Posted by CarolFL on March 28, 2000 at 08:12:08:
It was just what I needed this morning.
You are right … what a difference less than a year makes!
Love ya,
carol and dennis
“Thinking outside the box” will help you “live outside your box” - Posted by Nate Tyler
Posted by Nate Tyler on March 27, 2000 at 23:16:04:
At the convention, I promised JP to write another success story, as I’ve been too busy lately to post much on the NG.
I don’t know that this is posted as a “success story”, as much as an opportunity to share a new idea with the rest of you who have helped me so much throughout the last year of my new RE investing career.
Last November, I received a call off one of my “We buy” ads from a lady who had a manufactured home for sale in a park. Since much of my RE investing knowledge came from mostly sources surrounding this site, my “creative formulas” never seemed to include new manufactured homes.
If it was a mobile, I thought “Lonnie”. If it didn’t fit that mold, I passed.
I had never heard about anyone making money with them on this site.
So I automatically said “no” whenever I got one of the ever-so-frequent calls from these sellers.
On this particular day, I was feeling a little more “thinky”, so I decided to let the wheels spin.
The call was a pretty typical “motivated” one. The lady started out by telling me about the house.
She began by telling me they wanted 40k for the home.
I asked some more questions, then shut up.
She kept babbling, and told me “but we’d take 30k”.
I cracked a smile, asked a little more, and shut up.
By the end of the conversation, she had told me “but if we HAD to,” (I love this) “we’d take 23k”
So over the course of 5 minutes, she dropped her price almost in half.
I decided I had better do a little research and see if I could make money on the deal. I immediately called several dealers to get their opinion of what they might sell the home for. After getting a few different opinions, I was sure I could profit.
I went to look at the home, to find it was in excellent condition, other than the fact that it was the only home in the park without a yard. Just dirt out front.
They had it listed at 40k for six months with no takers.
I was sure that with some nice landscaping, I could improve the curb appeal and sell it no problem.
So I bought the house using a line of credit for 23k.
I spent an afternoon there, planted a new lawn, put in some bark, and put my “trademark” nineteen-dollar-Home-Depot outdoor ground lights in, and called it good.
Then I put an ad in the paper.
First 49,500 steals it.
two weeks. Nothing.
First 40,000 steals it.
Nothing.
Now this was the first time I had actually put any of MY OWN money into a deal, so by this time I was starting to get nervous.
I did a little more research to find that the market here is FLOODED with bank repos, and it was hurting the sales of these homes because the banks were doing anything to sell these repos…giving the dealers a run for their money.
I had a local dealer tell me “today you’d be lucky to get 35k for it…and that’s if you can afford to wait it out.” Not exactly the story I had gotten from the other dealers.
That’s when I knew it was time to get CREATIVE.
So, I sat down with the trusty 17b, and got crazy with the numbers.
I knew that these types of buyers are much like car buyers…concerned mostly with “down” and “payment”.
After some crunching, I had a plan. Here’s what I did:
Space rent at the park was 305 per month. That means one year at the park, was about 3660.
I ran this ad:
OWN YOUR HOME FOR LESS THAN RENT!
Like new 1500sf 3bed 2bath.
Only $550/mo for first year!
Won’t last! 555-5555
(offset by site-lease buydown)
Houses this size in the same area rent for $850+.
My phone rang off the hook.
After 2 weeks, I found a buyer.
I got $50,500 for the home. Way more than even the dealers were selling the homes for. Their payments would only be $550 per month on the home for the first year. I would pay the first years site lease of 3660, and be on my way. The buyers were tickled pink, because afterall, a year was “a long ways away!”
50,500
- 23,000 purchase
- 3,660 site lease
- 1,500 holding,advertising,spruce-up
=22,340 Profit!
Not bad for basically no work at all.
I thought that was great, and then I started getting even more creative.
Instead of paying the $3,660 to the park manager upfront, I decided to reinvest the money into Lonnies and let the cash flow pay the payment.
So now I’m buying an old single wide for 5k which is on 2 acres of leased land at a rate of $200/mo. The land also has a shop and shed which will make it an easy sell.
A house that size on acerage would rent for at least $750/mo.
I’ll create a note at 12%, 72mos, for $450 a month. With $200/mo property lease, that will only be $650/mo. It’ll be an easy sell.
So here’s how it all finally shakes out:
$21,000 cash profit
??? down payment on home
$145/mo first year cashflow after paying lot rent on first home
450/mo cashflow for 5 years after that.
So all said and done, we’ll make about $49,740 off this deal…give or take a few Tombstone pizzas.
All because I busted out of my comfort zone and did a little “thinking outside the box”.
And to think I almost said “No”! Good thing I wasn’t thinking small that day…
Thanks Terry, JP, and the rest of my CRE friends. Love the site!
Nate