Newbie status update, struggles (long) - Posted by JeffB (MI)

Posted by Michael(KCMO) on June 09, 2005 at 18:33:59:

Better let HIM order it, Steve. Otherwise you’ll end up w/ two! And it just goes downhill from there.


Newbie status update, struggles (long) - Posted by JeffB (MI)

Posted by JeffB (MI) on June 08, 2005 at 22:16:34:

It’s been a while since I posted about finally “pulling the trigger” on my first deal. Since getting over that initial trepidation six weeks ago (seems like ages though), I’m finding myself learning rapidly, at a rate I never would have thought possible.

My first purchase was a 1976 14x60 2/1, which was in poor shape but I did not realize it at the time. I paid $2000 for it. I showed it to many people and had it sold 3 times before finding someone the park would approve. In the meantime I paid another month’s lot rent ($432) plus a park app fee ($50). I followed all the Lonnie techniques but finally resorted to selling it for $100/mo for 30 months on May 16, “as-is” with $500 down, and the first payment due on June 1. I got a call the next day from the buyer (a young kid) telling me the washer didn’t work (sprayed water everywhere) and that the floor underneath was rotted. I told him to go find a used appliance and we would work something out. He found a used washer for $100 so I told him to skip his June 1 payment and we’d call it even. He was happy, and so was I. I did NOT want this home back!

Since getting rid of this problem home, I’ve gone nuts. First I quit my JOB (new baby due in one week and I’ll be a stay-at-home dad, so this is just coincidence). I bought two homes from Vanderbilt a week later, and got another title free on a third trailer from a guy. So now my inventory is:

1995 16x76 3/2 (fair condition, filthy inside, $6100)
1985 14x70 2/2 (fair condition, $900)
1971 14x70 2/1 with expando – free – needs lots of work

The first two vanderbilt homes (in same park) had back lot rent due of over $5000, which I negotiated down to $1300. I hired my younger brother and his friend to paint the interiors of both houses, and this worked out well.

For the last few weeks, I’ve been busting my tail remodeling window casings, going to home depot, repairing plumbling, skirting, powerwashing, going to home depot, repairing door jambs, going to home depot, hanging mini-blinds, etc, etc. There have been a number of showings of both the first two homes, while they were in the proces of rehab. What I have learned is that it’s better to show the homes only AFTER rehab work is complete. People have no vision and can only see a home for what it IS, not what it will be.

Both homes have been sold a couple of times, but the sales fell though. Why? Because I did not collect a deposit when I wrote up the contract (buyer said they had no cash on them but “I’ll bring it tomorrow”). Mistake #2, not to be repeated by me.

There are so many other mistakes that I don’t have the time to list here. But take my word for it, I’ve made many, and I’m sure I’ll make a whole bunch more before I’m done.

The 3/2 should sell for $20k once finished and I’ll have about $8500 into it. The 2/2 should get $11k, and the 1971 2/1 (the free one) I’ve already sold to a guy for $6500, with $1500 down but he’s going to be doing ALL the repair work before moving in, so I told him any receipts he brings me up to $1000 would be credited to his down payment. Then payments of $200/mo for 30 months or so to get the rest. This worked out to be a fantastic deal since I have zero dollars, and none of my time into the home.

What I’m getting to is that I’ve spent countless man hours over the past few weeks doing manual labor. I do not like to do manual labor on MH’s. Maybe it was too many years of sitting behind a desk, but in my mind, if I do manual labor I just became an employee again. And I quit a really good desk job, to be a stay at home dad (and investor). I need to get out of the business of working on homes. I think I’ve gained enough experience to cover most of the differences between MH’s and regular SFH, which I know well already.

I have a lot more fun finding deals, talking with people, or rather asking questions and letting them talk. I love being in control of the conversation without the seller/buyer knowing it. It’s a blast. Working on MH’s, is not a blast to me. So with one week until the new baby comes, I need to quickly get a new blueprint for how I’m going to move forward in this business. To quote Ron Legrand, “The less I do, the more I make!”. This is so true. The guy who bought that free house from me, only called me because I had taken the time to network with some people at a different park, who then referred him to me. $6500, made instantly. Versus slaving away in a hot, dirty MH repairing what other people let go far too long.

Have any of you found a way to successfully operate in Lonnie deals while doing absolutely no manual labor? I’m sure it can be done. You just have to figure it into your costs when you buy, right? And the yields will be substantially lower because of all the cash layed out up front, as compared to my “sweat equity”.

Hope I didn’t lose anyone with this long post. I thought about breaking it up and writing it tomorrow AM, to give Steve-WA a full day at work to read and digest it.


Re: Newbie status update, struggles (long) - Posted by Chris (WI)

Posted by Chris (WI) on June 10, 2005 at 22:05:37:

I really enjoyed your post. I like the fact that you quit your job and got into 3 MH at the same time. You are absolutely right about not wanting to do the work. Make your hunt for a handyman like a hunt for a good Lonnie deal. You might go through several but eventually you find all the help you need, carpenter, plumber, painter etc. Doing the first few yourself is good because now you know what it takes and it will be harder for anyone to take advantage of you. Keep at it, sounds like you are off to a good start.

Deposits are for used car salesman - Posted by Ray (MO)

Posted by Ray (MO) on June 09, 2005 at 13:56:30:

One of our buyers is a handy man. We use him. We have to manage him but he does great work and we pay him well $15.00/hr. The reason we use him is because his house looks good. When we sold it to him it needed a great deal of work. His down payment was sweat equity. The house needed a front door. We bought the door and he installed it. We inspected the work. The house then needed skirting. We bought the supplies he installed it. We inspected it. Once those two jobs were done he moved in. A great deal for everyone.

As for deposits, we take them if they offer and we tell them it is nonrefundable. We had several occasions like the ones mentioned were they gave us $100 and then were not approved in the park. We gave the deposit back but had to go through the hassle of meeting them or mailing a check. Now we say, “This house is for sale and will continue to be for sale until you place a nonrefundable deposit which will be applied toward your down payment. If you are telling the truth about your credit there should be no problem, right?” If there is a problem they will know and they usually say, “I’ll wait and see what the park says” I really don’t want a deposit, I want a first payment (Thanks, Steve). Don’t worry about deposits they’re for used car salesman.

comment: - Posted by Steve-WA

Posted by Steve-WA on June 09, 2005 at 11:18:07:

Oh, har har. BTW, I am reading it at work!

One comment; you said: " . . . Because I did not collect a deposit when I wrote up the contract (buyer said they had no cash on them but “I’ll bring it tomorrow”). Mistake #2, not to be repeated by me."

Deposit implies refundable. Try “initial payment” instead. In fact, I have incorporated it into Lonnie’s sales agreement; keeps them serious. I want no more than $100-$200 - enough to get their attention, but not enough to send them to a lawyer if they back ouit and I keep their money. Money for my time spent.

see it here

soon there will be links to these and other clauses/forms directly from the GOTC website - I’ll post when they are

Re: Newbie status update, struggles (long) - Posted by jp(sc)

Posted by jp(sc) on June 09, 2005 at 06:24:35:

I’m about where you are having done 3 deals. I think you are on the right track with the less is more philosophy. When it comes to MH repairs, the homes just need to LOOK good, they don’t actually have to BE good. Many times they don’t even have to look good. My most recent sale was a home that had really nasty carpet. My wife and I both walked through there and were completely repulsed by the vomitous carpet. I thought to myself that I would just try to sell it as is b/c I didn’t want to put in that much carpet. I vacuumed but the carpet still looked awful. Every single family I showed the home to LOVED the place and never even mentioned the carpet. After I repoed the home, I had Stanley Steamer clean the carpets. $125. Even though the carpet was very badly worn, it looked a million times better when they were done. Sold it again for even more and people still fell in love with it.

When I choose to do some repairs I have yet to hire anything out. I’m just skeert of the kind of work they might do unsupervised. I found one guy who previously worked for a remodeling contractor. Apparently he is a drunk and possibly drug addicted but he will work for peanuts and regularly begs me to let him do ANYTHING. He also has no car so I’d have to take him out to the homes. I don’t think I’d trust him on something like skirting or decks, but he could probably clean out trash or kool-seal a roof or something. Where do you guys find cheap labor? I know one other guy who is on full disability but works anyway. He insists to be paid off the books and in cash. He is much more skilled but is still pretty cheap (~$10/hr). With him I’m afraid I might get in trouble with the law since he is on disability. Also, how do you deduct paying him for labor without withholding payroll taxes and without drawing attention to it with the law?

Anyway Jeff, it sounds like you are off to a great start. Keep it up.


Re: comment: - Posted by JeffB (MI)

Posted by JeffB (MI) on June 09, 2005 at 11:23:10:

Steve, I really like that addition to Lonnie’s form, I think I want to do the exact same thing. One area that has always been foggy for me are those cases where you write up a sales agreement but the park office is not open – so you end up taking a “deposit” pending their park approval. The way you’re doing it splits it up, still collecting the money up front and putting the pressure back on the buyer to fulfill their end of the agreement (applying for park approval immediately).

Thanks a ton!

Re: Newbie status update, struggles (long) - Posted by JeffB (MI)

Posted by JeffB (MI) on June 09, 2005 at 07:41:10:

My younger brother is a commercial cargo pilot, 24 yrs old and saddled with student loans. He is on-call for his job 24 hrs but the MH park is nearby, so him and his pilot friends jumped at the opportunity to work for $10/hr. They are all quite skilled, and better yet they can be trusted. I feel like I should be taking better advantage of the opportunity to use them to do the work – plus it is really helping him out financially.

The last couple weeks while I’ve been working on homes, I’ve noticed a number of new for-sale signs go up in the neighborhood, along with a bunch of homes get tagged for eviction. And it just burns me up inside to think of how much money I’m losing on potential deals, while doing manual labor inside my homes.

that’s what we’re here for ;-)3 - Posted by Steve-WA

Posted by Steve-WA on June 09, 2005 at 11:32:04:

you owe me a Heineken

Re: Newbie status update, struggles (long) - Posted by Chris Reuman (Maine)

Posted by Chris Reuman (Maine) on June 09, 2005 at 23:12:01:

You can put an ad in your local paper, advertising for a handyman. Retired guys are great. They just want to be busy. Find a retired guy that has a lot of experience in the trades you need.

Also, I would restate what others have said, try to do as little as possible, but still make it look good. At the end of the day, unless it is a $15k-$20k home, you’ll go broke financially and time wise replacing everything. Also, once you replace one thing, then everything else looks like crap.

Best investing, Chris