Basic business principals - Posted by Dirk Roach
Posted by Dirk Roach on December 29, 1999 at 16:17:30:
In the mobile home realm, (aka Lonnie Deals, Flips, Move and set ups etc) one utilizes very basic business principals.
In fact I feel that is why the Lonnie Method produces such incredible results.
Here I will attempt to answer your questions, for the benefit of all who maybe considering mobile homes as an investment strategy, by answering your questions/concerns by the numbers:
1.) As a successful investor ones goals are pretty simple. One wants to make the best return on their investment. Personally my main goal is to make infinite yield on a deal, and I would say that 80% of the time I accomplish this. However if I cannot I will settle for anywhere over 70%yeild (if I have to). Which after extensive research etc. I have not found ANY other investment arena where these yields consistently occur.
The average medium, per captia income currently in the US is 27k (Gross!) And as far as Houses being the “best” investment people can make, is a statement which I disagree with totally. We all know that markets fluctuate and shift. No one has a crystal ball and no one with absolute certainty can place future markets. However one can look to various issues and climatic (economic) positions which can help one make sound investments.
In the mobile home world we do target the “blue-collar” class as our home buyers. They are a constistant target group which for the most part is over-looked, by the investing market. Basically we target them for two reasons: First, we have very little competition, no one wants to deal with these folks because frankly they have not evolved to level of financial sophistication to amass big chunks of cash, etc. They are forced to buy big ticket items (such as shelter), on payments, while paying above average interest rates. Secondly they live and function in a world were established, conventional lenders etc. will not treat these folks like people at all. There is an intrinsic distrust by this market of banks and/ or big corporations. Because basicly the conventional institutions look down their noses at this HUGE market. These folks are etreamly grateful that we are providing them with the opportunity to experience the pride of home ownership, and they show that gratitude by making timely payments (at above average interest rates).
I personally and many others have taken advantage of this stigma revolving around not only the target market, but the investment strategy of used mobile homes.
Depreciation and appreciation, really, honestly, simply do not exist in our investing theater. What does exist is the simple concept of “what the market will bear”. Thus the frutality of relying on existing, various publications such as the NADA books etc. Markets are variable from local to local, so existing sources of value are meaningless.
2.) Some mobile parks do require that older mobile homes be moved out of their parks when sold. Okay, we don’t play on that ballfield. Believe me there are plenty of other places to play ball in and some basic market reconisence will tell you were you can play and were you can’t.
3.) Repossessing mobile homes. Much easier to repo (in almost every state) than the fun trip of going down eviction road. Remember Mobile homes, 99% of the time are personal property NOT Real Estate. And also remember that for a couple of thousand dollars you can make a mobile home look like a palace inside, in little or no time.
Also statistically most often when you do get these back, you have already reached the point of initial investment and actually went beyond that. So what that means in real world investing not only do you have your initial investment back in your pocket, you also have made enough to cover repair and cleaning expenses, now you have a product which you can market with little or no competition, for an infinite yield, in a very quick time frame (due to the huge target market)
Can you think of a better investing postition to be in?
On a last note I would simply like to say that I by no means am attempting to enter into a debate with you, regarding investment strategy. What is good for me, and what I prefer, you may not. That’s cool, I respect that.
However let me also say that during the course of the last year I have averaged 12 completed deals per month, and that I have never lost one cent in any of my mobile home deals! I Buy for between $2k and $5k I have sold for between $13K and 17K. Those are real world numbers which I have executed time and time again, mainly because I know my market, and I have educated myself on various techniques to make that happen. So if you Danny or anyone else out there is sitting on the fence as to weather to look into mobile home investing, I guess one could say that I am pro mobile home.
Also one of the best places to learn, and understand how all of this works, besides other investment strategy will be at the upcoming convention.
I hope to see you there. And Good Luck with whatever course of action you maybe following.