The 12 % Challenge - Posted by Randy

Posted by GCage on May 22, 2000 at 17:41:55:

I agree with you. That’s why I’m reading this board. My only comment was that while it can’t be guaranteed, I think making 12% in the stock market is pretty easy over a period time (5-10 years).

The 12 % Challenge - Posted by Randy

Posted by Randy on May 21, 2000 at 12:28:34:

To make 12% or above on your capital is easy. Just sell a mobile home and carry back the paper. The only problem is to invest enough to retire on you have to do many dozen such deals and since they only last a few years you have to constantly be buying and selling new ones. That sounds more like a job then retirement.

Here is my challenge to you creative wheeler-dealers. Can you come up with a strategy for safely investing, say, 100K to 500K for about five years with minimum hassle once the deal is consummated that will return 12%?

What kind of a challenge is that!?! - Posted by Dirk Roach

Posted by Dirk Roach on May 22, 2000 at 13:11:39:

Hi Randy,
Simple solutions, create systems which run your investment strategies for you. Put the right people, or systems in place so that you don’t have to be there at all.
As far as creating a 12% return on mobile homes… That’s probably just about the easiest thing I can think of in the world to do. (Save doing nothing).
And it just doesn’t sound like very much fun to me.
Personally I really don’t play in the mobile home biz unless I fly in personally at 75% yield at a min. In fact that can be somewhat dull too! Really you want to have some fun… Go in for infinite yield. That’s were the fun is.
But I digress. Really the key is strategy and systems. You are correct in that mobile home notes are quick. Quick, fast money. And you are also right in that you have to do volume. Okay, so if that’s what it takes than do it. If you don’t want to get into the trenches, then simply find someone who does and let them go to work.
Personally I don’t think it would take long at all to put a 100k to work. Maybe a couple months. And then perhaps a few more to turn that 100k back into 300k. If you knew what you were doing and and you played it smart.
Personally your challenge of getting 12% on 100K with minimum hassle once the deal is consummated is pretty simple, for someone who knows how. I mean 100K in five years no reason you shouldn’t turn that into a million. I mean come on you are talking FIVE years, and that’s a lot of time.

Re: The 12 % Challenge - Posted by Rob FL

Posted by Rob FL on May 22, 2000 at 07:42:04:

If you have that much cash available, maybe you could hook up with several good mortgage brokers and lend hard money to investors. You could get high rates of return and the deals would be brought to you instead of the other way around.

Slam Dunk… and the magic of compounding. - Posted by David Alexander

Posted by David Alexander on May 21, 2000 at 19:01:29:

Getting 12% are you talking about doing it yourself or handing your money over to someone that can easily do it for you.

100,000 PV, 0 PMT, 12%

Compute for FV You get 181,669.67

Divide that by 60 and you get payments of 3027.83

So Your new Calculation is …

PMT 3027.83, 60 N, 100,000 PV

Compute for Yield and you get 26.57%

That means that as long as you get a 26.57% yield in whatever cashflows you buy or create… Slam dunk My Friend just buy the paper in bigger chunks on MH deals.

I also sent you a spreadsheet on Investing at 12% and compounding the cashflow which will far exceed what your after.

David Alexander

Re: The 12 % Challenge - Posted by JD

Posted by JD on May 21, 2000 at 18:15:37:

I would invest in Trust Deeds. You can easily get 12%, well secured from selective Trust Deed investment. I think it very unlikely the stock market will yield 12%/year over the next 5 years. It is still overpriced, you would be lucky to get a 6%/year return from an index fund over the next 5 years.

Re: Stock Market - Posted by Tim Jensen

Posted by Tim Jensen on May 21, 2000 at 15:22:56:

I would invest in the market(blue chips only) or a good Index Mutual Fund. Like an S&P 500 Index Fund.

This would have the least hassle and should be able to get you the 12% return.

Now many people talk about buying notes, the problem I see here is that you need to collect on the note every month. That in itself can be a hassle. I do not look forward to chasing people down every month (Hassle). Also if they default you can take the house back(hassle), however you never know what the condition of it will be. Now I know the market goes up and down, but over the long haul, it should give you a 12% return. Now, I am sure that there are people out there saying. “Well look now the market is down.” Yes it is but remember I said LONG TERM not short term.

Just my opinion,


Read the articles and newsgroup over at the cash flow forum - Posted by John Behle

Posted by John Behle on May 21, 2000 at 15:17:24:

Getting a safe. secure, long term 12% plus is very simple through investing in paper. Just click on CASH FLOW at the top left of this forum page.

Re: The 12 % Challenge - Posted by Columbus

Posted by Columbus on May 21, 2000 at 13:57:01:

The most hassle free way is to go with the private
mortgage. As a buy and hold investor I would have no problem paying 12% interest plus a few points for a
private mortgage. I’m sure there are many others in my
situation. I typically buy properties at 30-50% of after repaired value, spend another 10-30% to repair and end up with considerable equity and a good cash flow. I use savings, conventional mortgages, a bank line of credit, a personal(unsecured) line of credit, credit cards, partnerships, and private mortgages to get this done. The are always far more deals available than funds, so I’m always in the market. And if can make money buying houses with credit card money at 17.9%, obviously I would jump at twelve. And with the mortgages, you have no tenants, no customers, no daily hassles, just a monthly check . I consider 12% too low a return for my investing, but I also put in a lot of time and effort dealing with all of the aforementioned.

Re: The 12 % Challenge - Posted by Craig

Posted by Craig on May 21, 2000 at 13:37:22:

Spending cash on homes is one way to do it, however how about using your cash to make a 20% down payment then borrowing the other 80%. You still make the 80% of value offer and sell for 110%. You get a realistic 5% down from your buyer and finance them with 12% interest amortized over 30 yrs with a 15 yr balloon.

Example: $100,000 fmv home
You offer $80,000
Your Down Payment: $16,000 (20%)
You borrow $64,000 @ 10% for 30 yrs
Your payment $561.65 P/I

You sell @ $110,000
Buyer gives you $5,000 down
You finance the remaining $105,000 @ 12% amortized for 30yrs w/15 yr balloon.
Buyers payment is $1080.04 P/I with a balloon payment of $89,991.00 at the end of 15 yrs.

Now after your buyer has made the down your total cash outlay was $11,000. Your monthly cashflow is $518.39 for the next 15 yrs. You will owe $52,265.32 when the buyers balloon comes around. Leaving you with the difference of $37,725.68.

Your yield is 56.59% whereas you would have made about 17.56% if you had just went and spent $80,000 of your own cash for the house.

When you borrow not only are you able to sink your cash into more deals, you also triple or quadruple or even better your return.

I am not sure this is what you are looking for, but… - Posted by Hope(Fl)

Posted by Hope(Fl) on May 21, 2000 at 12:53:09:

why not just buy average s/f homes for cash, at lets say 80to 90% of value, turn around and resell with owner financing at 110% of value,with 10% down at 12% interest. You would not only make a solid 12% return on your money, you would also be creating additional wealth. For ex, instead of only making 12% on 100,000 or 12,000 a year, I would buy say 3 sf homes that were worth about 130,000 for 100,00 0 cash, and turn around and sell theose homes for about 150,000 at 12%, thereby generating income of18,000 per year. Get the picture. Of course, if you do not want to locate these homes or hassle with any of that, I would be more than glad to give you a 12% return on your investment with a 5 year baloon on property worth much more than that!!!

Yes, Buy Private mortgages. - Posted by Mark-NC

Posted by Mark-NC on May 21, 2000 at 12:47:58:

Holding paper is an excellent way to do this. It is easy to buy private existing mortgages or newly created ones with rates of around 12% or more there are lots of them out there. When you are ready let me know I will set you up.


Re: Slam Dunk… and the magic of compounding. - Posted by JB in MD

Posted by JB in MD on May 22, 2000 at 08:40:22:


I wonder if you would send me the spreadsheet as well?

Thanks in advance,


Investing Should Be So Easy… - Posted by JPiper

Posted by JPiper on May 21, 2000 at 17:02:40:

I remember 1968-1969 well. I was a young man…the stock market had been booming…then it was 1000 on the Dow. Everyone was making it big. At that time people trotted out statistics showing that the stock market showed returns of 10% per year…long term.

By 1974 the stock market was 550 on the Dow. Many stocks were down 90% or even more (if you can believe that). Of course I’m sure that can NEVER happen again! By August of 1982…a mere 13-14 years later (after 1969), the market had been back to 1000…but was sitting around 750 on the Dow. NO ONE was mentioning those long term statistics at the time…NO ONE. That was the beginning of the bull market we are in today.

Care to calculate your return from 1968-1969 to 1982 if you were in an index fund? Let’s see 1000 to 750…what’s that? And it only took 14 years to do it!

You know Tim, in the long term we’re all dead. I think it might be helpful if you would define “long term” for us all…so that we all know just how long you mean.

The one thing I think I can safely say. The fact that over some long period of time the stock market has returned 12%…means absolutely nothing in regards to what it will do over the next 10, 20, or 30 years. The past does not guarantee the future.

The bad thing about believing in 12% in the long term is that when the long term gets here, and it didn’t return 12%…what do you do then?


Re: Stock Market - Posted by Craig

Posted by Craig on May 21, 2000 at 15:26:35:

Sounds like someone just read the new Robert Allen book “Multiple streams of Income”.

Re: The 12 % Challenge - Posted by Brian, WI

Posted by Brian, WI on May 22, 2000 at 03:37:48:

Is it realistic today to get 12% on a mortgage you are financing?

Re: The 12 % Challenge - Posted by Craig

Posted by Craig on May 21, 2000 at 13:59:31:

But alas you only want your money invested for 5 yrs. You sell the homes with a contract for deed for 5 yrs however your buyers won’t have as much equity and it may be more difficult to refinance and pay you. However in that case you buy the same way, but you only sell for the fmv which is $100,000 you get $5,000 down and finance the remaining $95K to them at the same 12% with a 5yr balloon. Their payment is $977.18 p/m.

Your monthly cash flow is $415.53 p/m and they owe you $92,780.00 in 5 yrs. You will owe $61,807.57. Leaving you the difference of $30,972.43. Your yield on this investment is about 52.58%. One thing I didn’t take into account was closing costs. You probably ought to factor in $1500 or so of your cash going for that on each deal, in which case your yield is about 47.08% still much better than 12%. If you have $100,000 cash to invest you can do about 10 such deals by purchasing homes that are in the $75k - 80k fmv range for 80% of that value.

Survivors - Posted by Drew

Posted by Drew on May 23, 2000 at 10:53:10:


Mark has a good point, but the long-term statistics are actually skewed to the high side. The return of stocks or mutual funds is biased by a thing called “Survivorship Bias.” This bias is the result of ignoring those stocks or funds that go out of business or merge during the sample period.

For example,we could take a “Net Worth” sample of every RE investor that frequents this board today. Then come back in five years and do the same thing. Those people that showed up in both samples would then be used to figure out how quickly the “Net Worth” of the average RE investor grows. However, we would have left out all of the people that came and went during that period and only measure the survivors.

The result is that statistical returns are biased on the high side since all of the total losers have been eliminated from the data set. Not sure if this would nullify leaving out dividends, but it should be considered when viewing any long-term statistics of this sort.


One point… - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 22, 2000 at 13:53:25:

You are looking at capital appreciation over this period… You ignore the dividends that the stocks paid over that period…


Re: Investing Should Be So Easy… - Posted by Tim Jensen

Posted by Tim Jensen on May 21, 2000 at 21:43:52:


Interesting post.

Let me define long term. For me it is over 10 years.

Now, you mentioned the market did poorly in that time period. Well since the market did poory, I believe it is safe to say that the economy was not doing so well. I bet that there were a lot of foreclosures. Lots of notes went bad.

Also, as for buying a index fund like the S&P. At that time there was no such thing as a S&P index fund. It did not come along until August 31,1976. That would be the Vangaurd S&P 500 fund. So you analogy doesn’t fit here.

One thing we can agree on is that there are no garanteed returns in life. But the topic was not about garanteed returns, but what would probably return 12% without a lot of hassle. I believe that notes are more of a hassle then stocks or mutuals. Also, there is a lot less chance of Walmart or GE going belly up than Joe Jones.

Like I stated before, If you want 12% return with minimal hassles. I would put my money in the market.

Take Care,