OH0 on May 10, 2007 at 12:06:18:

Like Jeff, my returns run about 40%. This use to really bum me out until I recalled Lonnie’s article “The Perpetual Money Pump”.

Glen (OH)

im trying to get a feel for… - Posted by Adam (IN)

Posted by Adam (IN) on May 10, 2007 at 23:38:15:

where your at Micheal…how many deals have you done, how long in the biz, usual down, qualification criteria etc.

basically im trying to figure out what your doing that makes people stay or how you figure such a low default rate

Re: im trying to get a feel for… - Posted by Michael(KCMO)

Posted by Michael(KCMO) on May 11, 2007 at 04:14:47:

I’m in Kansas City, MO & surrounding areas. I’ve been doing this 4 +/- years. I was doing it part-time in addition to a regular full-time job up until 2/19/2007. I’m now full-time mh’s. I’ve done about 65 deals (I actually opened my file cabinet and counted). In the beginning I did a lot of cheaper homes with terms of 36 mos or less. I now do a combination but concentrate on creating longer-term cashflows - 4-6 years.

Down payments? $500-1,500 on the cheaper deals seem to be the norm. Although the buyer last night put down $2,250 on a $5,950 home. On the “higher-end” homes that I are priced for $13,000+ I usually get around $1,500-2,000 +/- dn pmt. My criteria is simple . . .

  1. Do they pass park app?
  2. Do they make enough money to pay their bills? I verify through bank statements, current pay stubs or last year’s w-2’s, in which case I would still call employer to verify current employment.
  3. How long have they been on their job? If not long, how long have they been in that industry, even with another employer? Do they have a history of jumping from job to job or having periouds of unemployment?
  4. DO they pay their bills? I run a credit report. Everyone has credit issues but what I want to know is what those issues are and what are the circumstances surrounding them.
  5. Residence history: Do they move around a lot? I verify with as many previous residences/landlords as possible. I also check online, doing a reverse search for all phone numbers provided on the application, reverse searches on addresses, etc, etc. Check court records. Many times if they have charges filed it will also include an address. Was it on the application?
  6. My application is about 6 pages long. The cover page explains the process and what they can expect. It also lists all other documentation they need to turn in with the application before it will be ran - state or federal photo ID (drivers license or other), three most recent pay stubs or other proof of income (i.e. tax return, bank statement showing deposits, etc), proof of social security number (i.e. SS card, pay stub, etc). Did they do it? Do they follow directions well? If I have to call them 5 times to get all requested info, which was given to them in a written, organized format, then how many times do you think I’ll have to call to get my payments every other month?
  7. How do they answer when I ask follow-up questions or confront with negative info I’ve dug up? Is everything always someone else’s fault?
  8. Dig, dig, cross-reference, dig, verify, ask, dig, dig.

Off the top of my head,

Re: im trying to get a feel for… - Posted by Ryan B (KS)

Posted by Ryan B (KS) on May 11, 2007 at 08:44:20:

Michael - Would you be willing to share your 6 page application? I think I’d like to use it.


Re: im trying to get a feel for… - Posted by Michael(KCMO)

Posted by Michael(KCMO) on May 11, 2007 at 10:07:09:

Come to one of our get-togethers, Ryan. :wink: I’ll be glad to give you a copy.


Re: im trying to get a feel for… - Posted by Ryan B (KS)

Posted by Ryan B (KS) on May 11, 2007 at 10:46:36:

Alright, alright, I’m going to come 6/1…

…what about… - Posted by roundhouse

Posted by roundhouse on May 14, 2007 at 10:56:46:

What about those of us that are a thousand miles away?
pretty please?