UPSIDE DOWN - Money from Nothing - Posted by Paul Stryer

Posted by Paul Stryer on February 11, 2006 at 14:16:26:

Sorry - I will not let it happen again - I use them both all the time

Paul

UPSIDE DOWN - Money from Nothing - Posted by Paul Stryer

Posted by Paul Stryer on February 10, 2006 at 22:42:14:

I want to share something with all of you, that has drove me nuts for the 3 years I have been in this biz. I hope this helps some of you.

How many of you have got this call.
Caller:"hello I hvae a home for sale
Me: " yes that is good I am always looking for good homes"
Caller:"O you are going to love this home is it so different then all other homes. It is clean, has a garden tub, upgrades in all rooms, cilling fan in all rooms, Central air"
Me:"WOW that does sound very nice, never heard of a MH with a garden tub (yea right). So tell me can the home stay where it is at?
Caller:"Yes it can and the lot rent is $175.00 per month"
Me:"What is the year make and modle"
Caller:"It is a 1990, 14x70, 3x2"
Me: "Great, So why are you moving?“
Caller:“well you see I bought it with my girl friend, but she ran off with my bother’s real dad’s best friend, well he was not really his best friend after he took my step dad’s wife - wait that was my mom - … Blah Blah Blah)
Me:” Well how much do you want for the home???”

DRUM ROLL - I am sure most of you know what the next answer is. Yep you got it

Caller:"Well I would just like to get pay off"
Me: “hang up” - no really "Well how much is that"
Caller:“Well I called the bank and I don’t understand it but after paying for 5 years I still owe $39,000.00"
Me:” So you are asking me to pay you 39K for a 15 year old home that I can buy for 1K to 3K wholesale - wait let me get my check book - OK so I do not say that I only think it. I as easy as I can tell him that I can not pay that much for a home right now because I just bought a few this week, but I will keep him in my database and when I need more I will call him.

How many of you have got that call. Well my partner has been laughing at me for 3 years be cause I worry about these calls and have been trying to find a way to make money on them.

I talked about it in a post earier this week, but I did it.

I found the way and made it work, well almost just needs one more touch and it is done.

Lady called me said I have a home near you and I found you on the web. I have a 4 bed 3 bath double wide in a park there and I got shipped out of town for work and I tried to keep it rented. and she told me the nightmare stories she had the last year. When she told me you can have the home just get me out of the lot rent and I will pay the home off. Then she told me that she owes 46K on the home. she said you can have the home and I will continue to pay it off. I told her that was nice but I need the title and she could not get that without paying it off. I was just about to blow her off when a LIGHT BULB came on. Why not rent it for her and keep the money since she said she does not want any money just does not want to pay lot rent.

I told her to give me a couple of days and I would ge tback to her. I called every PM in town and no one will do MHs, Just when I was about to give up I found one that would take MHs and then I found a few more.

Since the story is getting long I will speed up.

I signed a contract with the PM in the town where the home was then I faxed a contract to the lady that owns it. she signed a PM contract with me, and I signed sub contracted the job out to the PM.

He has many homes in that park and they rent for about 650.00 easy and he has a list of people looking right now.

so here is the deal

650 rent
65 for the PM/month
65 in trust account for maintains I asked for that
175 lot rent - he will pay that monthly for us and send reciepts

$345 that gets sent to me each month. And out of the kindness of my heart I told the lady that owns the home that I was going to send her $145 per month on the months it was rented out - SHE ABOUT FREAKED OUT - she was not expecting anything. My partner about fell on the floor that i did this but mostly from the fact that I did not keep the whole 345.

So for making about 2 hours of calls and NO MONEY out of my pocket I just made my company $200 per month cash flow on one of those homes that I always let slip on by.

I can not wait for the next UPSIDE Down to call me up, now I am ready as I hope you are.

Paul

Re: UPSIDE DOWN - Money from Nothing - Posted by Michael(KCMO)

Posted by Michael(KCMO) on May 10, 2006 at 22:54:38:

Paul,

It’s been about 3 months since you did this deal and I’m curious about how it’s going for you. Is it still working out as you had planned/hoped? If there have been problems, are they something that could be addressed and resolved w/ a little tweaking of your plan for next time? Overall, how’s it going?

Regards,
Michael(KCMO)

Re: UPSIDE DOWN - Money from Nothing - Posted by Michael(KCMO)

Posted by Michael(KCMO) on February 22, 2006 at 06:56:50:

Paul,

Either I can’t find the comment in this string, or I’m in the completely wrong string . . . but you mentioned somewhere how you’re setting up home warranties for your buyers. I talked w/ one of the reps from the company you mentioned - www.ahswarranty.com - and had him email me some info. Unless there’s a hidden “catch” somewhere I’m just not seeing, the whole thing looks like a great deal - for us AND buyers.

My question is this: Could you elaborate on how you have things set up w/ the company and w/ buyers so that you’re able to create a profit on the warranty? For example, do the buyers pay you and then you pay the warranty company or do the buyers pay the company directly? I would think them paying the company directly would be the least paperwork/headache on our end, but unless the company cuts you a commission check or something like that I don’t see where you get paid.

Anyway, if you would give an overview of how you have it set up I’m very interested to hear what you have to say.

Regards,
Michael
816-665-5408

P.S.
In regards to THIS string . . . I’m very interested in how it looks 3-6 months down the road. W/ the feedback you got ironing out some control details I think it’s looking like about the best thing so far that I’ve seen for making a profit on these upside-downers. By all means, keep us posted.

Short Sale (for if/when she stops her payments) - Posted by Dazed and Confused

Posted by Dazed and Confused on February 12, 2006 at 19:34:42:

Paul,

Your solution is probably one of the more creative I’ve seen at creonline.

If the lady ever stops making the loan payments (for whatever reason), you might consider doing what’s known as a “short sale”.

You approach her lender and offer to pay a discounted price for her mortgage.

Go to the “Financing” board and do a search on “short sale”.

Good luck.
Dazed

Will not stand the test of time. - Posted by Eddie-MI

Posted by Eddie-MI on February 11, 2006 at 19:54:47:

You may come out smelling like a rose for a few months. But your situation is rare. You get 650 a month rent, cheap lot rent, and what appears to be a park receptive to rentals.

Don’t know about your market, but MH renters around here are notorious for not paying rent and trashing the place. Then you have what appears to be a property management company involved. I am curious to see how this looks after a 6 month update from you.

UPSIDE DOWN - Money from Nothing - Posted by Joe C. (AR)

Posted by Joe C. (AR) on February 11, 2006 at 15:28:41:

This is especially a “no brainer” for a park owner. I’ve done similar, though different, deals with the same situation. I’ve posted about it before and was discouraged by the responses, but there are viable stratagies, with infinite yield, for tapping this market. All the elements are there for creative investment, and it takes no cash. I’ve had good luck with “upside down” mh’s, but I limit myself to homes at least 7-12 years old. Good for you.

I get more control than what you’re doing to minimize risk, but what you’re doing is a step in the right direction. Many will try to discourage you, but if you truely understand yield and do it responsibly it can be a cash cow.

Joe C. (AR)

Re: UPSIDE DOWN - Money from Nothing - Posted by Todd (AZ)

Posted by Todd (AZ) on February 11, 2006 at 14:33:25:

Hi Paul…No disrespect to anyone on the board but I, for one, think you managed to creatively work another deal all the while solving someone’s problem AND putting money in your pocket for your efforts. Good job. Time will tell how things work out but meanwhile go for it. Good luck Todd (AZ)

Re: UPSIDE DOWN - Money from Nothing - Posted by Ryan (NC)

Posted by Ryan (NC) on February 11, 2006 at 10:10:25:

Ever since talking to Marty & Ray a couple weeks ago my brain has been clicking on how to make something like this work with folks that are SEMI upside down by taking back a note from the seller… Basically we have a seller (burned out landlord or just burned by paying retail if you ask me) with 3 homes that are only about 1-3k over value and willing to come outa pocket a little just to make it all go away, and 2 sellers with homes that are 4-5k over value…

My rough thoughts are to L/O the homes for Market rate which is around $400-$425 here and the total out lay on the payments w/ lot rent is about 350ish which is way to skinny to work with but by taking back a note from the seller payable for something like $70-$90/ month the numbers come closer to my max leverage range. By securing the sellers note with their cars or something likely to trade in a few years the seller can suck the balance due into a new loan and pay us off within a couple years bringing the home down to a true wholesale price range.

The upside would be L/O consideration of 1k+ & CF of $125.00-175.00+/ month on each home with no $ in the deal

Risk / downside would be stuck in a highly leveraged L/O for ? years and if the seller stops paying the only recourse is to start repo on vehicles (upside down?) to try to force sellers payment or the sellers declare BK (which might allow a short sale w/ MH?)

This is still just a random thought at this point any ideas or other thoughts from the folks here???

Best wishes,
Ryan Needler

Lease/option - Posted by Karl (Oh)

Posted by Karl (Oh) on February 11, 2006 at 08:53:45:

Now if you were to lease/option the home from the seller so that you controlled the payments going to the bank, and took the seller out it all together, that would work better logistically. But then you have to decide if it makes sense to take over payments on an upside down loan in exchange for a little bit of monthly cashflow. Again, better ways to make money with mobile homes.

Karl Kleiner

Look out for that brick wall over the hill - Posted by Karl (Oh)

Posted by Karl (Oh) on February 11, 2006 at 08:44:46:

Paul,

I applaud your enthusiasm, but I think your “rent until repo” deal is a disaster waiting to happen. That seller may be thrilled today to get out of their lot rent obligation, and they might also be happy to take a little money from you each month the home rents. But not to far down the road, that seller is likely to decide they aren’t going to make anymore payments on a home they don’t live in, or they’re just going to lose their ability to make the payments. The bank is going to repossess, and your renter is going to get kicked out. There’s going to be a lot of yelling and screaming, mostly aimed at you, and your reputation as a good guy to work with is going to be damaged.

I wouldn’t do a deal like that for a measley $200 a month in a million years. There’s too many other better ways to make that same cashflow with mobile homes, where you’re not required to keep both fingers crossed to keep the deal from falling apart.

Karl Kleiner

Re: UPSIDE DOWN - Money from Nothing - Posted by JeffB (MI)

Posted by JeffB (MI) on February 11, 2006 at 08:34:16:

Gotta give you credit, this is certainly creative. The only reason I can see this not working for me is that I don’t know of any parks that allow rentals – they require a copy of the title in the resident’s name upon signing a lot lease.

I “bought” a decent shape 16x80 a couple weeks ago for free, because although the seller still owed $24k on it, they had paid off Vanderbilt and rolled it into their father’s home equity loan, so there was a clear title to the home. Ever since that deal I’ve been racking my brain thinking of how to repeat this deal, for other callers like the one you’ve mentioned.

?? - Posted by Steve-WA

Posted by Steve-WA on February 11, 2006 at 24:23:47:

so, she is going to keep making the house payments to the bank, and you get the rent? What if she stops paying?

do you get these calls often? Sell for payoff, yes, but they will pay the payments? I wouldnt hold my breath - but if it works for you . . .

?? - Posted by Steve-WA

Posted by Steve-WA on February 11, 2006 at 24:22:12:

so, she is going to keep making the house payments to the bank, and you got the title? What if she stops paying?

do you get these calls often? Sell for payoff, yes, but they will pay the payments? I wouldnt hold my breath - but if it works for you . . .

Re: Will not stand the test of time. - Posted by paul Stryer

Posted by paul Stryer on February 12, 2006 at 10:20:05:

I will let everyone know

Cheers
Paul

Re: UPSIDE DOWN - Money from Nothing - Posted by Paul Stryer

Posted by Paul Stryer on February 12, 2006 at 10:02:32:

Thanks for the encouragement

Cheers
paul

Re: UPSIDE DOWN - Money from Nothing - Posted by Marty (MO)

Posted by Marty (MO) on February 11, 2006 at 17:50:36:

I agree with you, Joe- it looks like a viable tool if it’s not over-leveraged. I think Ryan (NC) has a good system for using private money and not over-leveraging.
I still think I’d shy away from this deal as a Lonnie dealer… If I was in your situation, I think I’d explore this avenue- especially with the Ernest Tew L/Os…
good post-
Marty

Re: UPSIDE DOWN - Money from Nothing - Posted by Paul Stryer

Posted by Paul Stryer on February 12, 2006 at 09:59:03:

Thanks for the kind words - it is good to get some support. As you know most of your friends and family no matter how many deals you do tell you it can not be done.

I will let everyone know how this deal does over the next few months

Thanks
paul

Re: UPSIDE DOWN - Money from Nothing - Posted by Marty (MO)

Posted by Marty (MO) on February 11, 2006 at 21:20:03:

maybe keep your model of reducing risk by doing one of these deals and having a few free and clear notes as insurance in case it goes sour…

then, improve on it from there. I think the people who are just a little upside down are much more viable for lonnie dealers to work with. If you owned the park, I could see being much more receptive to long term lease-options…

How are you, Ryan?!! Looking forward to some more get togethers…

Marty

Re: Look out for that brick wall over the hill - Posted by Paul Stryer

Posted by Paul Stryer on February 11, 2006 at 14:12:39:

OK I just fixed the whole thing. I just called the owner and faxed her an amendam to the contract that says I will not send her any money, all the money I would be sending her goes direct to her loan payment. And I just talked to the PM and he is going to get $25 more for the rent then what he told me, so with that extra $25 added with what I was going to send her. she is only responsable for $45.83 more per month then what I will be sending to her loan.

I will setup a auto payment to her bank in the morning and it will be on auto, and I will not have to think about it.

Yea there are other ways to make $200 per month, but when you do not have to pay any money out of pocket the ROI is great. And even if she does decide to not pay any more down the road I can kick in the rest of the payment and still have $154.17 per month and no one gets kicked out of their home.

So I see it as a win-win-win for all. Ok so we agree to disagree that is what this whole forum is about and that is what Ilove about it I get all sides of a story and I can better make my mind up on what I should and should not do.

You All have a great weekend

Cheers
Paul