Journey through the next (Lonnie) deal..

Journey through the next (Lonnie) deal..

Real Estate Investor · Member since 2009 · 260 posts · 119 votes

Before I did my first deal, I spent time on BP searching for people like me going through their first dealings in this business. I found many who started sharing their adventure but when it started to get good, the thread died. The ones that did finish I found to be extremely helpful. They show how easy this business really is to get out there and get started!

My first post on the subject started out looking for answers and ended being a journal of my personal findings along with tons of valuable information from many great people on Bigger Pockets (Thanks to all of you!). That thread can be found here for those interested in reading along: http://www.biggerpockets.com/forums/30/topics/45339-first-lonnie-deal-on-the-right-track-

I have received a huge amount of support from people who are testing the waters with their toe but have yet to jump in for fear of the un-known. One of the most common things I see concerning a 'Lonnie deal' is "I can't get homes that cheap!". Well to that I say non-sense, poopy pants! You CAN. You just have to find sellers who NEED to sell. There is a big difference between a seller who wants to sell, and one who needs to sell.

With that being said, here we go!

This deal I just bought a few days ago started with a simple phone call I received one night about 8pm. It was from a gentleman who got my number from the neighbor of my first deal (you won't believe how fast word of mouth travels in these small communities!).

He said that he heard I buy mobile homes. I explained that I buy mobile homes if the numbers work and it makes sense to buy them. I always ask them to tell me about the home and let them talk. While they're talking you are learning about the home, why they need to sell, and building report all at the same time. It turns out that he needs to sell because he is moving out of state in less than two weeks to live closer to the children and grandchildren. On top of that, his wife has had a job offer that she needs to take advantage off (sounds like they NEED to sell doesn't it?).

After I kept him talking a little bit, asking basic questions about year, size, bed/bath, the AC, roof, ect. I asked him about the condition/repairs needed to the home. Just keep them talking! He told me the floors were in pretty bad shape. When I asked how much he wants for the home he told me $1000. Now that's within my price range so I told him I would be there in the beginning of the week to take a look.

Let me take a step back for a moment and mention something. This is a people business! If someone doesn't like or trust you , you probably won't get the deal, or at least not a very good one. It's very important to build report!

When I got there we talked for about 15 or 20 minutes about everyone's favorite subject.. you guessed it. Themselves! We talked about his business, the horribly hot South Florida weather, and the miserable people down here. Then we talked about how great North Carolina is how how he can't wait to get out of here. While we were talking I casually did my inspection. When I found a problem, I didn't have to say anything because he was right there.

During the inspection, I found water damage (not bad) on the wall around the window AC. Plywood over the holes in the floor (they were big enough your foot would go right through to the grass). The place was going to need to be re-carpeted.

After I was done I explained my concerns about the home. My main concern is that the place needed to be re-floored/re-carpeted and there is a very limited market for a 2/1 without central air, and aluminum wiring which means my holding cost + repair cost + sales price puts me above retail value and leaves me with very little if any profit on the deal and that's why I typically stay away from 2 bedrooms unless they have something to offer like central AC or 2 bathrooms.

Then he asked me if I would take it for $400 if he paid the next months lot rent. Can you believe it? I didn't make an offer or have to 'low ball' him. He did it himself!

Now.. this is where MY lesson was learned (that's right, I'm still learning as I go and have lots to go). I told him I would definitely consider it at that price but I wanted to put some numbers together first. That night I went home, put my numbers together and I was pumped! Then I started to get a bad feeling about not closing the deal. Sure enough, first thing the next morning he called me to tell me he had SOLD IT pending park approval for the full price $1,000 CASH.

Talk about a kick in the ribs and ruining my Saturday!!

Well.. I know this post is long enough to make your eyes bleed so I will end it for now with a 'To be continued...'

7Reply
166 views

Most Popular Reply

Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
15y

Nothing short of Inspirational.

See this reply in the discussion

74 Replies

Jump to latestLatest
  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    Marilyn, so far nothing terribly exciting. Justh marketing. I put out 5 bandit signs and got some calls but it seemed like the callers left their brains in their other pants. Here's how my bandit sign calls have gone so far..

    Sign reads:
    FOR SALE
    2br Mobile
    Will Finance
    phone number

    This is the call I get:
    Them: Umm Hi I am call 2bedroom home?
    me: Yes.. what would you like to know?
    them: umm how many bedroom?
    me:.....two bedroom
    them: uhhh.. two... two bedroom?
    me: yes.
    them: oh.. umm.. ok thanks anyways!
    me: *face palm*



    Besides that, I also update my craigslist ad about every 3rd day (if you're selling two, don't forget to put a link to your other ad at the bottom on both ads!)I've also had an ad running in the local shopper for the week and this one coming up.

    This time I'm doing things a little differently. The first deal I wanted to generate calls. After 10 calls a day of lookie lou's wasting my time with 20 questions and no intentions of affording or buying. Now I'm very specific in my ads.

    Now I answer what I can in the ad. Location, family park, address, lot rent, what it includes, address of the home, my terms, my sales price. I get much less action this way but the calls I do get are people who know the specifics and are still interested enough to call!

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    Anyone have any luck/sales to someone from out of state?

    So far my opinion is they have all ben 10 minute conversations that end up people wanting to move down here, but that's about it. I'm wondering if I shouldn't avoid out of state 'buyers'.

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    Update:

    Sold one of the two homes yesterday May 17th. I will post more details shortly. Hit a small snag in the title transfer process. Hope to have it taken care of tomorrow!

  • Investor · Southlake, TX · Member since 2009 · 950 posts · 338 votes
    16y

    Congrats Terry!

    This is great reading. I'm looking forward to the details.

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    Yay! That's awesome, Terry.

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    Ok so this is the MH that sold.



    Friday night I got a call on this ad in the shopper:

    For Sale: 2 bedroom mobile home in North Ft. Myers family park. Lot rent $364/mo. Will owner finance. Discount for cash. $500/down, $220/mo. Two homes available. Call (xxx) xxx-xxxx

    I gave him the address to the home to do a drive by. I always tell them if they like the home and want to see the inside to call me and I can get them inside the home. I do this so I know if they actually went to the home or not. If I don't get a phone call for the lock box combo (who doesn't want to see the inside once they get there??) then I have a pretty good idea they never looked at it and I can follow up with them a day or so later.

    When they do call, I try to stay on the phone with them so I can hear what they think about the home first hand and can gauge their interest in the home.

    Here's how the numbers worked out.

    Expenses:

    Purchase price: - $500
    Advertising: - $60
    Sales Tax: - $30
    Repairs: $0 (needed some work but sold as is)

    Total: - $590 (500 + 60 + 30)




    Cash Received:

    Selling price: +$3500
    Lot rent credit + $301

    Total: $3801

    $3801 - $590 = $3211 profit

    Cash on cash return: 544% (before tax profit divided by out of pocket expenses.)

    Total time invested: about 5 hours
    Holding time: 17 days


    So what did the inside of the home look like? There was a hole in the second bedroom floor and the carpet in the hallway/living room was dirty, stinky, worn out and pukey green. Definitely needed to be re-carpeted.

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    Ah, they paid cash for it. That's wonderful!

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    Did they pay your asking price or did they dicker with you?

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y
    Originally posted by Marilyn A.:
    Did they pay your asking price or did they dicker with you?



    I offer one price if it's financed and a lower price if it's cash. For this one it was 4500 financed or 3500 cash. When they ask how much I tell them it depends but between 3500-4500. Go take a look at it. This way I'm not nailed down to a price and they don't not look at it because they feel they can't afford 4500.

    In this case I told him 3500 before he was approved and later he asked if I would take less than that. I said that the price was 4500, I was already discounting it a thousand dollars, and that's the most I could do but I could take less and he can make payments on the rest if he the dollar amount was an issue.

  • Investor · Morgantown, WV · Member since 2008 · 207 posts · 33 votes
    16y

    Terry,
    I thought the MH witht the boat looked like you could sell for more, but I'm sure you've studied the market price.
    I believe you can add 2-3k to the price for a MH that is set up and in a good community because moving expenses are so high. You may try asking 1k more and see if you get the same response.
    I just sold a home for 7,500 2 br/1 bath, lot rent 150, folks paid around 2,800 and walked after six months. Now, I'm reselling for around 8k and have had great interest, suppose to close tommorrow.
    It seems that terms and conditions are most important to MH buyers.

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y
    Originally posted by mountainjoepa:
    Terry,
    I thought the MH witht the boat looked like you could sell for more, but I'm sure you've studied the market price.
    I believe you can add 2-3k to the price for a MH that is set up and in a good community because moving expenses are so high. You may try asking 1k more and see if you get the same response.
    I just sold a home for 7,500 2 br/1 bath, lot rent 150, folks paid around 2,800 and walked after six months. Now, I'm reselling for around 8k and have had great interest, suppose to close tommorrow.
    It seems that terms and conditions are most important to MH buyers.


    Lot rent there is $150?? Wow that's pretty good! Can you tell me more about that park?

    It's $365/month + water + utilities around here at the cheapest and that's for a 1.5 - 2 star park!

  • Rehabber · Dallas, TX · Member since 2009 · 60 posts · 8 votes
    16y

    Terry, you are the man! If anyone ever feels like this buisiness isnt worth it, your stories make the beginning stages feel worth the struggle.

    Thanks for sharing.

  • San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
    16y

    Congrats Terry, thanks for sharing!

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    **UPDATE**

    Ok the home sold today to a couple from Tennessee. They called about a week ago from up north and were very interested over the phone. I told them to call me once they actually made it down here. I was wondering if I should take out of town buyers seriously or not since so many of them never even made it down here. I guess now I know my answer!

    Here are the numbers for those interested.

    Cost of home + repairs = $1275 + 365 (May's lot rent) +$110 extra to the handyman= $1750 total out of pocket expense.

    Selling price : $4,200.
    $500 down/ $226.93 for 18 months @ 12.75%

    Profit: $2450 ($4200-$1750)
    Interst: $ 385

    Total net: $2835

    Cash on cash return: 184%

    Cash on cash return is figured by dividing the profit you make in a year (before taxes) divided by out of pocket expenses then moving the decimal to the right two spaces.

    In this case 226.93 x 12 months = $2723.16 PLUS the $500 (down payment received) = $3223 collected in the first 12 months.

    $3223 divided by $1750 = 1.84

    Move the decimal to the right two spaces. Pretty easy right? Sure kicks the pants off of the bank's measly 3-5%!!

    If there's any questions about the deal, home, ect I'd be happy to answer them.

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    Oh, that's great! I'm so glad you got it sold. Did you decide to buy the doublewide?

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y
    Originally posted by Marilyn A.:
    Oh, that's great! I'm so glad you got it sold. Did you decide to buy the doublewide?



    Me too! I almost had to pay another month of lot rent!

    As far as the doublewide, I just got some rough numbers from the handy man. He said it will take a full week and about 1,400-1,700 for labor only. I still have to price out a central air unit, carpet, and double check his material take off/cost.

    I am thinking about dealing with this one a few different ways (if anyone reading has an opinion on any of this I'd love to hear it)

    a) finance the deal myself (cost will probably be around 4-5k)

    b) get a personal loan from the bank and use THEIR money to do this deal. That way it leaves me more money to do other deals. 5kover 24months = 235/month.

    c) try to sell it has a handyman special and see if I can make a few grand cash on it without touching it.

    The park manager said I should be able to get 6-8k for it which surprised me but I still think I can get 15k for it.

  • Real Estate Investor · AZ · Member since 2010 · 7 posts · 0 votes
    16y
    Originally posted by Terry Drake:
    Marilyn, so far nothing terribly exciting. Justh marketing. I put out 5 bandit signs and got some calls but it seemed like the callers left their brains in their other pants. Here's how my bandit sign calls have gone so far..

    Sign reads:
    FOR SALE
    2br Mobile
    Will Finance
    phone number

    This is the call I get:
    Them: Umm Hi I am call 2bedroom home?
    me: Yes.. what would you like to know?
    them: umm how many bedroom?
    me:.....two bedroom
    them: uhhh.. two... two bedroom?
    me: yes.
    them: oh.. umm.. ok thanks anyways!
    me: *face palm*



    Besides that, I also update my craigslist ad about every 3rd day (if you're selling two, don't forget to put a link to your other ad at the bottom on both ads!)I've also had an ad running in the local shopper for the week and this one coming up.

    This time I'm doing things a little differently. The first deal I wanted to generate calls. After 10 calls a day of lookie lou's wasting my time with 20 questions and no intentions of affording or buying. Now I'm very specific in my ads.

    Now I answer what I can in the ad. Location, family park, address, lot rent, what it includes, address of the home, my terms, my sales price. I get much less action this way but the calls I do get are people who know the specifics and are still interested enough to call!



    Terry,

    You say Bandit Signs and Craigslist was your most effective way to advertise? Where do you advertise when you mentioned you very specific with your AD's. Any help will be appreciated. I am about to make offers on 2 MH for $500 3br/1ba with some minor fixes. I just want to make sure I don't hold for longer than 30 days and need some marketing help.

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y
    Originally posted by Geofrey Villaruz:
    Originally posted by Terry Drake:
    Marilyn, so far nothing terribly exciting. Justh marketing. I put out 5 bandit signs and got some calls but it seemed like the callers left their brains in their other pants. Here's how my bandit sign calls have gone so far..

    Sign reads:
    FOR SALE
    2br Mobile
    Will Finance
    phone number

    This is the call I get:
    Them: Umm Hi I am call 2bedroom home?
    me: Yes.. what would you like to know?
    them: umm how many bedroom?
    me:.....two bedroom
    them: uhhh.. two... two bedroom?
    me: yes.
    them: oh.. umm.. ok thanks anyways!
    me: *face palm*



    Besides that, I also update my craigslist ad about every 3rd day (if you're selling two, don't forget to put a link to your other ad at the bottom on both ads!)I've also had an ad running in the local shopper for the week and this one coming up.

    This time I'm doing things a little differently. The first deal I wanted to generate calls. After 10 calls a day of lookie lou's wasting my time with 20 questions and no intentions of affording or buying. Now I'm very specific in my ads.

    Now I answer what I can in the ad. Location, family park, address, lot rent, what it includes, address of the home, my terms, my sales price. I get much less action this way but the calls I do get are people who know the specifics and are still interested enough to call!



    Terry,

    You say Bandit Signs and Craigslist was your most effective way to advertise? Where do you advertise when you mentioned you very specific with your AD's. Any help will be appreciated. I am about to make offers on 2 MH for $500 3br/1ba with some minor fixes. I just want to make sure I don't hold for longer than 30 days and need some marketing help.



    I use bandit signs, craigslist, and the local penny shopper. I seem to get more calls from craigs list but more serious buyers from the shopper. You shouldn't have a problem moving a 3br in less then a month if it's in decent shape. Keep in mind that if you do end up having to pay for a second month of lot rent, once you sell the home (lets say the first week of the month) then you prorate the last 3 weeks of lot rent and the buyer pays for it. Then you are only out for the 7 days of lot rent versus the entire month so don't sweat it!

    To answer your question, I was very specific in my penny shopper and craigslist ads. The bandit signs don't leave me enough room to be anything more then generic. Good luck!

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    WHAT A STORY! The deal fell through today. More details at 11!

  • Real Estate Investor · AZ · Member since 2010 · 7 posts · 0 votes
    16y
    Originally posted by Terry Drake:
    Originally posted by Geofrey Villaruz:
    Originally posted by Terry Drake:
    Marilyn, so far nothing terribly exciting. Justh marketing. I put out 5 bandit signs and got some calls but it seemed like the callers left their brains in their other pants. Here's how my bandit sign calls have gone so far..

    Sign reads:
    FOR SALE
    2br Mobile
    Will Finance
    phone number

    This is the call I get:
    Them: Umm Hi I am call 2bedroom home?
    me: Yes.. what would you like to know?
    them: umm how many bedroom?
    me:.....two bedroom
    them: uhhh.. two... two bedroom?
    me: yes.
    them: oh.. umm.. ok thanks anyways!
    me: *face palm*



    Besides that, I also update my craigslist ad about every 3rd day (if you're selling two, don't forget to put a link to your other ad at the bottom on both ads!)I've also had an ad running in the local shopper for the week and this one coming up.

    This time I'm doing things a little differently. The first deal I wanted to generate calls. After 10 calls a day of lookie lou's wasting my time with 20 questions and no intentions of affording or buying. Now I'm very specific in my ads.

    Now I answer what I can in the ad. Location, family park, address, lot rent, what it includes, address of the home, my terms, my sales price. I get much less action this way but the calls I do get are people who know the specifics and are still interested enough to call!



    Terry,

    You say Bandit Signs and Craigslist was your most effective way to advertise? Where do you advertise when you mentioned you very specific with your AD's. Any help will be appreciated. I am about to make offers on 2 MH for $500 3br/1ba with some minor fixes. I just want to make sure I don't hold for longer than 30 days and need some marketing help.



    I use bandit signs, craigslist, and the local penny shopper. I seem to get more calls from craigs list but more serious buyers from the shopper. You shouldn't have a problem moving a 3br in less then a month if it's in decent shape. Keep in mind that if you do end up having to pay for a second month of lot rent, once you sell the home (lets say the first week of the month) then you prorate the last 3 weeks of lot rent and the buyer pays for it. Then you are only out for the 7 days of lot rent versus the entire month so don't sweat it!

    To answer your question, I was very specific in my penny shopper and craigslist ads. The bandit signs don't leave me enough room to be anything more then generic. Good luck!


    Thanks for the marketing tip. Props to you on your deals.
    Where did you get your MH contracts?

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y

    OK so this is what happened. Saturday I met with the buyers and collected $500 down. By Monday the wife got into a spat with the park manager and power company. She called me and wanted to walk from the deal and wanted her full deposit back. All this at 8:00pm.

    At 10:30pm I get a phone call from one of the neighbors who told me that they packed up all their stuff, left, and left the key in the bolt lock.

    The next she calls and tells me she moved out, doesn't want the place without electric and if the park manager is going to 'disrespect her' like that. She wanted her money back and if I didn't comply she was going to involve her attorney and the 'authorities' (is she talking about the MH police?!). I told her she was free to walk from the deal but I'm certainly not refunding her non-refundable deposit.

    I went to inspect the home and found out that they half painted the place blues, baby blues, oranges, and tan.

    OH MY GOD! THE WORST CASE-SCENARIO! Lonnie doesn't talk about this!! They ruined the place AND walked away! What do we do?! We use THEIR money give it a nice, fresh paint job and pocket the rest. That's what!

    It cost $250 labor and materials to have two guys paint it Navajo White. So basically I got a free paint job AND $250 cash profit just because. Total out of pocket dropped from $1750 down to $1500.

    A week after they walked away the home sold for 4k cash. I didn't think a week ago that I would be glad for these folks to walk away.

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    It will be interesting to see if the (non) buyer carries through on her threats. Let us know what happens, kay?

    Were you a little stressed out while all this was transpiring?

    I'm so glad you had a happy ending. Congrats on another cash sale. Maybe you're not meant to be a Lonnie dealer. Maybe you'll just sell everything for cash. Sounds good!

  • Real Estate Investor · Member since 2009 · 260 posts · 119 votes
    16y
    Originally posted by Marilyn A.:
    It will be interesting to see if the (non) buyer carries through on her threats. Let us know what happens, kay?

    Were you a little stressed out while all this was transpiring?

    I'm so glad you had a happy ending. Congrats on another cash sale. Maybe you're not meant to be a Lonnie dealer. Maybe you'll just sell everything for cash. Sounds good!



    I don't think she will. She shook my hand, handed over the pool passes, and walked away. She didn't have a leg to stand on and she knew it.

    To answer your question, I wasn't STRESSED OUT but I wasn't excited either. It was already sold in my mind and I was looking for the next. Instead it was back to dealing with this one again. Now that this is over (again) I can focus on starting the next one this weekend.

  • Real Estate Investor · Near Houston, TX · Member since 2010 · 93 posts · 12 votes
    16y

    So, what is this next one you're starting this weekend?

  • Rehabber · Dallas, TX · Member since 2009 · 60 posts · 8 votes
    16y

    I hope everyone is watching! Terry is becoming a guru right before our eyes.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.