Posted by Marty (MO) on May 20, 2007 at 22:48:07:
just glanced through this… to reiterate, you’re concerned about how to
raise cash for lonnie deals in parks?
Don’t make your investors lienholders. You’re basically writing this up
as a signature loan.
Sell notes and offer full recourse. You can sell the whole note or
partials.
This still gives you full control of the deal…
always worked for us!
good luck,
Marty
long rambling about finance strategy - Posted by wayne–OR
Posted by wayne–OR on May 20, 2007 at 22:07:42:
Before anyone jumps on me about thinking about this stuff and just get out there and do deals…I am out there driving the bumps daily, and in contact with 5 parks that I have permission to work in weekly, including driving through each of the parks once a week.
This is just some side thoughts about bridging financing acquisition strategies for stick built houses and applying them to MH houses (which is mindracking sometimes since MH’s are personal property and stick build is real property).
So some backstory:
As a side venture, I wanted to expand out a bit (and not contribute too much time–limited amount of time) to being able to have the ability to latch onto Land/Home package deals and lay the foundation for a land/bank if the opportunity arises.
SO in anticipation of this I have been in contact and seen several local hard money lenders and it clicked some ideas in my head.
Heres where the rambling begins (please dont misinterpret my writing as lecturing as it is just my take and interpretation to how I believe things are done)
First off, the hard money lenders must and insist on first position for the lien.
So when you acquire stickbuilt with a wrap around mortage (illinois land trust, All Inclusive Trust Deed–whatever)…with a wrap around mortgage with the wrap being done on the hard money lenders first position.
Questions arise as too…for arguments sake…if the HML’s first lien is 5k and your sales price is 10k…you take a second lien position for 5k or for 10k? Do you have your wrap include the first position amount or just the amound of your sales price minus the first lien position?
It makes me wonder to have it for the entire sales amount (including the first lien) for a total of 10k, that way they write one check to you and you turn around and write a check for the first lien position, since you are going to have to sign a personal guaranty with the HML anyway.
This way you are sure that the first lien is paid monthly and you sleep a little better at night.
and after talking with some of them, the points, interest, maturity (balloon date), fees, (escrow is a must from what I can see), and the borrower pays the entire escrow fee…it is just simply not feasible to use a HML for lonnie deals in a park.
Just running some numbers on small amounts, they become alligators if your holding goes over a month…and even if you do sell quickly with no concessions on lot rent, not to mention property taxes…the yield is almost non-existant…
So this method is more for Land/Home package deals.
With the exception of if you find a private lender that will adapt to your ways of business with just a percentage payment on their loan and a first position…someone that is not as stringent as a HML and wont insist on points, balloon…pretty much inflexibility that you simply cannot adapt to your model of doing business.
If you were to borrow 5k from someone at 15% interest…no points (beats the hell out of CD’s)…give them a first lien position—then it raises a couple other problems.
How are you to insure that you can still have the power being in second position to still evict deadbeat buyers??
and the private lender you use in the first position doesnt want the hassle of getting the home back…that is your job…I would assume you have a written agreement or limited Power of Attorney from the private lender giving you the rights you would normally have in first position without diminishing his rights and position too much.
Any input or tweaking of these strategies is greatly appreciated.
Re: long rambling about finance strategy - Posted by Tony Colella
Posted by Tony Colella on May 21, 2007 at 07:36:14:
Wayne, I think you may have Real Estate reading overload.
Not a bad thing but at some point our brains are trying to connect all the creative strategies at once and then we flip between the lonnie deal, land/home (hybrid deals) and real estate deals.
For now just focus on one thought process. If you are going to do a Lonnie deal than use what has proven to work (proven by Lonnie and most of us who post and read here). Don’t try and tweak that system yet. Ain’t broke, don’t fix.
If you then focus on land/home deals then try and keep it simple. I have never wrapped a loan on the buy side and honestly that type of deal is one that is falling under scrutiny by attorney generals in many states. I do not believe there is anything underhanded in it, but it may also be unnecessary.
I find that no matter who the lender is be they hard money lenders, banks or commercial hard money lenders (as we call them in the books and courses) all prefer to have the first lien position and offer us better terms and rates for such a deal.
I personally prefer to pay off the seller and have them gone. I want the deed. That deed is very valuable to me. I can do many things when I have the deed. With the seller paid off the deal is clean.
How we obtain the money to pay off the seller is discussed in detail in our material as well but suffice it to say that as you are finding out, the numbers must work or the deal gets skinny quick.
The numbers can be made to work out. The contacts and networking with other mobile home investors has proven to many of us to be invaluable not only in brainstorming but in working deals.
Using proven strategies already fitted to the investment vehicle will make it much less confusing and by nature, less risky.
Later you may tweak them but for now, I recommend using what already works instead of trying to reinvent the wheel. I understand your desire to do so, we have all been there but most of us kicked ourselves when the (non)deal hit us smack in the face because of it.
Tony