I’ve bought 3 mobile homes and then turned around an owner financed themo to my tenant buyers. I am very pleased the the ROI but I want to continue to expand my MH portfolio but do not want to use my own money to buy them.
What methods do you recomend that would allow me to use little or none of my own money to buy the mobile homes?
Methods of using other people’s money is pretty standard across the investment board.
Some folks create a note and sell it or parts of it.
Some use options instead of cash and the when they find a buyer they use the buyers money to make the (simultaneous) purchase.
Some use private money, self-directed IRA’s, credit cards, lines of credits, friends and family money etc.
I am not advocating any of these, just mentioning a few to get your idea generator started.
Tony
Raburns,
Why OPM? Are you talking about 100% OPM?
At some level you will be challenged to use 100% OPM. Either it will be costly so some deals will not stack up or you might have problems attracting the money. If you use OPM to do a deal and then sell on the deal (buy, fix, sell for cash; flip the deal for a small profit, etc) you can build up your cash from multiple deals. Some tax implications.
If you have three notes now, consider selling some or all of the future payments. You could find it hard to do. Or it might be easy if you find the right investor. What you will discover is getting people to invest in your MH business could be difficult until they really trust you and the returns. You might want to lower the returns so you do not scare people away. If you are making a great ROI others will see that as a sign that something is wrong unless they already invest in MHs.
I agree with John on the caution to keep your offered interest rate to private parties consistent with their world view. If you offer a family member 16% on their money they will assume you must be stealing it from somewhere because the banks are paying a whopping 0.85% on CDs and the DOW is averaging 3.02%. Historically, the stock market has returned about 10% over the long haul. So offer them something between 5 and 10%.
On the other hand, a real estate or Mobile home investor won’t talk to you for under 10% and most are looking for more. I generally pay 5 points and 15% to those who know the business and know and trust me.
Steve
Go S.A.F.E. ly here
Don’t want to throw cold water on a guy doing good like you are but we’ve all got to watch our own versions of SAFE law in our states.
After the Fed Law was enacted ALL states were required to pass their own versions so we must familiarize ourselves with OUR state’s version of SAFE, which highly regulates seller financing.
For a good example of how no 2 states look at this exactly the same way, have a look at how TX and WA states look at SAFE.
Whereas TX is allowing a seller like you to hire an independent SAFE Licensee to negotiate and take buyer’s note, WA is much stricter and wants a seller here to ask for permission of every deal and get excepted from our SAFE licensee rules.
So do yourself a favor and check out yours.