Posted by Tony Colella on March 22, 2006 at 11:10:33:
At some point it might be a good idea to review Lonnie’s book. We all seem to go through a phase early on in these deals when we think, “Lonnie’s system won’t work here so I will have to adapt.” This is shortly followed by the worst deal we ever do.
Lonnie’s system may look simple but I assure you that it is a simplified documentary of what has worked AFTER much trial and ERROR.
You want to pay $15k for a home that will retail at $19K? Remember Lonnie’s rule of double your purchase price (or in many cases triple).
You are buying from a lender (repo) yet the park is saying they own it? Not sure what is going on there but something is amiss. Sounds to me like the bank has repo title to the home but has an agreement with the park that if they sell it they will get a commission. The park marks the home up and markets the home. You are cutting out the middle man if you deal with the repo lender (although this may not endear you to the park but read on).
Next, you are attempting to gain access to a park that is selling homes. What do you offer them accept a greater lot rent fool (no personal attack on you… the greater fool theory is a real estate term). We read here time and time again how parks that also sell their own homes deter buyers from buying investor homes while rerouting them to the homes sold by the park (and why not, it’s their playground). This can leave you holding the bag (and paying $15k plus lot rent for the pleasure).
Don’t become a motivated buyer Les, it really, really hurts the wallet. Hang in there and stick to Lonnie’s system that will keep you and your investment safe.
I need help fast!
I have made an offer on a repo from 21st century.
They are about to accept, I think.
I visited the park today and spoke with the manager
and found that the park owns the mobile and that I am really
buying it from the park owner. They like the idea,( my being on the hook for the lot rent).
I see this a way to get to work this park, but I have a gut feeling that tells me go slow.
The home is a 1999 3-1 14X66 that has been rehabbed, ready to sell.
They have been showing it for 19,900, I offered $15K. (Probably high, but wanted to get started in the park)
Who would play or pass?
Hello,
I’ve bought a number of repos and can tell you that, even with not knowing what your market is like (I doubt it is any hotter than mine right now) the most I would have offered if it was in decent shape would have been around $9000 cash. That $19000 price they list is their “retail and we’ll finance you” price. This is around the price that YOU would want to offer to YOUR potential buyers.
If you are going to pursue late-model repos on a regular basis, and there are alot in your area (it really depends on the state you are located in), then it might make sense for you to purchase a NADA manufactured home guide. Go to www.nadaguides.com and you can get one for $150.00. It comes as a really thick book, but for the $150 price you also get an easy to use CD-rom that gives you a bank value for hundreds of trailers.
Although some of the values given are somewhat optimistic, it is the same guide the repo banks use
so you can kind of see where they are coming from, and it will give you, the wholesale buyer, a baseline to start your bidding at.
For instance, you can decide that you’ll start your bidding at around 25-30% of the price that the guide gives you, and go up from there until you reach your upper limit. If you can’t go as high as the bank wants you to go-PASS ON IT. I promise there will be others. The next one-and it may be exactly the same kind of home, in the same area, with the same things right and wrong with it, and the same repo guy handling it-will go for what you want to pay.
And in case you think you are starting too low by offering 25-30 cents on the dollar, just remember that one of the goals of your bidding should be to get them to counter back to you a higher price. If you make a bid and they immediately accept, it probably means you offered too high!
Thanks for all the replies.
I turned the purchase down today when 21st called me to start the paper work. I told them that I hoped it would not damage any future purchases. He wasn’t happy, but agreed let it go.
This is not my first mobile deal, its been about 2 1/2 years ago since the last one.
I really want the mobile home business to work this time. I have push all other real estate aside and I am focusing on this business.
I sure would like to be able to network with some people in my area of the country.
Posted by gary klos on March 22, 2006 at 13:21:15:
I would pass. but I don’t know your area it mit be a good deal. we have been buying under 10k and have on hand 10 units now. and sold several. but that is my area. yours may be different. does it need work? if not thats good if it does how much and will you get enough cash flow from the mobil to give you a 20% return.
I tend to agree with what Tony said below for the most part. However, it really has to be tempered to your locale. Where I’m at, even though I’m in the “mobile home capital of the world”, this market is rather - strange. I’ve lost out on several MHs because I wasn’t willing to pay what the owners were asking. Finally, I decided jump in: last December I purchased a 1993 MH that is in pretty good shape WITH A GOOD TENANT IN PLACE for $10k; she’s paying under market, but keeps the place in immaculate shape. I’m not selling but keeping as a rental; I’m clearing about $2400/yr on a $10k investment for 24% return. Not bad; I couldn’t do that with any houses around here right now.
I’m negotiating for 2 more MHs, one for $14k (a 1997 16x80 3/2) and a much older home (details still coming) for $5k; I should be able to clear nearly $10k/yr on a $20k investment for nearly 50% return.
Lonnie deals are great and you avoid all the landlording hassels and I’m still looking to do them when I can find them. But for now, I’m looking forward to the monthly cash flow this affords me. And at this rate, I’ll need only about 8 more MHs to replace my J.O.B income!