I decided it was time to submit my success story. In my first few months, I made some costly newbie errors that I feel I should share with other newbies, so they don’t make the same mistakes.
My story begins in September 1998. I had a dental appointment early in the morning that caused me to have a few extra minutes at home to relax and watch some TV before I left. I was scanning the channels and came across a Carleton Sheets infomercial. I have always seen supposedly easy ways to make a buck, but this one was different. I decided that if this guy was as popular as he said he was, there had to be info on the Internet.
At lunch that day, I plugged his name into my favorite search engine and ended up at CRE Online. It seemed that I had found a place that I could get lots of free information about how to get into real estate investing. That night I read all the success stories and as many of the how-to articles I could.
I immediately made the decision that mobile homes were an easy, cheap way to make a monthly cash flow. After a few weeks of reading posts and asking questions, I ordered Lonnie’s book, Deals on Wheels.
Two days after receiving it, I placed a test ad in the paper to see how many potential buyers I would get. I also called on all the $2,000 or cheaper mobile homes for sale and cruised the speed bumps for a few days. That weekend I got around 15 potential buyers and after looking at a few mobile homes, I had a few I could buy CHEAP.
I had no money and had no idea where to get some. I started telling everyone I know my plan and was offering an 18% rate on a $5,000 loan. After a few weeks, a guy I know was pleased to make 18% on money he had just sitting in the bank. The deal was I would pay him $320/month for 18 months.
Mobile Home #1 – I convinced the seller (who was already living in his new mobile home across town) to let me give him $10 earnest money to have a two week option to show and buy his empty home. I then called all my prospective buyers to see if any would be interested. I had a few that were.
**Lesson #1: Don’t have the buyer and seller in the same room.
I had not asked for a key from the owner yet, and I would meet him at the mobile home when I had a possible buyer. The home was a wreck with holes in the ceiling, and walls. The carpet was trashed, and the bathroom was disgusting. The girl that ended up buying it asked me with the seller right there, “How can people live like this?” I was embarrassed and didn’t know what to say because the seller was right there.
Any way here’s the numbers:
Purchased: $700
Sold: $300 down, $200/month for 6 months @ 0% interest = $1,500
I was happy, I doubled my money.
Mobile Home #2 – This mobile home was owned by a real estate professional who was happy to work with me. She was renting it to her nephew who kept moving in and out every time he broke up with a girlfriend, and the Realtor was tired of it. She wanted to unload it.
Originally she was asking $5,200, but had it advertised for two months, and I talked her into $2,600. I just had to find a buyer. I had 4 or 5 look at it (the seller didn’t want to give me a key though and she sat in the car while I was showing it).
Finally I sold it for:
Purchased: $2,600
Sold: $300 down, $175/month for 36 months @ 12% interest = $6,300
Good Nuff!
Mobile Home #3 – I ran across a new mobile home park I had never noticed before with a whole bunch of “Lonnie” deals in it. I spoke with the park manager and got a list of empty mobile homes they wanted to sell. I called my list of buyers, and a few of them walked through all the homes with me. I had a couple of guys that wanted to buy one.
I talked to the manager, and she said she could sell it for $2,200. I worked some numbers and decided I could do it. Here is where it gets hairy.
The owner of the park lives out of state and owed the manager some money to take care of some bills. When I showed up with my money order, she told me that the manager asked her to ask me to get the money order into her name, so she could cash it and pay some bills.
**Lesson #2: Trust no one.
She also said that he came down on his price to $1,700 if I would also buy a 10×50, 1-1/2 bedroom, they had sitting empty for a few months for $500. My thought was that I was planning on spending $2,200 for one, now I am getting two for the same money, good deal.
I went back to the bank and got the money order transferred to her name, then called my buyers who moved in that night. The title was in the park owner’s name, and the manager said she would send it to him to have it notarized and give it to me when it came back. The new buyer understood this. Two days later the Park Owner shows up to fire the Manager.
It seems she has been skimming a lot of money and the only proof I have of my purchase is a money order in her name and a receipt from the park receipt book, which the book has mysteriously disappeared. The owner decided to let me collect the payments from the new buyers until we get this all worked out.
**Lesson #3: Don’t give money for a mobile home until you have the title in your hand.
I am still battling this one; I still am fighting for the title, and the guys I sold it to seem to be “professional tenants” and are being evicted for non-payment at this time. This one didn’t work out so well. I get to resell it at the beginning of next month though with a near $2,000 judgment that I probably will never receive.
This is how it is supposed to be working:
Purchased: $1,700
Sold: $200 down, $175/month for 30 months @ 12% interest = $5,250
Mobile Home #4 – The $500 one I bought with #3 had a title, but a previous owner that was impossible to track down signed the title in the wrong spot. This home was hard to unload because of it’s size. Only a single person could live in such a small space, and it had to be one that was not afraid of the title problem. I finally got rid of it after having to pay two month’s lot rent:
Purchased: $500 + $240 lot rent = $740
Sold: $400 down, $400 in one month = $800
The kicker here is, one week after paying me off, the guy died of a heart attack. His brother called me and wants me to buy it back or try to sell it for him, and I get to keep 1/2 the sale price. I definitely don’t want it back, but I have another mobile home for sale, and when I talk to potential buyers, I will keep this one in mind. I may end up coming out all right on this one.
Mobile Home #5 – When wandering through the park one day I was approached by a retired lady who wanted $500 for her home, so she could take her new conversion van on the road. With some negotiation, I got it for $450 with the appliances. She wanted and extra $150 for them, but when I started to walk away, she changed her tune.
I sold it a few weeks later for:
Purchased: $450
Sold: $200 down, $200/month for 9 months @ 0% interest = $2,000
This one is working out fine.
Here’s the summary (when I get some real buyers in home #3):
Monthly payments in to me: $175 + $175 + $200 + $200 = $750/month
Payment to my loan guy: – $320/month
Total: $430 cash flow in my pocket every month!
I need to keep working on new deals because it won’t be long before the 6 month and 9 month notes are paid off. I hope you newbies take note of my mistakes, and don’t be afraid to jump right in feet first. If you don’t start the game, you can’t win!