Posted by Steve-WA on February 29, 2008 at 15:56:47:
Mike, I gotta agree. You’re going to have 15K tied up for a long time. I know the market where you are, and i also know that perhaps a Lonnie Deal isn’t the best use of one’s money.
Cash sale is different; tying up that much money in a personal property loan . . . I gotta agree with Tony. But - - - you’re a big boy, and if 60% works for you, then power to ya.
Did you know for nearly the same money, you can buy new, and make a helluva lot more money on a sale?
I’ve got a buyer with a 10k down payment. He’s willing to buy a home for 35k (25k note) and 1000 a month for 29 mos. I can buy the home for 25k and immediately resell it to him with no holding time. That means, I get my money back in 15 mos. Yield is 61%. How many would do this particular deal?
Consider the opportunity cost - Posted by Tony Colella
Posted by Tony Colella on February 29, 2008 at 11:16:28:
Mike, I am going to go on record again here and say that spending $25k on a lonnie deal is both against Lonnie’s system and likely a terrible use of $25k that could be leveraged into bigger and better deals.
That much money and not having the control of the land is very, very risky.
Using $25k towards a land/home deal or small park down payment would reap far greater rewards, provide you with the land and control, provide you access to more cash and increase your net worth.
Steve in Washington has posted here about 2 of his land/home properties that he “landbanked” as we wrote about in our book and he pulled over $200,000 out of these deals if memory serves me.
Steve went on to buy a house in Hawaii with that money.
So ask yourself which may be a better use of $25k. Leverage, control, growth, profit, landbank, house in paradise or a used trailer sitting on someone else’s land?
Re: Same deal, better numbers - Posted by JeffB (MI)
Posted by JeffB (MI) on February 28, 2008 at 21:34:25:
What is the wholesale value of the home. Or what would you normally buy it for without a buyer in hand?
The reason I ask is that just because you have a strong buyer in place should not necessarily be a good enough reason to overpay for the home.
Having said that, if your buyer checks out and everything is a go, I’d do this deal in a heartbeat. Forget the 60% yield – you are talking big dollar profits here.
In my experience, people with this much cash down are fickle. Things can change quickly and if 10k suddenly becomes 5k because they want some money for a TV or new carpet, the deal doesn’t look so attractive. People with cash also change their minds quickly/frequently because they often have other options available to them. So make sure that, if you do this deal, you protect yourself and make sure that the timing works out so you aren’t left holding the bag on a 25k home that really isn’t worth that much without this particular buyer in the picture.
Re: Same deal, better numbers - Posted by Todd(AZ)
Posted by Todd(AZ) on February 28, 2008 at 15:31:54:
Tough question Mike. Everyone and everyone’s market is different as well as how much liquid money you have sitting around in the bank. I wouldn’t do the deal but others probably would. I wouldn’t even consider it if I were you until you had the other party’s money upfront. I can see how a quick flip like this is tempting thats for sure. Todd(AZ)