Looking from the outside in because I have never been involved in a Lonnie deal, I find that the concerted effort to eliminate and to criminalize the enterprise of private lenders is akin to repudiating all we know as the uniquely American concepts. Privately selling and financing as an enterprise of housing is foreign to all other societies I am familiar with. But, it has been a significant contributor to the growth of our country from the beginning. Lonnie dealers, or similar entrepreneurs by any other name, service a section of our society which is shunned by banksters and their ilk. Their clients have no other opportunity to procure inexpensive shelter for their families, no other chance to improve their circumstances. The mischief of attacking the Lonnie dealers is, of course, perpetrated by the ‘administrative law’ and regulations created by bureaucratic functionaries: these people interpret legislative law, write the new regulations, and create the enforcement for compliance along with penalties which may include threats of jail sentences. The Lonnie dealer and his clients must be a threat to the national security, or their elimination is considered for the good of the people and not for the banks. That this interference, in a customary free market, creates unemployment and more poverty is immaterial to the bureaucrats who allegedly work “for the good of society.” The Lonnie dealer, or any entrepreneur supplying the same service, used to be an integral part of our society. He was an American icon, a benefactor, a hero in the truest sense.
A lot of freedom has been given up in exchange for a low rate 30 year mortgage.
Another thought, while most of our customers are “how much down and how much a month?” oriented, have you ever considered how much better off a buyer is once their home is paid off? I just received the final payment on a deal, it was a 36 month contract $2000 down payment @ $300 mo + lot fee….I just can’t wrap my mind around the “don’t buy a MH because they will depreciate” thinking, the man that bought this house is clearly better off.
Bernd,
Private financing is not a uniquely American concept. It was invented before there was an USA.
Private financing is the most common in places where there is limited access to banking or institutional financing. Consumer protect laws tend to be the strongest in countries that have long and stable governments. The countries with the least stable or newer governments will tend to be the more open (lack of laws tends to mean people invent stuff to fill the gap).
It is a bit grand to think a Loonie dealer is an American icon. An icon that next to no one has ever heard of is not much of a symbol.
John, I don’t think the Lonnie dealer is an icon either, but I do think on a larger scale that the principles which lead a LD to invest are what Bernd was referring to. An entrepreneur who is willing to risk his capital to generate a return, while simultaneously providing a crucial service to society, is a critical component of the American economy, till now.
I hardly think the new regulations were intended to put guys like me out of business. I doubt the government even knows that our business model exists. Rather, the fact that the regulations impact us is yet another unintended consequence of poorly written, rushed legislation… a product of our highly disfunctional government.
It is sometimes, for me, becoming difficult to stay patriotic, when I barely recognize the country and the freedoms we used to enjoy.
Jeff,
A thoughtful reply.
My angle is I do not see most of what is being said as uniquely American. Unintended consequences is spot on as the British would say. Providing housing as a private enterprise is not specific to the US and predates the US by a very long time. Any investor in any venture is risking their capital. The rule of law is almost the most important thing when investing so we all depend on the legal framework.
I grew up in the US and invest in multiple countries. I provide housing and I have my money on the line plus a promise to pay others who are lenders in some of the transactions. Thinking that the change in the law in the US is some how tied to patriotism is flawed IMHO.
Some would argue that the Mortgage Backed Securities (MBS) industry created a global mess because it was poorly regulated. That the situation would have been different if we had less or more regulation rather than the flawed mixed that existed. Protecting consumers is an American tradition. Populist presidential candidates for over 100 years have pushed populist themes even if the themes when against the more conservative legacy. The problem with populism is it appeals to the masses and the masses can out vote minorities who might know better. Then again, many of the reforms that protect folks form bad food and inhuman work conditions were not welcome by those with vested interests compared to the bigger population.
LD have always had to deal with the issue of being licensed or being thrown in with use car dealer regulations. The idea that they were selling a used vehicle and they were providing financing. The laws were at the state level so some states were more painful than others if you wanted to be a LD.
Real estate is nothing more than the buying and selling of legal rights. You never take the dirt with you when you die. You depend on the legal system to create distinct legal rights. In other words, the same government that might be changing the rules has largely created the market by creating all the other rules that makes it work. If there was no real legal system we would have a very heard time doing anything that depends on trading rights and contracts.
The legal system creates opportunities and takes them away. We just need to get on with figuring out how to make money using the system.
[QUOTE=John_Corey;884081]Jeff,
Thinking that the change in the law in the US is some how tied to patriotism is flawed IMHO.
[/QUOTE]
John, it’s not the change in the law that concerns me as much as the way in which those changes are happening. And my patriotism comment was a bit of a reach, but meant to communicate my disgust with all-things-government nowadays.
[QUOTE=John_Corey;884081]
The legal system creates opportunities and takes them away. We just need to get on with figuring out how to make money using the system.[/QUOTE]
I couldn’t agree more with this statement. I have to remind myself daily that fretting about the state of the union serves no practical purpose, and despite the rallying cries to the contrary, it is highly unlikely that one man can make a difference. I choose instead to focus on channeling those energies into productive capacity, into something I can control. For me, this has meant ceasing a 7-year old LD operation. Not because it doesn’t work, but because there are better opportunities… such as wholesaling used MH’s between parks. It’s highly lucrative in my market, and much less likely to be subject to any wild regulations coming down the pipe. Granted, it is not a model that will work in perpetuity, but I now realize there is no such thing.
This brings us back to the old adage: Flexibility is the key to mental health. And so too it is to physical wealth.
There have been few generations in the recent millennium that didn’t see significant changes in their lifetimes e.g. war, famine, plague, powerful political changes, etc. If anything, the more recent centuries have accelerated change. How many of us are sending and collecting electronic money, communicating across the continent, buying items 100s or thousands of miles away, and using maps and directions all from a thin gadget in our pocket.
There is a part of all of us that wants to keep the familiar while also pining for change. What seems most constant is the familiar changes to a different change than we expected.
Steve
[QUOTE=Dr B(OH);884087]There is a part of all of us that wants to keep the familiar while also pining for change. What seems most constant is the familiar changes to a different change than we expected.
Steve[/QUOTE]
A great way to put things. Thanks Steve.
Lonnie Scruggs is an icon, and by extension so are his active disciples. Thousands of people are familiar with his writings and lectures. His essay on ‘Creating Your Own Economy’ is a classical, universal business model in itself. Tell us, where in the world do you find entrepreneurs that sell low cost housing and offer the financing on the same to relatively poor people? In socialistic Europe, in the East, in South America, where? Laissez faire capitalism, as it used to be practiced by the common man, has no historic equivalent in opportunity for the person just starting out. And “consumer protect laws……….” are instigated by lobbyists for the express benefit of their employers and not for the alleged consumer; e.g.,‘The Safe Act’ . We may face some very serious problems in the U.S., but nobody can match the traditional, uniquely American values of individual rights and property rights and the inherent entrepreneurial spirit.