Trade-in's -- Fuel for Growth? - Posted by JeffB (MI)

Real Estate Investing Real Estate Law
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Posted by Adam (IN) on May 24, 2006 at 05:09:30:

yea, Jeff, that is a downside i noticed as well but ill gladly take that “downside” any day of the week…i would be getting a 2/1 in trade for a 3/2 but it solves everybodies needs and the 2/1 is in a park i love and wont have much trouble selling so im not upset at but as i said before, this is a sort of work in progress for me but was definately one of those “lightbulb going off in the head” type of moments so we’ll see how it goes…

P.S.-this also kills another “i dont have enough money” theory since in essence if you can get one (and don’t even tell me you cant get ONE!) then you could trade your nice, new, freshly remodeled home FINANCED and you’ll even give them trade in for their home, then repeat…some of you “couchers” are soon gonna be out of excuses :wink:

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Trade-in’s – Fuel for Growth? - Posted by JeffB (MI)

Posted by JeffB (MI) on May 23, 2006 at 19:18:26:

Lately I have seen an extraordinary number of sales of nicer units sell to current park residents in the older section of the park. Many need to upgrade from 2BD to 3BD, but also I’ m seeing some upgrade from old 2BR to slightly newer 3BR.

The nice part about taking these older 2BR units on trade is they are already paid off, and the residents don’t expect to get any value for them. So when I can give a “trade-in credit” of sometimes $1000, they are thrilled. Of course, the amount of the credit is really irrelevant because the money comes back on the sale of the newer home.

So what I am discovering is that for every unit I acquire, sometimes I can create TWO notes out of it (one for the sale of the unit, and one for the trade-in unit). The second note comes at no cost to me. Pretty good yield I would say.

I’m curious if anyone else has really zeroed in on this phenomenon, and if so, are there any tricks or tips that can be applied to market and sell homes to existing residents more effectively? It is somewhat difficult to sell these trade-in units, but due to my very low acquisition cost, I can make just about any deal work out. It also is having a great word-of-mouth effect as people leave one home, neighbors ask “hey where you moving to” and “who’d you buy from” and “hey, this guy Joe next door a great trade-in price, maybe we should see if he has something WE might be interested in”.

This seems to work particularly well in the park I do all my deals, which is about 700 units, split into three phases of 30 yrs old, 15 yrs old, and 10 yrs old respectively. So there is a nice age difference in the homes and a lot of upgrade-sale possibilities.

Just thought I would see what kind of discussion this would generate and hopefully get some new ideas. Let’s have 'em!

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wow what a caweinkidink… - Posted by Adam (IN)

Posted by Adam (IN) on May 23, 2006 at 22:21:29:

ive just hit the same sort of phenomenon that you seem to have encountered…i just got a home back in a park i love and while out “repossessing” the home, i passed out fliers and got a call from a couple in a 2BR needing to sell and out of curiousity i asked why they were moving?

well, they were in a 2BR and had outgrown it and needed a 3BR so for the heck of it i asked if they liked the park and were interested in staying? their answer: weve been here 8 years so yea and whatda ya know, i had a 3 bedroom (my repossessed 3BR) and im in the process of “trading them in” so to speak

the thing that is so wonderful is that i solve thier problem (bigger home and no mess having to sell) and solve mine (my 3BR is sold AND i now get a free home in a park i love!)

i say free home, heres why…after repossessing the 3BR i had, i figured it up and i had only $350 left in the deal plus some touch up paint, a months lot rent, and $50 in materials, so i call it a scratch with the trade and remember, im giving them “trade-in” money on a home i have no money into so what am i giving them? not a thing on my end and future money on their end (that they get IF and only if they pay off to the end, so if they do great! if not its like i gave them nothing)

i plan on passing out a flier in this park advertising a newly remodled home and that i will give CASH trade-in, on a home that i of course paid nothing for and will list for likely $9,500 so say i give them a $1000 off, i get a note for $8,500 on a home i paid nothing for, and best of all i get to do it again with THEIR trade (and they will leave the home clean b/c their moving into YOUR home, not skippin town like most!)

maybe this is one of those too-good-to-be-true kind of things but im stoked about seeing it a little further

ill update my findings if anyone is interested…

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Re: wow what a caweinkidink… - Posted by JeffB (MI)

Posted by JeffB (MI) on May 23, 2006 at 22:26:42:

Good post Adam, that’s almost exactly how I stumbled onto this.

The only downside I have seen so far is that, since I’m giving a trade-in credit, this means that I am usually selling the nicer home with no-money-down (since the trade is like cash, to them). I guess it’s a small price to pay for the opportunity to crank out the cash flow over time.

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higher priced homes - Posted by Lin (NC)

Posted by Lin (NC) on May 24, 2006 at 09:56:22:

I’ve been trying to figure out how to make purchasing homes in the $6-10k range make sense for Lonnie deals rather than finding buyers with good credit and getting them bank financing. Here homes in that price range are often immaculate 1992’s to pretty good 1996’s (with appliances) and I love that I won’t have to fix or do a thing to get them sold. That’s not my strong suit. If I start marketing to the folks with a trade-in I essentially double my cash flow for a few years and still have one nice long note left when/if the trade-in home pays off. And all that takes not too much more effort than selling the newer one on its own.

Surely this has been discussed in detail here already but sometimes you don’t pay attention until it’s pertinent to you, I guess.