Posted by JHyre in Ohio on October 24, 2000 at 06:55:38:
Bob McNeely here in Ohio did exactly the same thing…he’s usually pretty generous with the info.
John Hyre
My biggest problem to date (long) - Posted by Marc Donovan FL
Posted by Marc Donovan FL on October 22, 2000 at 13:20:12:
I started in June buying cheapo single wides from the family parks. So far I have bought 17 homes and sold 13 for a total of $96,000. I have spent over $50,000 of my own cash to get where I am now. I have a total income from these homes of $2,500 or so per month. That’s nothing short of phenomenal as far as return on investment, but I have no more funds to continue, and I cannot sell any of my notes.
When I first started, I planned on making this a full time business. I had eight other people working for me full time, doing buying, selling and rehabbing. It looked like a home run. My plan was to sell just enough notes to maintain a steady pace. But it turns out that there are no buyers. I posted that problem here last month, and I got a few good leads before my post was removed (apparently asking for note buyers violates the rules, I didn’t know). I posted my notes on ANN, and I got a few responses. As soon as they found out there was no land, they all said nevermind. I did sell two partials and two notes to two buyers, but those guys are tapped out now. Ernest Tew offered to fund my deals, but he only wants homes less than 15 years old, and there are very few homes in this county that meet his criteria. When I find those deals, I’m sure he can help, but so far, no luck.
So, I laid off all of my help, and now I’m putting together a business plan to try to get venture capital. I must say, the plan is impressive, due to my past success, but it just burns me that I can’t just sell some cash flows and go on. People buy cash flows that are a lot more risky all day long. Why is there such a stigma attached to MH paper?
I just think its ridiculous that I have doubled my investment, but I cannot spend the proceeds. Its like discovering oil in the desert, and dying of exposure trying to get back to town. At least he died a rich man.
I realize that Lonnie’s plan is to go slow. Keep the day job until after a few years of doing deals, you can quit the day job, and slowly get wealthy. And I probably should have sat down with a spreadsheet and faced the possibility of no note buyers, but I just thought for sure, I could get someone to buy enough partials that I could continue indefinitely.
But, the whole reason for my post (other than venting my frustration) is to see if anyone has been able to solve this problem for their own business. In my mind it is a major stumbling block. Maybe it should be addressed in DOW second edition. I love doing this, and I would like to devote full time to it, but so far I cannot figure out how to do it.
Marc Donovan
Needing Cash - Posted by djswett
Posted by djswett on November 03, 2000 at 24:30:20:
$50k cash advance is not a lot of money to someone who feels comfortable working with creative financing. The other posts indicate the importance of looking for an institution that will work with your MH paper. This idea will work, but there is always the final approval of the “loan committee”.
There is another way. I was a hard money loan broker for 15 years and arranged money advances for deals. I guarantee you that you have Ernest Tews right in your back yard. There are always deal makers looking for a good return. I used to go to the courthouse and run down thru the index looking for OWC or 2nd notes on properties. You can also check for UCC filings for MH finance deals. That gave me the names of lenders to whom I could present my deal.
Right off the bat, I would ask to see your net worth statement. Do you hve enuf financial depth to personally guarantee your existing MH deals or do you have enuf assets so that I can sue you for indemnification if the MH IOU’s go bad. People know that MH loans have a lot of air in them and that they are depreciating assets like automobiles. It is real easy for a loan to value to be upside down. I will loan you money, but I don’t want the headaches of loans that go bad.
Could you take a good chunk of your note portfolio to a local loan broker (check yellow pages) and get a blanket collateralization (called hypothecation) of the notes. Say offer $30k notes and get $10k cash. Obtain a good success with that advance and then hit the lender for another $30k notes for $10k cash. Then you still hve one more hypothecation to do with your old notes and by that time you have built up another bunch of notes.
By this time, you might be able to find a partner who will give you the basic cash to do the deal and then you do the labor of find-it, flip-it work. He gets first return on his cash and you keep the back end paper cash flow.
DJ
I don’t understand the problem… - Posted by Mark (SDCA)
Posted by Mark (SDCA) on October 26, 2000 at 13:04:15:
You say you have $2500 per month in cash flow each month. Is this the ONLY income you have? If so, I would guess that is the problem. You are soooo close. At 2500 per month, how long would it take to generate another deal out of the cash flow 2-3 months??
My advise is get a job for a couple of years and use the cash flow from the mobiles to generate new deals. It won’t be too long before you have enough cash flow to generate deals AND live on.
Mark
Re: My biggest problem to date (long) - Posted by Eric C
Posted by Eric C on October 24, 2000 at 10:02:19:
Hi Marc -
All of these folks have good suggestions, and while I often trade for things I’d like to have (as Steve suggested), that won’t get you very far down the road if you’re doing (or planning to do) these on a full-time basis.
Lyal relayed his experiences and JHyre pointed you to someone else who has a lesson to share. Take advantage of them.
My take is a little different. There are ways to qualify your lending institution for these BEFORE you ever go in the door.
Learn to sell yourself and your deal;learn to package.But most importantly learn to choose your institution carefully.
Research your local institutions as to their loan preferences. Although there are several ways to accomplish this, you most easily do this by checking with other investors in your area (whether or not they invest with you or in your type of deal). They can give you valuable insight as to the structure of successful deals as well as those that were DOA. In other words, they can tell you where the boundary lines are.
Banks, especially smaller ones, reflect the personalities of the people that run them; that is both good and bad news.
The good news is that all you have to do to sell your deal is find someone (at a bank) that will ACTUALLY LISTEN to you AND LEARN about your business.
The bad news is that there are not as many of these folks out there as in times past.
I was taught that there are basically two types of institutions – “people” banks and “numbers” banks;the labels describe (fairly accurately) the lending practices at these institutions.
“People” banks are those that place more emphasis on the individual (borrower), their track record, and their character than anything else.
“Numbers” banks are just the opposite; nothing matters except the numbers. Your credit score, your loan ratios, the current interest rates, etc., etc…
Do I need to tell you which type of bank is more flexible? Do I need to point out that as banks(and other institutions) grow larger they begin to rely more and more on the numbers alone?
“People” banks exist everywhere. You’ve just got to put forth some effort to find them, educate them, and NOURISH them (and your relationship with them). Your relationship with them will be key. “Numbers” banks could care less; and as long as you meet their requirements for yield and risk, you will get your loans – nothing more.
If you’d like more information, just ask.
Yours,
Eric C
Re: My biggest problem to date (long) - Posted by lyal
Posted by lyal on October 23, 2000 at 07:49:33:
Marc, I ran into a similar problem a while ago. I made up a nice portfolio with pics and facts and started making the rounds of the local, small “hometown” banks. The first was sympathetic but didn’t couldn’t understand what I was doing. The loan officer kept talking about “rentals” etc. The second guy literally threw me out of the office (I SAID it wouldn’t be any good for our BUSINESS!!! I think was the quote as he pointed to the door.)
I finally found a guy who could understand (they lend money for mobile homes). I had to fill out uncountable forms, submit to the credit check and sign a personal guarantee (I do this stuff in an “S” corp) but I got him to set me up with a 15K credit line. After I used that up I went in and showed him the docs for what I’d done and he let me “term off” loan using the homes I had sold as collateral (I sell on a “Contract for Deed” type deal where I keep the title). He keeps the titles in a file in the bank for his protection. In every case, the payment I get is more than what I owe and the term is longer. I never need to borrow more than 50% LTV on these. I’ve done this twice now for 5 homes and he understands that I’ll be doing it on a regular basis.
Email me if you have questions.
Lyal
Re: My biggest problem to date (long) - Posted by Steve–DC
Posted by Steve–DC on October 22, 2000 at 15:29:39:
Marc,
Have you offered to use the notes you created to trade for items that you can sell for cash. I remember researching Jimmy Napier’s course a couple of years ago and he used some the notes he bought at a discount to buy a new car every few years from one of his local dealers. Maybe you could look for a motivated seller of some other type of personal property (car, boat etc.) and see if they are willing to trade the income stream (or a partial) for the item they are trying to sell.
You could even try to line up a buyer for the item before YOU actually purchased it. Just use your creative ads to sell the item for cash and then you have funds to do another deal.
Or maybe you could use the item to buy a MH! If it is a real nice car or a nice boat, you might get someone who wants to QUICKLY trade their old MH.
Hope this gives you few more ideas to work with.
Steve Smith
Re: Needing Cash - Good Answer! - Posted by Terry Vaughan
Posted by Terry Vaughan on November 03, 2000 at 14:45:53:
DJ:
Very nice post with good information!
Thanks for the participation.
Re: My biggest problem to date (long) - Posted by Steve–DC
Posted by Steve–DC on October 24, 2000 at 17:42:48:
Marc,
I think that Eric’s post is right on. You are already successful in this business and you just need a good people banker who believes in YOU. I have a very good set of tapes by a gentleman in Florida named Don Tauscher that describes how to go about setting up a relationship with a “people” banker. If you want to borrow it, just send me an email and I will get it in the mail to you or, if you will be at the workshop, I’ll just bring in when I come.
Of course, maybe you don’t really need it. But, the series is especially good in helping identify exactly who a “people” banker is.
Steve Smith