Thursday, June 17, 2010

Investing 101: Working With Banks

Recently, I've been getting a bit agitated and annoyed working with banks on their mobile home inventories.

Right now, the banks owned mobiles are just too much of a risk for what the banks (in my experience) are looking to get. It's getting to the point where even the parks won't buy them back. And, that raises a major red flag with me.

(Note: Typically, I try not to compete with the parks I do business with. Some of the parks I work with (but not all), will usually go after the bank owned mobiles - they've got a separate team of people and experience in this area (usually not the park manager). Regarding typical homeowners, they usually don't go after these as it is too time consuming and usually cannot be negotiated effectively over the phone like the bank owned homes).

To tell you the truth, I've never had much luck working with banks on their inventories in the past (even when I first started out wholesaling). It's like a game - too much back and forth with very little results (from my experience).

In my experience, it's just been too much time involved and too much paperwork with very little return. It's like I have to work a lot of them, submit paperwork, prove my case and wait for some "pie in the sky" decision maker to give me the green light. It's been the same way even with the mobiles.

A few weeks ago, I made this post on this bank owned home I put an offer on. Turns out, it's still sitting vacant out there. And, the park manager tells me even the park won't buy it - the bank is asking a pretty ridiculous amount on it.

What's even worse, is the most recent news I heard from another one of my park managers.

(Note: My park managers are my "eyes and ears" - they keep me updated on the latest news with the mobile home biz as well as what's going on in their parks. Having strong relationships with the park managers of the parks you choose to do business with is key to being successful in this business).

This particular park manager has been a real ally - we basically talk on the phone about 2-3 times per week. This park manager really enjoys keeping me updated on the latest news (aka gossip) on who's doing what and what's going on in the biz. It's amazing how much information I've learned from this park manager alone on the state of the business, other park managers/park owners, other parks, other investors, etc.

In any case, this park manager has been working with a couple banks trying to negotiate deals for me. I did not ask this park manager to do this - this park manager tells me they'd rather work with me on deals as they know I keep my word and have a good reputation than work with others who may not be as reputable.

(Note: There are a couple other park managers who attempt to negotiate bank deals for me with homes taken back in their parks. Their logic is they'd rather have someone they know and trust work these deals than some stranger who comes in that they do not know. Plus, usually when a home is taken back by the bank the park will go after the lender for the back lot rent owed - someone will need to pay the back lot rent. And, they will consistently attempt to contact the bank for the funds due).

So, the park manager calls me this week and tells me she's talked to one of the banks (of course one that owes her park a lot of back lot rent!). Well, it turns out they're willing to deal with me. But, there's a catch (of course!).

Here's the catch. I've got to buy a package of 10 mobiles from them, scattered all over (I'm talking thousands of miles away). Most of them are in the early 1990s-mid 1990s range. But, I've got to take them in "as-is" condition (I'm sure there's no way to check the water and/or electricity on these) and move them as well as take them with all the liens such as back lot rent owed, tax liens, etc.

And, all this for a low, low price of.......5k each! Wow, what a deal, right? Not really.

The park manager told me straight and I quote, "Basically, they want you to buy their crap." And, what's even more funnier is she told the bank rep there's no way I'd take this deal (if you could even call it a deal) as she knows that I don't buy "crap" - I only buy homes that I know I can stand behind (I really believe in my product).

And, you know what the bank rep said? The bank rep told the park manager and I quote (again), "Why do you have to go and ruin my deals?" Oh brother!

Then, the bank rep told the park manager to tell me that I better not let this opportunity pass me up as there may not be any more homes to buy (yeah right!). This is not the end - this is only the beginning. It's only going to get worse. And, being the buyers market that it is - it's the buyers who have the power, not the sellers.

After hearing this, I've made the decision to not even pursue bank owned mobiles at this time. It's not worth my time if they're going to be playing this game.

I'd rather focus my efforts on folks who really need to sell good, quality type homes in nice parks. Period.

It's a much better use of my time and energy. Why should I waste my time chasing after these bank owned homes that require too much time and too much work? Plus, if they're not going to be paying off the liens on the homes - forget it. It's going to cost more time and more money for me to deal with these issues (on top of the issues with the individual homes). No thank you.

Will things change in the future? Possibly. It will take some time - I think the bank inventory supplies really need to pile up before banks will start to have "fire sales." Of course, this will be on an area to area and case by case basis.

In any case, I'd thought I'd fill everyone in on my perspective on working with banks. I've had some folks contact me asking me if it's a good route to take. In all honesty, working with banks just hasn't been my cup of tea.

(Note: Though, I have heard of others who have had success working with banks. In this business, everyone will have different experiences - what works for me may not work for you. And, vice versa. Again, it's all a matter of personality and comfort level - everyone works differently).

A wise investor once told me, "If you're going to play the game, make sure you play by your rules. If you can't play the game by your rules, find another field to play in." And, that's exactly what I've decided to do.

Happy investing!

p.s. Feel free to leave comments on any post either here and/or my Facebook Page. Comments are always welcome, thanks for reading!

1 comment:

Anonymous said...

Sorry for my bad english. Thank you so much for your good post. Your post helped me in my college assignment, If you can provide me more details please email me.