Posted by David Alexander on June 04, 2000 at 18:59:24:
Simple answer is your providing Housing, not a used car. My notes run generally 72 to 84 months. In one park I’m looking at possibly working in the PM says that most of the houses their are going on notes 10 years plus.
David Alexander
Help! Need some new ideas for upfront money - Posted by Kristine
Posted by Kristine on June 02, 2000 at 11:34:47:
Hello there all. After doing the rounds of parks for the last three weeks, I am ready to go on some deals.
Problem is this: I can buy for between $9000 and $11,000 and have a market to resell for $18,000 - $21,000 (2000 down payment, 5 yr notes, no interest). I have buyers ready to go approved by park. If I spend this kind of money upfront, I will have no money for other deals. Have explored selling the notes and find that I would still be too much in for the first year or year-and-a-half. Is there any other way to finance the purchase that I should explore?. I understand this is the downside of doing business at these prices, but it’s my area (and it’s already an hour away from home). I need to get moving on this as I have sellers and buyers calling me! I now understand that terms are a real service and make all the difference if you want to sell a used mobile home.
I really want to do this business, but can’t swing the wait for the return(s). What am I not thinking of?
This board and Lonnie’s books have totally changed my outlook about creative thinking and business. I know it can be done. Any and all thoughts appreciated. Thanks for your time.
Sincerely,
Kristine
John Behle’s working line of credit. - Posted by MDonovan
Posted by MDonovan on June 04, 2000 at 07:13:37:
Search on board 3 (cash flow) for “line of credit.” It has what you are looking for. You will need a complete business plan to present to your bank. You are looking for a line of credit that will be secured by your notes. They will preapprove you for up to a certain amount, based on a fixed LTV ratio, then each deal is just paperwork. You may need a partner to prime the pump for the first deal or two. It depends on your cash situation.
Re: Help! Need some new ideas for upfront money - Posted by Dave
Posted by Dave on June 03, 2000 at 22:11:32:
Their are a couple of ways to solve this off the top of my head.
If you can buy for a a average of 10k and sell for a average of 19500. then take out a note from conseco or vmf or someone else that does M/H loans. even at the higher rates they have today 12%. on this example you would have a note on 10K for 222.44 per month and income of 291.67 a positive cash flow of $69.23. use the 2K you collected for the down and apply it to principle of the loan and you will pay it off under 5 years. you will loose a couple thousand in gross profit. but you will still gross out $6500 in profit per deal with no money out of your pocket. (if your homes will book out by the NADA that the lenders use)
Or-- I would think that all the homes that you can buy for 10k average are not paid for??? If not let the seller (to you) carry the paper or most of the big mortgage companys offer a transfer of equity program. most of the time all you have to do is pay $500 and transfer the loan to your name. Now the seller is out of his loan. Perfect situation : seller wants 10k for his house. owes 8k assume his note on the 8k (it is more then likely at the end of the mortgage term so more princeable is being paid not interest)collect the 2k from your buyer to give to the seller you are dealing with. now you have no money out of your pocket and your start receiving payments.
hope this helps. good luck
Re: Help! Need some new ideas for upfront money - Posted by Lonnie
Posted by Lonnie on June 02, 2000 at 20:25:31:
Hi Kristine,
Review chapters 5 & 6 in making Money w Mobile Homes. There are many ways to bring an investor in on the deal and share the profits. Get aquatinted with several investors who would like to partner up with you.
Good luck,
Lonnie
Re: Help! Need some new ideas for upfront money - Posted by bwhite-tn
Posted by bwhite-tn on June 02, 2000 at 19:14:51:
Kristine,
Chris has given you an excellent method to keep up a
steady turn ratio.
I would like to add another possibility. If you have a
small independent bank in your area, this should work for you also. Do one or two deals then go to that bank
for a loan of 50% of your note with your note as collateral.
Build a good relationship with a couple of bankers.
That should carry you thru 20 deals or so depending on
their limits.
Your notes will be at 12% to 14% and your loans maybe
8% to 10%.
Just my .04 cents worth (inflation adjusted)
why not finance a few? - Posted by chris_wa
Posted by chris_wa on June 02, 2000 at 14:06:30:
thru local lenders…like conseco. you will need a higher caliber buyer(credit worthy) but they are out there…this will supplement your current cash needs and get your total investment back out immediately. maybe do one or two like this for every 3 or 4 lonnie styles. that should keep you rolling.
i would call them and ask for their direct loan department. don’t get put off to some broker(no offense to them) but they will cut into your pie and actually doing the loan paperwork yourself is a breeze.
hope this helps
chris_wa
Oops, that’s Ed Garcia. - Posted by MDonovan
Posted by MDonovan on June 04, 2000 at 07:33:30:
http://www.creonline.com/wwwboard/messages/72201.html
This is Ed’s idea.
John prefers to get private investors that loan against his notes.
Re: Help! Need some new ideas for upfront money - Posted by Kristine Poe
Posted by Kristine Poe on June 03, 2000 at 23:39:32:
Dear Dave,
Thanks for your good ideas. One problem might be that the homes I am looking to buy for $8000-$10,000 probably will not qualify for financing from Conseco. Most are early 70’s. I’ll find out, though. And believe it or not, these homes are owned outright. It’s the housing market here. Mobile homes in this area are appreciating all the time in context of the market. So, I am hoping that means if I don’t come up with any funding sources, I will be able to borrow to purchase, at least the first time around. My bank would broker a loan like that out. What is “vm?.”
Borrowing money seems complicated as it takes time and doesn’t allow me to close on deals ASAP, but it’s a start. Are there any other finance companies I should know about?
Thanks again for the ideas. Looks like I have options, just have to choose and move…
Sincerely,
Kristine
Re: Help! Need some new ideas for upfront money - Posted by Kristine Poe
Posted by Kristine Poe on June 04, 2000 at 17:58:12:
Lonnie, thanks for the advice. I reread the chapters 5 and 6. Thinking that my first deal (sellers are ready to go and so am I) will probably be a friend’s upfront money, with me doing the deal and managing the note.
My question is this: 12% interest for the use of the money sounds good to both me and my investor. Let’s say I buy for $10,000 and sell for $20,000, $2000 downpayment, 5 year terms makes the note $300 per month. I give the entire downpayment to the investor and now owe her $8000, to be paid down in equal installments over 5 years. What would her payment be? I don’t have a fancy calculator, but I do have a amortization schedule. Looks to me like my investor gets 60 payments of $177.96. This amount, deducted from the $300 payment, gives me a payment of $122.04, with no money of my own in the deal. Is this right? If it is, this is a win/win, because my investor would be happy with a secure 12% and I would be thrilled with no money in. Also, if I get a larger downpayment, there would be less money to repay, so the portion that stays with me of the $300.00 would be more, right?
Please let me know if I am way off here. Interest has never been my strong suit, but I’m very keen on learning the numbers. Thank you.
Sincerely,
Kristine
Re: Help! Need some new ideas for upfront money - Posted by Kristine
Posted by Kristine on June 02, 2000 at 23:49:41:
Thanks for your idea. Have been building a relationship with my local bank for a while now. I have other, small secured loans with them. Any ideas about how seasoned a note would need to be before they would let me borrow against it? Also, I am marking up my deals 100% and am not planning on charging interest. Maybe I should rethink this. It’s just that lot rents plus term payments are so high already. Will be thinking on this this weekend.
Thanks again. Hadn’t even considered borrowing against the notes from a bank. This board has such good idea people.
Sincerely,
Kristine
Re: why not finance a few? - Posted by Kristine
Posted by Kristine on June 02, 2000 at 23:38:57:
Thank you, Chris, for your post. I am not sure if Conseco serves my area, but I will find out. I am wondering, though, if they are going to finance early 70’s home for 20K? Also, I don’t think any of the the now 35+ callers interested in terms would qualify for financing. But maybe, who knows. I’ll look into it on Monday.
I want to understand this process, though. How do I do the paperwork myself? Isn’t that something that the buyer does? Or can I do it as the seller and broker on the deal? It would involve an inspection, just like other financing, right?
Thanks again for your ideas.
Sincerely,
Kristine
Re: Oops, that’s Ed Garcia. - Posted by Kristine
Posted by Kristine on June 04, 2000 at 11:27:25:
Thank you for a fabulous link. If others out there haven’t checked out the above working line of credit line suggestion, go there are read it! I’m a newbie, so I don’t think a bank will work with me this way, yet. But what a great way to have enough cash to do deals, pay a decent interest rate, and have it all flow through one place–no need to sell notes. Thanks again. I would never have found that on my own.–Kristine
Re: Help! Need some new ideas for upfront money - Posted by Lonnie
Posted by Lonnie on June 04, 2000 at 20:39:58:
Hi Kristine,
Your figures are correct, $176.96 to your investor, $122.04 to you. But I have to agree with the others, why offer zero interest? In fact, don’t even quote an interest. Most of your buyers are only concerned with “how much down, how much a month.” Find out how much they can pay per month, how much down payment they can make, then use a rate of interest you’re happy with.
Here’s an excerpt from my revised book (if I ever get it finished). These are actual figures of a recent deal. Hope they help illustrate what I mean.
Best wishes,
Lonnie
PS Yes, the larger down payment, the less you need to borrow, and the more you keep each month. Or, you could split the down payment with your investor, keep some cash for another deal, and still come out OK.
How To Get Five Extra Payments
I knew this couple could pay $1,500 down, which would leave $10,400 on a note. And I knew they could pay $250 per month. If I had used my standard interest rate of 12.75%, kept the payments at $250, and financed $10,400, the note would have been structured like this.
How Note Was Structured
N I PMT PV
55 12.75 250.67 10,400
If the note had been structured at 12.75%, (the industry standard) I would be due 55 payments, totaling $13,786. But, by asking the buyers if 60 payments of $250 per month would work, I’ll collect $15,000, an extra $1,214. The difference in the interest rate is less than 3%, but it’s added five more payments to my note.
This couple wasn’t really concerned with the interest rate. Their only real concern was being able to buy the home they loved, with affordable payments. They couldn’t care less if the interest is 12.75%, or 15.47%. Oh, and I also increased my lot rent $15 per month.
Re: Help! Need some new ideas for upfront money - Posted by Ernest Tew
Posted by Ernest Tew on June 03, 2000 at 09:31:52:
Kristine: Why sell with no interest and have the loan paid off in five years? Typically, buyers look only at how much down and how much a month–not how many years. For example, with no interest, a $12,000 loan will pay off in 5 years at $200 per month. With 12% interest, you could receive the same $200 a month for seven years and eight months.
As an alternative, you might reduce your selling price (to appear more competitive to the few buyers who care) and increase the interest rate.
Re: Help! Need some new ideas for upfront money - Posted by Kristine
Posted by Kristine on June 04, 2000 at 18:11:22:
Ernest: Good point regarding interest. My test ads state “no interest” and I have been getting a lot of calls. But, you are absolutely right about buyers looking mostly at down payment and monthly payment. 7 year notes sound so long. Do people in this kind of market really go for those? 5 year notes seem short and are similar to car payments and other high-interest installment loans. Maybe I’ll just leave the term out of the ad. Thanks again. And thanks for the purchase agreement forms.–Kristine