Posted by Brian, WI on November 23, 2002 at 19:13:41:
No, they go for more BUT…
You are not going to get a 20 unit apartment building for $145,000 like you do a 20 unit rooming house!
Brian,WI
What would you do with $100,000 Cash? - Posted by Giovanni
Posted by Giovanni on November 21, 2002 at 11:07:14:
I have read both of Lonnie’s books. They really made the little light bulb go off in my head. Wow you can make great returns with little risk. Can’t find that to much in real estate.
Long story short… My father passed away a short time ago and now I have to take care of Mom. I have inherited a little over 100k.
I’m not sure which way to go. Should I do all buying and selling mobile homes with financing or should I focus on purchasing a mobile home park?
Cash flow is the main goal here.
Need advise, what would you do?
Re: What would you do with $100,000 Cash? - Posted by DB (IL)
Posted by DB (IL) on November 23, 2002 at 21:14:42:
You may want to consider Tin Can Alley in addition to the other books suggested. This book deals with buying discounted mobile home notes. It may be easier to keep the whole $100k invested by buying other people notes or partials than trying to find that many lonnie deals real quick to produce cash flow.
David
$100,000 Cash? Vegas! - Posted by James Strange
Posted by James Strange on November 23, 2002 at 01:09:38:
I go Vegas and have a good time at the craps table. But I would have to be back at work on Monday. Easy come Easy go.
Re: What would you do with $100,000 Cash? - Posted by Lonnie
Posted by Lonnie on November 21, 2002 at 20:14:44:
Sorry to hear about the loss of your dad. Hope my suggestions/advice will help you in some way.
First, regarding what to do with your $100K. My first suggestion is to do nothing. Don?t get anxious and go for some super deal. Or allow some ?financial advisor? or financial consultant? to talk you into letting them show you how to get rich by using your money. (If those people were half as smart as they claim, why are they still working a job?)
Without knowing your level of financial expertise, and business management ability, I think it would be hard for anyone to give you good advice without knowing the answers to such questions as:
Do you have good financial discipline?
Do you have good self discipline?
How much, if any, experience do you have in business management?
How good are you at managing money?
Do you understand how money really works? (Passive investments, power of compounding, yields, etc.)
How much experience do you have in managing people?
These are just some of the questions you will need to answer in order to determine what type of investments to make, and how to become financially successful. Unless you have good financial discipline, and the ability to make good business decisions, that $100K could very well evaporate in a short time, with nothing but sad memories to show for it. So my first suggestion/advice is to park that $100K in a safe and secure place and do nothing until you have enough knowledge to make that first investment. Even if it means getting little or no return on your money. There will be plenty of good deals when you are ready. But if you get overly anxious and jump into that super deal before you know what you?re doing, it could be disastrous.
If you have no experience in running a MH park, I would advise against buying one until you get some knowledge of what it involves. Buy Ray Alcorn?s book ?Deal Makers Guide To MHP?s, and Ernest Tew?s book ?How To Get Rich Helping Others.? Read and study these books until you understand the business and know what?s involved.
If you?ve never had any experience in managing people, then you certainly need to get some experience and knowledge in doing so. More than anything else, this business, like most any business, is a PEOPLE business. And unless you have the ability to manage people, your chances for success are greatly diminished. I?ve seen a number of investors, including some close friends, who had everything needed to be successful, except the ability to handle people. And they either failed, or went out of business because they couldn?t handle the people they were doing business with.
Here?s my opinion/suggestions for what it?s worth. First, read, study and analyze all the various types of investment strategies and techniques that are posted on this site. Read the success stories, how to articles etc, until you become familiar with what?s out there in the real world. Then decide and focus on the one type of investment that you feel will work best for you. Then, pick one low risk deal that requires a small amount of cash, and start your learning process. This will allow you to gain valuable knowledge and management skills which are so important in becoming financially successful. And don?t get in a hurry, or start thinking you have to do a deal, just for the sake of doing a deal. Good deals are always there if you know what you?re doing. (And there are plenty of bad deals if you don?t know what you?re doing.) So don?t get in a hurry, you won?t go broke on a missed deal.
If it?s mobile homes, and/or mobile home parks that interest you, I suggest you do several ?Lonnie deals? to gain some business knowledge and learn what it?s like to deal with people, especially tenants/buyers. And especially if you plan on financing your buyers. Let?s face it, the world is full of professional crooks and thieves who are smarter than we are. So you must be able to recognize these types and know how to either avoid them, or how to deal with them. Otherwise, you could be in for some very costly and very bad experiences.
These small deals require minimum cash, your risk is low, yet they afford you the opportunity to make excellent profits and returns on your investment. Once you have some experience, knowledge and skills in doing this, and when you feel you?re ready to move into purchasing a park, that will be the time to do it. But unless you already have experience in operating a business, and dealing with people, I think it would be unwise to cut your teeth on a park, especially if it requires a good chunk of your cash. Since your goal is to make sound investments that will provide you with the necessary cash flow to take care of your mother, I think you should go slow and use caution. You have a great group of folks on this site who are ready and willing to help you. None of us want to see anyone make a bad decision, so don?t be shy asking for opinions/advice/help when it?s needed.
If you will develop and practice good financial and self discipline, and learn how to make good financial decisions, you can easily turn that $100K into a million, and more.
To your success,
Lonnie
Re: What would you do with $100,000 Cash? - Posted by Chuck-NY
Posted by Chuck-NY on November 21, 2002 at 15:25:39:
Lonnie recommends you start out doing Lonnie Deals first especially if you are new to MHs. I would agree.
I would suggest that you DO NOT invest all that money into one type of investment. You might want to contact Ernest Tew with regards to being a passive investor.
One thing I would do is open a Self-Directed Roth IRA
so you can use it to fund your deals.
You will want to use some of it for business liability insurance. Check with Ernest Tew to see if a LLC or Corp. is right for you.
My father in law, when he was alive, was very smart with his money…he had about 5 or 6 banks he put his money in. Remember, you need to spread out your risk.
Buying a park as an active investor may not be a good idea if MHs are new to you. I think that Lonnie Deals are the best way to break into the MH business.
HTH
Re: What would you do with $100,000 Cash? - Posted by Mr. C
Posted by Mr. C on November 21, 2002 at 12:12:42:
Use the money as the down payment on a mobile home park.
Naturally the process to park ownership is more complicated that space permits me to detail… Ray’s book would be very useful here… but if cash-flow is your goal, this is the means to it.
I’m in the same $100,000 Cash boat! - Posted by Brian, WI
Posted by Brian, WI on November 21, 2002 at 11:47:33:
It would be interesting to see what people say about this.
I’ve just been getting into Lonnie deals, and have been talking with a park owner about buying his park, but I’ve also been using what I have as “proof of funds” when putting in “All Cash” offers on vacant single family houses. Granted this isn’t going to produce “cash flow”, but could help to get the deal done compared to someone that uses a financing contingency.
I’m guessing most people will say to hang onto as much of your cash as possible and that’s what I’m trying to do, cuz there would be nothing better then to be able to buy property and still have all that money left over besides!
Good luck
Brian,Wi
Re: What would you do with $100,000 Cash? - Posted by Giovanni
Posted by Giovanni on November 21, 2002 at 21:51:36:
Thank you Lonnie for the sound advice.
This is a great group here. I will take my time, get a few “Lonnie deals” under my belt before I jump into buying a park.
Just so you know my situation, my main concern right now is of course Cash Flow. Mom needs about 2,500-3,000 per month for living expenses. I can’t take to much time thinking about what I should do.
So do you think I should I allocate a certain amount say $30,000 just for the “Lonnie deals” to try to get the 2,500-3,000 per month cash flow I need?
Giovanni
Re: What would you do with $100,000 Cash? - Posted by Brian, WI
Posted by Brian, WI on November 21, 2002 at 15:56:42:
Chuck,
Your suggestion of not buying a mobile home park without having at least doing Lonnie deals is very sound. I however don’t have a lot of time for the learning curve, and have kinda of done this before…
When I bought my 1st rental property 7 1/2 years ago, it was a rooming house. The only thing I knew about these is that they are CASH COWS! and boy have they been. I bought 2 more rooming houses 3 years ago. The 1st one was “taken” via eminent domain, I sold the manager of that one my smallest one, leaving me with just 1 and I’m to be closing on that Tuesday of next week. Needless to say, I’m going to be looking for something to 1031 into and have come across a 32 spot (expandable for 25 more) mobile home park. There are deferred maint. issues with this park and it is about 1 hour from home, but the numbers seem to work out.
Anyway, I jumped in with both feet with rooming houses, not knowing a lot and made a lot of CASH, and may be doing the same with a mobile home park. Do you think I’m silly for doing this? I do value your opinion.
Thanks
Brian,WI
Re: What would you do with $100,000 Cash? - Posted by Giovanni
Posted by Giovanni on November 21, 2002 at 19:00:21:
Thanks for the advice. I will buy Ray’s book today.
I have been leaning more toward the MHP ownership side of things. Problem I have been finding is the lack of parks for sale close to me. I have been in the mobile home park store web site and every thing is at least 3 hours away.
Any experience with absentee ownership?
Re: What would you do with $100,000 Cash? - Posted by Lonnie
Posted by Lonnie on November 23, 2002 at 11:18:23:
Let?s do a hypothetical scenario. Suppose you find a park you like and the PM will work with you. You buy a MH for $3,000, sell it for $6,000, finance with 10% down, and take a note for $5,400. You structure the note for 32 months, $200.00 per month. Average one deal a month and after 12 months you?ve generated $2,400 monthly cash flow. 15 deals equals $3,000 per month. Of course, if you average more than 1 deal a month, you reach your goals much quicker. It?s up to you.
Review chapter 17, page 174 (Deal A Month) in DOW. This exact scenario is covered in detail.
I got a call just yesterday from a man who did his first deal the end of last year. So far this year, he?s done 16 deals. If he averages $200 per deal, that?s $3,200 monthly cash flow. And incidentally, this man is disabled and was in chapter 13 when he started. He?s now paid off his creditors and his BK has been discharged. See, when you take action, things happen. But you have to make it happen. And I feel sure you can.
I would suggest you go slow, protect your cash, and don?t try to sit the world on fire to begin with. Just do one deal at a time, learn all you can, and proceed according to your skill?s and your ability to make good deals. There will always be plenty of good deals when you?re ready.
Say, why not let the folks here know where you are, and maybe someone in your area would be willing to hook up with you. You can get a good education having breakfast/lunch with other folks and swapping stories.
All the best. And keep us posted.
Lonnie
Why are rooming houses cash cows… - Posted by James Buster
Posted by James Buster on November 22, 2002 at 17:34:46:
compared to apartments and/or sf homes? How management intensive are they?
Re: What would you do with $100,000 Cash? - Posted by Chuck-NY
Posted by Chuck-NY on November 21, 2002 at 18:26:44:
I don’t think you’re “silly”, but I do think you are excited & enthusiastic about what you want to do.
All I can recommend is that you check with the experts on MHPs…that would be Ernest Tew & Ray Alcorn. There are also lots of people on here with MHP experience who could offer you advise.
You have a lot of research ahead of you. I can guarantee you one thing, if you don’t seek the advise from the MHP experts from this site or elsewhere…you will pay too much and the education you get may not put a smile on your face when all is done.
One final thing…be conservative with the money and BE SURE of each investment.
I know what it’s like to have a lot of money and before I knew it…the money was all gone (before MHs)
Re: What would you do with $100,000 Cash? - Posted by Todd H
Posted by Todd H on December 16, 2002 at 20:17:25:
Lonnie,
I am new to investing in MH’s and I need help understanding your scenaio above. How do you buy a MH for $3,000 and then sell it for $6,000??? Why would the buyer for $6000 not just come by sooner and buy that same one for $3000 and save himself the difference? Coming from the SF rehab business, I can not see the logic? Is it becasue the seller for $3000 would NOT carry the note which is what the buyer at $6000 had to have to get into the property and he is willing to pay that higher price? Also, how difficult is it get buyers? I know that in the lower end SFH, getting buyers can be VERY difficult at times. Another questions is how often do you wind up foreclosing on people?
I see the value and the quick money to be made if the scenario you just described is a normal deal but I just need to see why someone would pay $6000 vs. $3000 they could have paid for the SAME MH yesterday.
Thanks for your clarification…
Re: Why are rooming houses cash cows… - Posted by Brian, WI
Posted by Brian, WI on November 22, 2002 at 22:45:11:
James,
Here’s some numbers on the last rooming house I have and am selling:
Bought for $145,000-$29,000 down = $116,000 financed at 8.25%(I think) for 20 years =$988 PI add to that taxes and insurance about $400 for a total of $1388.
The gross monthly income on this building is about $6000! Let’s just add about $1800 in monthly expenses(heat, electric, vacancy, etc.) for total monthly expenses of $3188. Now you have $6000-$3188=$2812 per month postive cash flow!
That is why these buildings are cash cows!
And yes, they are more labor and management intensive, but it sure has been nice to have maxed out my deferred comp. plan at work and Roth IRAs due to all the extra income.
Hope this helps.
Brian,WI
Re: Why are rooming houses cash cows… - Posted by James Buster
Posted by James Buster on November 22, 2002 at 23:27:05:
Why is the income of a rooming house so high compared to an apartment building?
Re: Why are rooming houses cash cows… - Posted by Brian, WI
Posted by Brian, WI on November 23, 2002 at 09:57:09:
19 rooms x 70/week rent=1330/week x 52weeks/year=69,160/12 months a year=$5763/month Gross Income!
Brian,WI
Re: Why are rooming houses cash cows… - Posted by James Buster
Posted by James Buster on November 23, 2002 at 17:51:35:
Apartments go for less than $300/month in your area? I’m impressed!