Posted by David Monson on June 29, 2007 at 10:36:59:
Thanks Pat but I’ve watched Florida go from being a land of opportunity to a land of bureaucratic, greedy officials who want only the biggest buck action. I believe I’ll just finish up what I already have going and find a sandbox thats not full of sandpricks. Georgia maybe, I know some county’s are still user friendly.
Dave Fl.
finding money (very long) - Posted by Dave Fl.
Posted by Dave Fl. on June 21, 2007 at 08:12:42:
This post is not to solicit a lender but to ask you folks to critique my presentation to all the lenders I have approached so far and gotten nowhere.
First the deal;
Approx. 15.7 acres
Sub-divided into 46 lots
All lots have city water, sewer, and underground power.
All lots front on blacktop roads.
All lots have secondary access via a 20â?? easement in the rear of each lot.
10 lots have been sold for cash and are no longer part of deal.
36 lots remain.
As of last count 7 remain unsold.
Most of the 29 sold lots are on Lease-purchase contracts approx. 1 year old, oldest started 2003.
All lots sold for $15,000.00 on average.
All lots sold/offered at $500.00 down and $50.00 per week payments at 10.65 to 14%,
Each lot repays $24,000.00 on average.
37 X $24,000.00 is $888,000.00. Contracts vary can pay up to $1,119,000.00
Purchase price is $290,000.00.
Current monthly income is $4800.00. Will increase to $6200.00 when all lots are sold.
Collateral is 37 improved lots plus lease-purchase contracts on 29 of those lots.
Each lot must be deeded to buyer as it is paid off.
Only expenses are taxes and attorney fees.
Buyer (me);
Of legal age
Years of experience in MH’s and park management
Fico about 750
$60,000.00 cash down
Excellent credit history
Almost no monthly expenses to pay because management position pays me a salary plus free housing and all expenses.
No criminal or driving record
There’s more but this should provide a good overall picture.
So tell me, what am I missing, whats wrong with this picture, why am I getting the cold shoulder. What can i do to fix the problem?
Sorry this is so long but I’m really up against the wall here. I know I’m a motivated buyer but the deal is to good to not be. Or maybe its not and I just don’t see it.
Thanks Dave Fl.
Re: finding money (very long) - Posted by Joe-Ga
Posted by Joe-Ga on June 26, 2007 at 16:04:05:
90% of lenders out there want something they dont have to put a dime in and it be worth double the price…you will have to find a lender who deals in these type deals to be able to get financing.Most lenders , saying mobile home anything is like calling their mama horrible names… good luck…
Re: finding money (very long) - Posted by Keith (OH)
Posted by Keith (OH) on June 22, 2007 at 16:03:53:
Dave,
What is the end use of the lots ? I am assuming they are vacant ?
At the very core of this deal is vacant land being rented. Neither investment being the most sought after security for financing. I think the lease purchase agreements are actually muddying the deal for you. My first thought was either the lots had an inflated sale price or the leases were agreed on becasue the “buyers” couldn’t get financing on their own. Once again either scenario creates questionable security for the loan.
The real value of the lots should be based on how much the 10 lots sold for cash and how many days on the market. Maybe repackage the deal to show how much of a discount you are buying the multiple lots against how quickly the lots sold for cash individually. See if the seller will split the deal in half. Buy half the lots for $145,000 and get an option to purchase the others. Put your 60K down on the 1st lots. Now your under 60% LTV instead of 80%. When they sell for cash (or you get to a position to take cash out), take your profits and purchase the other half. If you don’t think you can get the cash out of the 1st lots then maybe your deal is just too skinny to make the lenders comfy.
Keith
Re: finding money (very long) - Posted by Tim
Posted by Tim on June 21, 2007 at 14:03:43:
I’m going to have to make a couple of assumptions here, so my numbers may be way off. The first, & biggest assumption is that the lots are actually worth 15k. In other words, that they would sell for that on the open market without owner financing. Without that a bank(or private lender) won’t even consider the loan.
My next assumption is that the average term of the loan is for 10 years. This is based on your $24k average amount paid over the life of the loan, $500 down & $50/week. Simple math [(24K-500)/50] gives 470 months, or 9.04 years. I’ll round that up to 10 years.
Finally, I’ll assume that you instantly sell the remaining lots, increasing your cash flow to $6200.
So, as a note buyer I’m looking at the following:
$290,000 present value
10 year term
$6200 monthly payment
for an interest rate of 23%
I know this is a simplification, but I don’t see how the yield will vary by more than 2-3% in either direction. I strongly suspect you are looking at a $290k purchase that will pay $888k over time, ignoring the actual yield. If you look at the deal from a note buyers perspective, figuring borrowers with marginal credit, this may not be a good deal. The truth is, you are buying what are probably subprime loans at 55 cents on the dollar.
Putting on my hard money hat, you want to borrow $230k on a property worth 540k(36x15,000), or 43% loan to value. If the value is there I would consider it, but I’d be looking for 5 points up front & 15% interest(minimum).
Re: finding money (very long) - Posted by TeddyB_SC
Posted by TeddyB_SC on June 21, 2007 at 10:05:00:
Dave,
While you’ve provided a lot of info, I don’t see where you have listed the actual(appraised/sold for)value of the property. 10 were sold for cash, but how much cash.
I would want to know what is the “real” value of the dirt I’m buying. I’m sure a bank would too.
TeddyB_SC
Re: finding money (very long) - Posted by Anne_ND
Posted by Anne_ND on June 21, 2007 at 08:39:54:
Dave,
You can’t sell this deal because you don’t have confidence in it yourself. “Or maybe it’s not and I just don’t see it.” Is it a good deal or not? YOU answer the question, don’t ask it of others.
I wonder how elegant and smooth your package and presentation are when you talk to banks and other lenders? You have to believe in it to get it funded.
The only other thing I can think of is - how many Lonnie deals have you done? Your inexperience could be why no one will give you money.
Anne
Re: finding money (very long) - Posted by Dave Fl.
Posted by Dave Fl. on June 24, 2007 at 03:47:18:
Kieth,
Thank you for your comments and insight. Yours are the first and only thoughts that make sense to me, you have caused me to re-think this deal from a different perspective. I am going to go back to the sellers and re-make this deal as you suggested, this time using actual instead of potential.
Again, thank you for pointing this out to me.
Dave Fl.
Re: finding money (very long) - Posted by Tim
Posted by Tim on June 21, 2007 at 14:09:00:
Instead of “an interest rate of” I meant to say “a yield of”.
Re: finding money (very long) - Posted by Dave Fl.
Posted by Dave Fl. on June 21, 2007 at 10:50:44:
Have not had an appraisal yet but each lot sold for $15,000.00. A few for cash , the rest on lease-purchase contracts. 37 lots@$15000.00=$555,000.00. That plus the interest on the various contracts runs it up to a “possible” $1,119,000.00 bucks. That figure is what’s left on the contracts, thats what I’m buying.
Re: finding money (very long) - Posted by Dave Fl.
Posted by Dave Fl. on June 21, 2007 at 09:44:31:
Ann, I have a boat load of confidence in myself and this deal, I made that last comment because I didn’t want to come across as smug and/or arrogant to the point of not listening to anyone.
I have years of experience in parks and have probably done 30-40 lonnie deals, lost money on one of those.
I do not however have experience in a deal like this and it seems the lenders don’t either.
Since I posted my question I have talked to one broker who called me back and he admitted this was a tough deal to finance and that he needed to research to find the right program so maybe thats the problem, the lenders don’t know what to do so they do nothing.
Dave Fl.
Re: finding money (very long) - Posted by TeddyB_SC
Posted by TeddyB_SC on June 21, 2007 at 12:29:11:
No! What you are buying is 37 lots. That’s what a bank is going to loan on, not the potential payoff of the contracts. What is the bank going to get if you default? 37 lots valued at what.
If it’s $555k, then tell the bank the loan will be secured by $555k of real estate. You are asking for $230k, so there must be a serious problem somewhere.
I agree that you should go to the town and check with the local banks. I would get there a day early and check out the local RE prices.
Good Luck,
TeddyB_SC
this job is about making connections - Posted by Anne_ND
Posted by Anne_ND on June 21, 2007 at 10:48:25:
Sorry Dave,
I think the issue might be contained in your last sentence: you are talking to brokers and banks over the phone. You should be on their doorstep bright and early in your sunday best with your typed-up prospectus, NOT talking over the phone (see Ryan’s recent post about this). Money deals get done in person. Furthermore, by using a broker, you are adding an extra layer of fuzziness. Brokers are notoriously uninformed and lazy.
good luck,
Anne
Re: finding money (very long) - Posted by Tony Colella
Posted by Tony Colella on June 21, 2007 at 10:40:31:
“Talked to a broker” sounds like a phone call and a complete waste of time.
I have made no bones about my opinions of most mortgage brokers who are contacted or make contacts on park deals. An honest one will tell you that they cannot do such a loan. This does not mean it can’t be done, just that they don’t know how to do it. They have a group of usual suspects (lenders) they work with day in and day out on more traditional real estate. Anything outside of that norm and you might as well forget their help. Again, at least this one did not waste your time telling you “yes” to any question you ask, only to later have to admit they haven’t a clue on how to get this type of deal funded.
I have related some of my experiences with mortgage brokers here in the past. Several were out and out willing to commit loan fraud to get paid. One called me 6 weeks after I got my park purchase funded via a local bank (and had 2 other lenders willing to do it including BB&T a national bank) the mortgage broker said and I quote," Tony, I shopped this deal all over town and no one will do it, sorry."
I had to ask what lenders he had approached in the last 6 weeks and just how he got turned down. I listed the banks in town that had approved the loan. He got quiet and I hung up. Waste of time. Unfortunately my experience is not unique I am afraid.
The only reason I went to multiple banks to begin with was the mortgage broker made it seem so hard.
I have no use at this time for any mortgage broker. We as investors need to establish lending relationships with banks and private money. We cannot expect to do this over the phone (at least not until the relationship has been established and many good deals done).
Dave you can keep pushing a rope and this deal uphill or you can come to Asheville and have us show you the deals we did, how we did them and how we work with banks. Save money and lose the deal or make a trip and meet everyone here in person. Your choice.
Tony
Re: finding money (very long) - Posted by Jim
Posted by Jim on June 21, 2007 at 21:27:47:
Amen Tony!
Re: findindg money (very long) - Posted by Dave Fl.
Posted by Dave Fl. on June 21, 2007 at 11:04:23:
Tony, I know your position and I agree with it. My contacts have been both on the phone and in person, face to face. The results were the same. I finally contacted the brokers as a last resort, same results.
I’m not giving up on this, I’m just trying to figure out what the problem is. The seller is willing to extend my purchase agreement so next I will go the the town in question and visit the local banks.
Pushin a rope is a challenge and I love a good challenge.
Thanks Dave fl.
Re: findindg money (very long) - Posted by Patrick S. Lawson
Posted by Patrick S. Lawson on June 28, 2007 at 16:42:53:
What part of florida are you in? If central, I can put you in contact with some local banks VP’s that are great at structuring deals. Rates are not going to be so hot, but the deal can get done.