After so many years in the mobile homes business and many killer deals, I keep thinking it can’t get any better. But it seems like there’s always somebody who comes along and proves me wrong. I have to share this recent deal with you…it’s too good to keep to myself.
A little over three years ago we had just bought another mobile home lot, and were looking for a nice home to place on the lot to sell. I called around to all my friendly new dealers informing them I was in need of a nice used home. Within several days, I got a call on one that had just been taken in trade.
This home was 10 years old, 14 x 80, 3 bedrooms, 2 full baths, with stove and refrigerator and in exceptionally nice condition. After the usual negotiating game, the dealer agreed to sell and setup this home for $7,250, including installing the skirting. The electrical hookup and advertising ran another $463, for a total of $7,713.
The first sale
The home was sold for $12,900, $1,000 down and a note for $11,900, 12.75% interest (industry standard) with 72 payments of $237.31. If you run the numbers, you will see that’s only about 38% yield, which is less than a typical “Lonnie Deal” that starts at 50%. But keep in mind, by selling the home, we also generated a monthly lot rent payment.
The buyer was a single man who proved to be one of the best buyers I have ever dealt with. Payments were always on time and no problems whatsoever. After approximately three years, he decided to get married and had already bought a house. Now he had a mobile home that was no longer of any need to him.
After trying to sell the home through a mobile home broker and getting nowhere, he called me to see I if would be interested in taking the home back. (I love to talk to sellers after they’ve had their homes listed with brokers for several months with no results. There’s nothing like an unproductive broker to create a motivated seller.)
At the time my buyer called me, he had made 37 payments of $237.31 ($8,780) plus $1,000 down, for a total of $9,780. So we already had a nice profit. He still had 35 payments left and a remaining principal balance of about $6,900.
Just pay me for the fridge…
After asking questions and finding out what he really wanted, we struck a deal. He told me he had just put in a new refrigerator and needed to get enough to cover the cost of the refrigerator: $500. After some hesitation, (I’m glad he couldn’t see my face) I repeated back to him what I though I had heard him say.
I had heard right. He said if I would give him $500 and cancel out the balance of what he owed, I had the home, and he was out of there. I couldn’t believe what I was hearing. Folks, this man was in love and the wedding bells were pounding in his ears. And he wasn’t about to carry his new bride over the threshold of an old, used mobile home.
After paying $1,000 down and 37 payments of $237.31, all he wanted was $500 and cancellation of the remaining balance of his note. Did he have a deal, or what?.
The home was in better condition when I got it back than it was when I first sold it. The kitchen floor had been rebuilt and nice vinyl covering installed. He had also installed an air conditioner the year before. He left his washer and dryer, and he had finished fencing in the yard.
The second sale
In less than one hour after I got the home back, it was sold to a couple who were on my potential buyer waiting list. Well, actually we had an agreement for sale with an application and application fee. This couple were waiting for their tax refund check to show up, which would take about another week.
In fact, we had two buyers wanting to buy, and both waiting for tax refunds. I grabbed the first one that got the money. When the other buyer gets their money, I have a home for them also, in the same park.
The sales price this time was $13,900, $1,000 more than the first time. The new buyers made $1,000 down payment and signed a note for $12,900, payable $250.40 monthly for 75 months, 12.75% interest. If the note runs the full course, we will receive 75 mobile home payments of $250.40 ($18,780), plus $1,000 down payment for a grand total of $19,780.
They also get to send us 75 rent checks for the lot, starting with $240 monthly. If there are no rent increases (fat chance of that happening) that means we get $18,000 in lot rent. The mobile home payments and lot rents over the next 75 months will total at least $36,780. And all we have to do is wait for the mail carrier to drop off the checks.
How good can it get?
If the first buyer had stayed and made all the mobile home payments, we would have received $8,305 (35 x $231.37). By getting the home back and selling it again, we will get over $11,000 more than we would have, had the first buyer not moved.
Let’s recap this deal and see what has happened. We had a total cost of $7,713 in the home when we first purchased it. We sold it and received $1,000 down and $8,780 in payments (37 x $237.31). We then paid the buyer $500 to give the home back to us.
We sold it again for $13,900. This time we got another $1,000 down and if the note runs the full course, we will receive $18,780 in payments. Somebody tell me what my yield is. I keep getting “error.” And, we will also receive somewhere between $18,000 to $20,000 lot rent over the next 75 months.
Maybe I should send the bride and groom a nice wedding gift; they sure gave me one, and I’m not the one getting married. And to think, I used to work a “job” to put groceries on the table. But back then I didn’t know what I didn’t know: How to make your money do the work. How good can it get?