MH buyer wants us to refinance. - Posted by Robert_CO

Posted by Mark (SDCA) on February 04, 2000 at 12:49:28:

I think Lonnie quotes 11 3/4 which seemed plenty high to me. 18% is unsecured rate. 21% is what those cheesy rent to own stereo places charge. I am amazed the buyer agreed to pay 18% and even more amazed that the seller feels that isn’t enough.
I guess I am just too soft…


MH buyer wants us to refinance. - Posted by Robert_CO

Posted by Robert_CO on February 03, 2000 at 19:43:05:

We sold a 1970 Mobile Home for the third time on September 1, 1997. This third time appears to be the charm, depending upon your perspective. Michael, our buyer, who works nights and who seems to at least partially support his daughter and grand daughter who live in the Mobile Home, has paid us $285.00 on or before the first of the month for thirty straight months. We offered him an opportunity to make one interest only payment last month to save him some monthly money and of course extend the note by one month. Michael delcined which surprised me but that must have got him thinking.

This month he asked us to refinance to reduce his payment to about $200 per month. Why not ask? With the park rent going up faster than his rather small income, he says he cannot afford the $285.00 anymore. (I know, how did he manage for so long?) He has integrity and perserverance and I respect him for that.

Let us assume we do not want the home back because it will have to be moved and be nearly worthless. So then we want to partially accomodate Michael.

His current note rate is 18.155%. Our mobile home “standard prime” is 18.00% but when we rounded the payment to an even dollar amount the rate went up slightly. His effective annual rate is 19.745% according to our T_Value software. I guess that effective rate is something like an APR.

How do I increase our return (refinance fees or the like) significantly and still keep his APR under 21%, the legal upper limit in our state for consumer loans by non-licensed lenders? Also assume we are not getting licensed anytime soon since we are not doing enough loans to require it.

How do we help Michael, make money and stay under 21.00% APR?

Cordially, RobertR_CO

Re: MH buyer wants us to refinance. - Posted by John Behle

Posted by John Behle on February 22, 2000 at 22:05:18:

I really don’t have much to add to the advice you’ve been given. My approach is much like Lonnie’s. I tend to be way too soft with people. It’s a too edged sword that is VERY situational. I had one deal leately where I forgave a ten thousand dollar penalty for someone that was late on a balloon. I expect more deals from him and frankly didn’t feel the note was all that fair. The ironic thing is that he wrote the note and was going to put another buyer into the deal. The buyer fell through and he ended up with the property. Cash was tight and I let him go a long time without payments. When it came time for the payoff, I forgave the 10k hit, but I did charge him the default rate on the note. We just did it at 30% interest for the 11 months it was in existance.

So, we had another deal recently. I let someone else be a little more harsh with them because I was too busy to meet with them at the time. They just declared bankruptcy. I know if I had met with them and been more win/win than the broker that met with them that they would not have declared bankruptcy.

I tend to go just the opposite way. I rarely do hard ball negotiations. I actually see their side easier than mine. I won’t put a deal together that I wouldn’t do from the other side. At the same time, no matter how “Good” you make the deal some people will still not appreciate it. Recently I cut a sweet pre-foreclosure deal with a relative. They wanted to begin investing, so I let them keep the property, put the money in, charged them the lowest rate I have ever charged and put a great deal of time, effort and money negotiating a deal they could not have done. Now they don’t appreciate it, feel they did all the work and question how much they want to pay me back. Not every deal can be a good deal for everyone involved. Yet, there are tons of deals out there. Be willing to walk away from deals or some profit in favor of other deals.

I am a BIG believer in what goes around comes around. Again and again I run into people and make more deals later. Most of the time it is a very good result of they come back because I treated them well.


THANKS and Neither a borrower nor a lender be… - Posted by RobertR_CO

Posted by RobertR_CO on February 04, 2000 at 13:54:34:

Thanks for taking the time to respond, all of you kind folks. I seem to be in the minority here. Call me a capitalist pig or rather capitalist hog since pigs get fed. My best (?only) choice seems to be to go along with you benevolent democratic capitalists.

“Neither a borrower nor a lender be” comes from Shakespeare. The next line is or should be “because the interest rate is too high for the borrower and too low for the lender.” I always remember that next line when I make a loan. I will not now debate or rather justify my interest rate. Rates, however, are negotiable and I have negotiated them in the past.

I have not been able to convince Lonnie to raise his interest rate and he has not yet persuaded me to lower mine. Of course, most everything I know about generating Mobile Home notes, I learned from Lonnie. His knowledge is only exceeded by his generosity in giving it. Lonnie is a beacon of inspiration for me and taught me how to have fun at something which makes money. No gratitude is sufficient for the person who teaches us how to have fun making money honestly. I consider myself quite fortunate to be Lonnie’s (and his squirrel dog Joanne’s) student and friend.

Cordially and benevolently yours,


Re: MH buyer wants us to refinance. - Posted by Lonnie

Posted by Lonnie on February 04, 2000 at 09:23:06:

Hi Robert,

The others have given you good advice. And I think the best point is, don?t get too greedy. When you get a good, reliable and steady paying customer, you should concentrate on doing what it takes to keeping that customer for life. This appears to be the case here. So don?t be blinded trying to figure how to make a few extra bucks this one time, which might cause you to loose a good customer and a lot of future bucks.

I have a young couple that?s been making me car payments for the past 7-8 years. They just made their last payment last week, and they?re now looking for a pick up truck. Guess who they will get the loan from to buy that truck? They?re more than happy to pay me 18%, because they know they can get the money when they need it. But if I should get too greedy, they might find somebody else to borrow from and I?ll be the loser.

Last month, one of my good paying MH buyers needed to borrow $2,000. All she had to do was come by the house, sign a note and she had the money. I?m charging her 18%. Not near as much as flipping a little cheapo MH, but all I have to do is write a check and collect payments, and I don?t even have to leave the house to do that. (Money doubles every 4 years at 18%, so that?s not too bad.)

Chances are that sometime in the near future your buyer will need new appliances, AC, another car, or money for something. When that happens, you will have the chance to make a lot more money then, than by trying to squeeze a few more bucks from this deal. Sometimes a little squeezing can turn into choking. Also, you will have a satisfied customer to spread the word on what a great guy you are, and a chance for new customers. Hope this helps.

Best wishes,


Don?t know how much is left on your loan, but if you figure the actual dollar amount between 18% and 21% I?ll bet you will be surprised at how little it will amount to. Sometimes we get too caught up in percentages instead of dollars.

I’m with Glenn - Posted by PeteH(NYC)

Posted by PeteH(NYC) on February 03, 2000 at 23:16:14:

You’ve already collected $8550 from a buyer you say you respect for his integrity on a home I’m guessing you didn’t have any money left in since it was the third time you sold it. You’re charging interest at half again as much as Lonnie recommends. At what point do you decide your yield is “good enough”?

Re: MH buyer wants us to refinance. - Posted by Glenn OH

Posted by Glenn OH on February 03, 2000 at 21:52:19:

Where’s the problem?
Obviously your investment has been returned. “He has integrity and perseverance and I respect him for that” - not if you are now trying to gouge him for higher interest. If he has paid you well for 30 months, why not just refinance at $200 per month and keep those checks coming for more months - isn’t that the whole point and where the big money is made?! If you really want to add a little, add an extra month to the loan.
Remember Lonnie’s line: “Pigs get fed, hogs get slaughtered”

I do sometimes get greedy. - Posted by RobertR_CO

Posted by RobertR_CO on February 03, 2000 at 22:10:42:


Thanks for the reality check, but…

If we give Michael additional benefits, don’t we deserve some too?

Cordially, RobertR

I vote for a little ‘humanitarian spirit’ here (nt) - Posted by SusanL.–FL

Posted by SusanL.–FL on February 04, 2000 at 10:39:26:


Re: I do sometimes get greedy. - Posted by Glenn OH

Posted by Glenn OH on February 04, 2000 at 08:31:08:

Your giving Michael the privelege of paying you 18% interest for many more months. That seems to be the rate for note buyers quoted in many books, so it is a good rate. The key is the “many more months” - your investment in this money is zero, therefore your return in infinite!! Forget about usury, you’ve got it beat by a mile.

Re: I do sometimes get greedy. - Posted by Ben

Posted by Ben on February 04, 2000 at 06:26:08:

Give it up. Give to others what they need and you will have everything you need, in time.