Need expert advice on quandrum of selling MH - Posted by bobb

Posted by bobb on August 26, 2005 at 17:48:27:

:slight_smile: Steve, your “short” post gave me a laugh. I really like the spirit of this board.

Okay, I didn’t give the details for fear of it not being a good enough deal in the eyes of the fine folks that read and give advice here. I know, yada, yada.

Here goes.
I am into the DW for $14,250.
I allowed $5500 for the buyers 14X70 SW in trade.
Sales price was $32,404.22 minus $5500 trade in. Financed $26,904.22 @ 15.405% interest for 156 monthly payments of $400. ROI or yield is ONLY 32.76% BUT, I will sell the SW for 14k at 12.9 % with $1000 down. So the total yield will be more like 62%.
I am extremely pleased with this as I am wanting to increase my mo cash flow. This is my first $700 everyone. I am happy, happy, happy.

So there you have it. I will await your dissection of my first sell.


Need expert advice on quandrum of selling MH - Posted by bobb

Posted by bobb on August 20, 2005 at 12:39:25:

I have a DW for sale @ $32k. Asking for 3-5k down and payments for 10-1s yrs and mo pmts of $350.

I have an offer from a guy wnating to trade his 14x70 3/1 which he says is worth 14k and is offering I take it giving him a 9k credit towards my DW (This offer just came in and I haven’t started due dillegence).

If I took this deal I simply would be increasing my cash flow on my original investment in the DW. I would not be “doubling” or increasing my cost or investment. Just two homes with marginal profit in the second one (Not doubling per Lonnie’s rule).

A positive of this deal is I will sell my DW for my asking price of 32k and then I’d have the 14x70 3/1 to sell for 14k (I think it is harder to sell somenting for 32k than it is 14k).

Without further babbling, is this a deal that you would give a thumbs up or down to? Do you see a way to make the deal better?

If I go with this my and sell the 14x70 3/1 I’d have 2 income streams.

  1. 32k - 9k = 23k @ 13.9% for 10.7 yrs = $350/month
    20 14k - $1000 down @ 13.9% for 5 yrs = 302/month

Oh yeah. How do I figure my ROI on this? I’m trading part of one deal for another. One will take 10 years to pay off and one 5 years. How do I punch the numbers. Let’s say I have 16k in the DW.

Allright everyone, give my your best.


Re: Need expert advice on quandrum of selling MH - Posted by bobb

Posted by bobb on August 24, 2005 at 17:01:06:

Tom, Mark and Steve,

I would like to say thanks to each of you for the information you provided. I’m not new to real estate but am new to MH deals. I was a little nervous with the way the deal was coming together and that’s way I posted. With your input I was able to negotiate a great deal for my new buyer and myself. This board is awesome and you guys are the reason it is.

Thanks and good investing,


Re: Need expert advice on quandrum of selling MH - Posted by Tom (WA)

Posted by Tom (WA) on August 22, 2005 at 13:23:07:


You ask about your ROI. I have a feeling that what you really want to know is the yield or return you are making on your money as this is the number everyone talks about and can be used to compare various investments.

If you are into this DW for $16,000 and you get $1,000 down payment for the SW, your net investment is $15,000. I have used straight amortizations on their payments rather than your rounded numbers just because it is easier to calculate. If you get $349.18 for 125 months and $301.81 for 60 months that equals $650.99 for the first 60 months then 349.18 for the next 65 months.

That calculates to 49.8%. That sounds pretty darn good to me. Personally, I’d much prefer almost 50% yield annually over ten years than 60 or 70% for 2 or 3 years and then need to keep doing new transactions to keep it going.

To compare, if you just sold the DW for $32,000 with $3000 down and $348.05 monthly for 15 years, your yield would be 31.8%.

I like the trade-in deal better.


Re: Need expert advice on quandrum of selling MH - Posted by Mark Haugsten

Posted by Mark Haugsten on August 21, 2005 at 03:05:31:

I suggest you look at more than those dp numbers, since that is where you are in the first deal. To whit the dp/trade is not the only issue.

You want $3-5k, and he is offering a commodity, but bidding it into the deal at $9k. I’d be tempted to suggest that cash is king in this deal, and you would prefer $3k cash. He should be able to sell a $14k MH for $3-6k! Take the cash instead. This will only affect his payment, which I think is important in the deal, see below.

In the abscence of a cash sale to the public in the $3-6k range , why should you 2 consider it worth more than lowlow wholesale, just as Steve suggested.

How long has his home been for sale, also? I gather he has some idea it is worth $14k, but where did that number originate? Why did he drop over 36% right away? That is a steep discount for tradeins.

Remember, we are trained to see tradein ledger entries as discount areas on retail prices, so his suggestion could have been for $17k, just as easily as $9k. If he had a $14k automobile, and wanted a $32k automobile, he would not go into any dealership and say, “give me $9k”, would he? He’d start probably 35% over $14k. I think he is using $9k becaue he accepts it as too high, and not something that the market will give cash for, just credit, such as the dp proposal.

I would point out to him, that as a (licensed?) dealer/investor you can buy 3/1 SW repos all day long at $1-3k. They are in parks, or on bank/finance repo lists.

In a park, and at $300 a month, a park is going to take the owner to court to get abandoned/claims liens/titles in about 5 months. He is simply too high to compete with your professional sources. Remeber Steve’s ‘deflate their expectation’ program? “I can take $3-5k cash, and buy another 3/1 SW, fix it up, and have cash left over!”

He is too high, obviously, in valuing his home to you for this deal. He would take a deep cash discount, and pay you just $3-5k down if he could get $9k cash in a heartbeat, and he’d gladly pocket $4-6k. UNLESS he wants lower payments, I think. So…

That brings up the critical element you don’t explain, the $350/mo payment. I am guessing that is the #1 critical number to him, not so much the dp? Typically, just 2 numbers are critical to mh buyers, and those are dp, and monthly payment.

Why not structure the deal as 32k, $2500 tradein. $29,500 financed at 12.75%, for 198 payments (dont say how many years, but remember this is a DW, and the dealers sell 240 month minimum financing at this price range), of $357.54?

I think the variable element in the deal to try to work with is the time he will be making $350 payments. If you consider a $4k, $6k, or $9k tradein credit, adjust the payments number up or down to keep the $350+/mo. The interest rate can fluctuate as well.

You asked about Return On Investment, or ROI.

Your ROI is simple. At $660 a month, and $7920 a year, divide by 160 (1%of 16,000) to get (7920/160) 49.5%. Since a LD starts at 50%, I suggest you drop the whole thing. :slight_smile: If you want to get seperate ROI, then I would prorate your 16,000 to 11,000 and 5,000 in each respective deal. That means ROI of (4200/110) 38% on the DW, and (3600/50) 72% on the tradein.

Return Of Investment…(a different ROI)
Your $16,000 with $1,000 down, returns in 22 months, at $660.
$16,000 with $3,000 cash down returns in 37 months at $350. So, you get a quicker return with the 2 mh deal by about a year, and a quarter.
At $5k down you get $16,000 returned in 32 months. Your 2 mh deal is not that much better than a good cash down payment, in my opinion, since the deals extend over a decade.

I do t his sometimes - Posted by Steve-Wa

Posted by Steve-Wa on August 20, 2005 at 23:22:08:

more lately, it seems. Thing is, you gotta give low wholesale for anything you buy - even if its a trade-in. 9K is too much. Ask him the lowest he’d take.

and you never said how much your basis is on the DW - is there an outstanding loan balance?

Well? - Posted by Steve-WA

Posted by Steve-WA on August 24, 2005 at 19:30:20:

Details, man, details!