Posted by DanM(OR) on May 06, 1999 at 14:23:56:
Bill has a creative way of handling this. I have his bulletproof corp course, which is great by the way, and he deals with loaning your corp money. I am sure that he has a similar solution.
Best of luck to you!
Dan Matejsek
Investor Capital for Lonnie deals - Posted by Tony-VA
Posted by Tony-VA on May 06, 1999 at 05:47:21:
I spoke with Dirk by phone and he suggested that I post this here. I have just begun my “Lonnie business” and have created a Corporation to do these types of deals.
I have found a couple of investors interested in loaning my corp. money for a 15% return. My question is about the paperwork that should be involved. Am I right in assuming that the investor is simply loaning money to the Corp. with a written agreement spelling out the terms etc.?
I then purchase the MH, sell it and use the cashflow proceeds to pay off the investor’s loan? The investor’s loan is not actually tied to the title and loan paperwork on the MH. This way, my corp. controls the MH and can repossess should it become necessary. My corp. would continue to pay the investors loan during the interm.
If this is not the proper way, and I should sell partials of existing lonnie notes, what paperwork would be involved? Would a second note be created using the first as collateral? Would the corp. still have the control of the MH to repossess if necessary to ensure the funding?
Thanks in advance,
Tony Colella
Re: Investor Capital for Lonnie deals - Posted by David Alexander
Posted by David Alexander on May 07, 1999 at 10:37:35:
Tony,
I would say the Investors would probably want to be secured, either by the MH’s, the Notes, or other collateral. Also, if your in this for the long hall I would say you want the Investor secured for your own peace of mind. You could even go so far as to set up insurance so that in the event of something untimely, the loans would be paid off and your family would still get the cash flow and assets.
I would suggest borrowing against the collateral as John teaches, as that gives you the most freedom.
If you are going to sell the notes or partials, I put protective clauses in them such as first right of refusal if sold, the right to keep making payments in the event of default to keep the note current, the right to foreclose myself. You could also accomplish this having a seperate management agreement with your Corp and the Note buyer.
By far the best way is to borrow against the Notes as collateral, also put substitution clauses in the agreements. You want Investors that are willing to send you a check to do the deals, and then you secure it with MH paper later.
Now for the 1,000,000 dollar question. Where did you find Investors to loan against Mh paper at 15%. I have that for my RE, but the best I have for MH paper is 18%. Cultivate these guys, together you can make alot of money. Once you have that in place if the funds are limited and you top them out, you will want to start looking for Institutional money to cash the paper out, get your cash and start the process over.
Good Luck
David Alexander
Re: Investor Capital for Lonnie deals - Posted by John Behle
Posted by John Behle on May 06, 1999 at 17:40:20:
As Bud mentioned, it can be hard to get an investor to just loan to the corporation with no collateral. Someone would have to know and trust you to do that.
You can do what you are suggesting and still offer the investor the collateral of the mobile homes as you buy them. You still have control, it just takes a few documents to secure the investor. Later as the corporation has assets and a track record, then it can be easier to attract an investor.
A fool and his money are soon parted. - Posted by Bud Branstetter
Posted by Bud Branstetter on May 06, 1999 at 16:46:07:
Tony,
This is no reflection on you or your honorable intentions. Look at it from the skeptical investors point of view. The loan will be to the corporation with no asset specifically used as collateral. Also there would be no personal guarantee. Therefore if the assets are mismanaged and the money not repaid only the corporation could be held liable.
Would a bank want personal gurantee, yes.
Would a bank want the loan collateralized with the asset, yes.
MH’s without land are like car loans, very difficult to sell the cashflow for decent rates. There are people that will buy and especially as portfolios. The better paper work you have the better time you will have.