Posted by Robb on August 02, 2003 at 17:35:00:
Chuck,
$300 is the net profit on a single wide move. His bill for a tow and pilot car is ~ $500, his bill for break down or a setup is dependant on labor but is usually in the $700 area.
I think the core issues come down to: Does it make ‘DOW’ business plan more improved if there is an Inexpensive method of moving a MH or having a place to store/repair a home prior to placement?
used mobile home business - Posted by Robb
Posted by Robb on July 30, 2003 at 02:43:45:
I have been amazed at the quality of knowledge that is displayed on CRE at the MH pages. While looking at a half a mobile that wasn’t destroyed in a tornado, I have stumbled on an ‘opportunity’.
The owner of the used mobile home business wants out. He wanted out yesterday and has worked through a number of potential buyers with no takers.
I’m trying to get my feeble mind around the possibilities and would appreciate any ideas or holes to look for.
Income comes in five parts
He is one of the primary movers of MH in the area. No employees all subcontract labor. He makes about $300 on a move with his toter truck, $150 if the guy he set up with a toter drives. 15 to 20 moves per month.
He has leased property (rent covered by 8 MHs paying rent) that is the only storage lot in the county for guess what? — repossessed and park evicted MHs. These are an on the come potential. He says that he gets clear title on more than half of them in about 3 months. Most lenders want the headache out of their hair and offer him the title in lew of expenses. Most of the evicted MHs are at the request of the PM and they don’t pay moving expenses so they loose their ability to attach the MH. Evictees don’t follow up and pay the move bill or storage fees and give up the home. His acquisition cost is the move, paperwork at the courthouse and time. Because of the discount he does nothing to them to sell them and sells them for a minimum of 2X his expenses. He moved 60 MHs last year and has 30 pending filing paperwork and owns 40 outright.
He finances the sales to the public at 16.5% with about 20% down. Only to excellent credit risks because he doesn?t want to have to deal with it again (don’t think he has ever heard of Lonnie)
Because he is the 'good Samaritan" in the eyes of the PMs as opportunities come available in the park he gets first option-pick whichever you want to call it. Cleans and flips or just flips to fixer upper types. Does 100 of these a year.
The best double wides he places on 10-acre plots and makes 30-40K depending on size.
He runs no advertisements. There is no phone listing but his phone rang all day long the day I rode with him! he says he spends about 60hrs a week on accomplishing all this. (Ok wih me I’m used to more.)
He wants about $1200 for each of the MHs and 15K for a toter. He suggested half down and payments for 6 months.
To Much??? The goose that laid the golden egg?? My real concern is the first 3-4 months and the cash outlay that must continue for the ‘factory’ to continue. Down payments should (I hate this word) cover this and the financed payments on MH’s should get to 5 figures by month 5-6. What terms would you folks ask for?
Thanks in advance for you time in reading my missive!!
Re: used mobile home business - Posted by Mr. C
Posted by Mr. C on July 30, 2003 at 10:04:40:
“He wants about $1200 for each of the MHs and 15K for a toter. He suggested half down and payments for 6 months”.
The price is right, the terms can be worked out.
“My real concern is the first 3-4 months and the cash outlay that must continue for the ‘factory’ to continue”.
Yes, it is a “factory”… and it will only produce results if you work it. This isn’t the passive income engine that most people in the MH business strive for, and his numbers (assuming you can verify them) would seem to reflect this.
Make no mistake, you are buying a JOB… it’s just disguised as an opportunity.
Brief comments, referancing your numbers follow…
20 moves a month at $300 each (is $6,000/month, you’d have to do 20 lonnie-deals to generate that)
8 MH’s paying rent… (someone’s a landlord)
2a) Because of the discount he does nothing to them to sell them and sells them for a minimum of 2X his expenses. He moved 60 MHs last year and has 30 pending filing paperwork and owns 40 outright. (I’d want to see his some proof of this if it was me).
Ok, so he’s no dummie.
Sounds great, but I’d want to see some proof of it.
Why 10 acres? …wouldn’t 1 acre, or 3 or 5 be adaquate? Looks to me like he’s giving away land, and potential profit from other deals.
Re: used mobile home business - Posted by Robb
Posted by Robb on July 31, 2003 at 24:49:36:
Mr C- Steve-
Thanks for the review… I spoke to a friend to day who flips houses and some MH’s and his comments were similar. I’m buying a Job!! Not the normal way of thinking about a job. But one that seems to have pretty good up side and seems to have ability to become more passive as time goes on.
He pointed out every thing must have documentation. Starting with taxes, bank statements, receipts on MH moves, Reputation with PMs, and interviews with subcontract labor. Enough documentation to validate the deal, but not enough to leave his asking price unchanged!!
Warning: The lack of paying taxes on his income over the years has cost him in the purchace price of the business. Normally someone would pay 2-3 times the yearly cash flow for a business like this. If (I know at this point that’s still pretty BIG IF) these numbers hold up, this is a potential loss of 100s of thousands of dollars (or I just might be his goose that laid the golden egg (:-).
My friend also suggested splitting the down payment in half. Half now and half in 60 days to limit the down side. Financing the rest for as long as possible up to 2 years and then offer a lump of about 60-70% discount to the note at the end of the 60 days, only if things are going well.
responses to the responses to your coments:
Brief comments, referancing your numbers follow…
-This isn’t truly passive but is pretty close, take a call, schedule a driver and a truck. Goal would be to have payments from notes become the prime income stream
-sorry about the confusion, this is a storage fee that mostly corporations are paying (to protect their interest). Very few people currently walk onto the properity currently. Plan some free (Less shipping and handling!) Homes to drive traffic.
2a) Because of the discount he does nothing to them to sell them and sells them for a minimum of 2X his expenses. He moved 60 MHs last year and has 30 pending filing paperwork and owns 40 outright. (I’d want to see his some proof of this if it was me)
-I’m on the paper trail.
Ok, so he’s no dummie.
Sounds great, but I’d want to see some proof of it.
-He picked up title of an '81 28x44 today and has offered it to me for $2,500 with 2 months free rent. My counter offer is 20% of selling price will report on progress. I am going to interview his best and worst PM lists.
-because this is a rural area and the planning comission/ water permits will auto-subdivide a 40 acre plot to 4 10’s, with 4 wells, any smaller is a 100k process. Part of the draw of the area is it’s ‘in the country’
Trying to pick up paperwork tomorrow… More to follow
I like the way you put that: - Posted by Steve-WA
Posted by Steve-WA on July 30, 2003 at 10:36:42:
“Make no mistake, you are buying a JOB… it’s just disguised as an opportunity.”
I saw this and went - WOW. The seller has worked up to a little empire, but an empire that requires a lot of active participation. How well would it work to jump into this? How would I push this to be more passive?
Easily overwhelming, but lots of upside potential. Lifestyle change, to be sure. Heavy decision, Robb - - - good luck.
Re: used mobile home business - Posted by Mr. C
Posted by Mr. C on July 31, 2003 at 01:22:46:
Here’s something that just dawned on me. Shouldn’t this be more like $3,000, instead of $300?
($3000 x 20 = $60,000 month)
The only way that $300 makes sense is if it’s a “hook and drop”… but that doesn’t jive with the 10 acre deals he’s doing.
The more I look at this thing, the more I question it.
Re: I like the way you put that: - Posted by Mr. C
Posted by Mr. C on July 30, 2003 at 10:51:09:
There’s a MH dealer 30 minutes south of me that’s doing this same thing as a off-shoot of his main business (selling new homes). He even developed his own “community” to sell them into.
He’s working both sides of the street and is the ONLY mobile home dealer, toter and rehabber in that county.
Tell me that ain’t a JOB and half.
my view - Posted by Steve-WA
Posted by Steve-WA on July 31, 2003 at 09:53:11:
We see this differently, Chuc - I mean Mr. C.
10 acre lot is his storage facility, pullouts pay him rent to store the MHs . . . and it is a hook&drop operation, near as I can tell.
It gets better… - Posted by Mr. C
Posted by Mr. C on July 30, 2003 at 11:04:08:
The median income for that area is ~$25k a year.
Talk about a “money pump”.
Re: my view - Posted by Mr. C
Posted by Mr. C on July 31, 2003 at 10:34:04:
That’s what I’m trying to determine… the numbers (so far) either don’t add up, or sound too good to be true, depending on what aspect of this buiness it’s referring to.
Something’s not right about this thing…