Message for for Tim(Atlanta) - Posted by Lonnie

Real Estate Investing
1

Posted by Tim (Atlanta) on September 04, 1999 at 09:14:57:

Apparently, the post I made yesterday was construed as being a solicitation for business, and therefore deleted. I promise you and the other members of this board, that was not my intention.

My current thinking is to purchase the front-end of some of the Mobile home notes. Maybe the first half of the note. As an example, $10,000 note, 13% interest, 48 months, payment is $268.27. I would offer to buy the first 24 payments for $5,000 cash now. That would give me a 25% return. (According to my HP 17BII financial calculator, which I am still learning).

Without soliciting anyone for business, does this sound like a reasonable plan, or are my numbers well out of the realm of possibility ?

Once again, I sincerely thank you for your time spent educating us newbies.

2

Message for for Tim(Atlanta) - Posted by Lonnie

Posted by Lonnie on September 03, 1999 at 16:21:24:

Hi Tim,

I printed out your post about your partner wanting to buy MH notes, then left to show a MH, came back and typed out an answer, went to post it, and found your post had disappeared. Since I already have this typed, I?ll post it anyway. (JP, I think there?s a gremlin gobbling up some messages.)

Tim, there are several ways to buy MH notes, and most are good,…providing you understand the business and know what you?re doing. I?ll cover a couple of ways that I could offer to sell you a MH note. I?ll give you two choices and you pick the one you like.

  1. If you want guaranteed payments, a guaranteed yield with no problems if and when the buyer stops paying, this might be my offer. I might offer to sell you the note at a 12-15% yield, I collect payments from the payor, and I make all payments to you. If the buyer stops paying, or if the MH is repoed, I do the dirty work, and find a new buyer. Your payments continue, but I have the right to repo, re-sell and keep any additional profit I can make on the re-sale. But you will get your payments from me every month with no problems. Also, I reserve the right to substitute the security in the home the note was on, to another MH of equal, or greater value in the event of a repo.

  2. Or, I might offer you a 18-25% yield with no guarantees. You get a higher yield, but if the buyer stops paying, or MH is repoed, it?s your baby, don?t call me. So you have a choice… higher yield, more risk… lower yield, less risk .

Your question “Could one buy enough notes at a discount of 30% off FMV to make money” indicates to me that you, or your partner, need to learn a lot more about the note business before you jump in. Don?t make the mistake of confusing discount with yield, the two have nothing in common. For instance, here?s two note examples with same discount. Which one would you rather buy?

First note… $10,000, 12%, 120 payments of $143.47, discounted 30%, you buy for $7,000. Second note…$10,000, 8%, 144 payments of $119.51, discounted 30%, you buy for $7,000. Your purchase price and discount are the same on both notes. Which would you buy?

Regarding you r question about what rate you could expect on MH notes… my starting point on the notes I create with MH?s is 50% and up. But occasionally someone comes along and screws up my plan. I sold one today and the buyer is paying $8,500 cash. I have $4,500 in the home. I?ll also get $250 lot rent.

In my opinion, the note business is the best business in the world. But like anything, you must know what you?re doing, or you?ll pay the price. There are two ways to pay for your education…pay someone to teach you the correct way. Or, learn from your mistakes, failures and graduate from the school of hard-knocks. Sometimes it?s more important to know what NOT to do, than it is what TO do.

Hope this helps,

Lonnie