Posted by Pete Andersen (AZ) on April 20, 2004 at 12:02:52:
Why not try a low ball offer?
Need Advice On A Deal - Posted by Jorge Nolasco (AZ)
Posted by Jorge Nolasco (AZ) on April 20, 2004 at 09:11:13:
I have read Lonnie’s books, posted ads, and am looking to do my first deal. I looked at a home with an asking price of $20K. The home is: 1971 24x64 3/2, central a/c and heat, workshop/shed attached, motivated seller. Lot rents are $295. I have a possible buyer (just took name and number) who can put $2k down and can spend $650 a month (incl lot rent). I want to try to do a simultaneous buy/sell deal. I talked to the park manager, and she is fine with me carrying the mortgage. I am considering offering $10k, sell to buyer for $19k, carry $17k at 7 years, 8% rate. I am scared and want to make sure I do the right steps. This is what I have as a plan:
- Call buyer and propose the property with price and terms.
- If buyer is interested, I do the MHP tenant form with them (I have to be on the form, too) to make sure they can be in the park.
- If buyer is approved by the park, I make offer on home.
- if offer accepted, close the deal set up move out/move in dates for seller and buyer.
The buyer’s lease is up in a month and a half (May).
Should I buy the home first and then get the buyer approved by the park? What steps am I missing? Do I have the right order in my steps? Should I run the credit check on the buyer first? If so, how do I actually do that? Or will the credit check be done by the MHP off the agreement form?
Appreciate any advice.
Is 36.55% yield your goal? - Posted by Dan (Michigan)
Posted by Dan (Michigan) on April 20, 2004 at 10:19:09:
If you have read DOW and understand the Lonnie approach, then you would be looking for a deal that will yield at least 50% annual.
The deal you propose may be acceptable to an uneducated investor, but you can do better if you follow Lonnie rules. Investing $10K on your first deal may be a bit risky.
I suggest you reread DOW and look for MH’s in the $2K-$5K range in the beginning.
My 2 cents.
Re: Is 36.55% yield your goal? - Posted by Jorge Nolasco
Posted by Jorge Nolasco on April 20, 2004 at 10:40:40:
Dan, thanks for the input. I am still struggling with yield computations. I see the deal as such: in it for $8k ($10k minus $2k down payment) with a final investment earnings total of 20681.93 ($17k plus $3681.93 interest off the note) which I calculated yield to be 258.52%. What am I doing wrong on my calculation?
I calculated my return of my $8k investment to be at the 2 year, 8 month mark, something I am comfortable with.
I still am looking for those $2-$5k homes, but they aren’t as readily available in the parks I have looked at. The parks are either nice with double wides or dumps with patched up singles and RVs.
I calculate your yield this way… - Posted by Dan (Michigan)
Posted by Dan (Michigan) on April 20, 2004 at 11:21:12:
Present Value (PV) = $17,000
Interest = 8%
Payment = $264.97
Number of payments = 84 (7 years)
Total investment = $8,000
Yield = 36.55% over 7 years
Reducing your investment to $4,000 improves your yield to 79.12%
Reducing your investment to $2,000 improves your yield to 158.97%
It’s easy to see where you need to focus your effort - on the buy side of the equation - to maximize your return.
Thanks Dan! NT - Posted by Jorge Nolasco (AZ)
Posted by Jorge Nolasco (AZ) on April 20, 2004 at 11:53:42:
NT
Re: Thanks Dan! NT - Posted by Dan - GA
Posted by Dan - GA on April 21, 2004 at 22:27:27:
Mortgage Lenders are getting 9-12% or more on used manufactured homes for borrowers with good credit. Why are you accepting only 8%. I charge 16-18% depending on the credit risk. When the people ask why so high of a rate, I explain that if I don’t sell for cash, I have to make money on this deal next month as well, etc… I then offer a 5% discount for an all cash offer if they want to go to the bank and get a loan. I’ve never had anyone take me up on it. Most people don’t care about the terms, just the monthly payment. Increase your rate and your term to keep the monthly the same. Remind them that in x years, they’ll only be paying lot rent, and not house rent and lot rent if they were to rent something compareable.
Good Luck