Tuesday, January 4, 2011

Terminology Tuesday - Amortization Schedule

(Note: I think it's important to know the terminology and words used when learning any new business including mobile home investing. I came up with 'Terminology Tuesday' as a way to go over the terminology used in the mobile home business. It's important to know the terminology when talking to people in the business so you're all on the same page).

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When I work with buyers, I always let them know before we close that at any time during the term they can request an amortization schedule. This gives them peace of mind that they can always know how much they have paid.

However, I do make it clear to folks that if they do make a request - it must be done in writing. In the beginning, I did take verbal requests. Though, now I prefer to have everything in writing. I know it sounds meticulous, but that's just my preference.

(Note: Always cater your business to your style of doing things and what you feel comfortable with - everyone has a different style).

One time, a park manager did tell me one of my buyers asked her if she could just get a payoff from me. I told the park manager that the request needs to be in writing. But, the park manager said "Why don't you just tell me the payoff and I can just pass it on to your buyers the next time they are in the office?"

Quite honestly, I did not feel comfortable with this arrangement. Sure, this was a park manager I knew very well and we both got along great. Though, it just was not my comfort level to do business this way. For me, I really needed to stick to my policy of honoring requests in writing.

(Note: Again, you need to do what you feel comfortable with. One of my fellow investors has told me in the past that I can go a bit overboard at times with my policies and procedures. This particular investor does not operate like me - they prefer to do some things verbally which has worked for them. Again, it's all a matter of preference - run your business according to your comfort level and style of doing things).

Sometimes my buyers request amortization schedules, sometimes they just request a payoff. Whatever they request (of course in writing) I always honor their request - it is part of our agreement to let them know what they have paid.

(Note: I've heard of some investors who do not provide this information or withhold it from their customers. I feel this is wrong and unethical).

Lastly, I am always upfront with buyers before we close and let them know that they can always pay more than the monthly payment for a quicker term. At any time during the term, I let them know they can always pay off the balance if they wish.

(Note: Actually, I encourage a quicker payoff. This gets them excited as most like the idea of owning a free and clear home. At times, some do end up paying more than the monthly payment. Though, the majority like the idea of paying extra but really end up paying the monthly payment).

As for obtaining and/or creating an amortization schedule, there are various programs on the Internet. If you do a Google search for "amortization schedule program" you will find many come up in the results.

(Note: If you use "Google Docs," they do have an "amortization schedule" program available. I've used it myself, it works quite well).

Quite honestly, it's important not to get so bogged down in all of the paperwork. In my opinion, it's more important that you learn and create a mutual trust with your buyers.

Sure, there's paperwork involved but what good is that piece of paper without someone's word behind it? Someone can make a promise to you but if there's no trust and that promise is broken, then there really was nothing there to begin with.

I hope this "Terminology Tuesday" post has been helpful and has given you some useful information to use.

(Note: Lately, I've been contacted by many with concerns about the "SAFE Act". My best advice would be to check with the local parks (and "Lonnie" dealers) in your area to see how they are handling it.

In my opinion, I think the parks would be under more scrutiny (since they operate on a bigger scale) than individual "Lonnie" dealers. Again, it's going to boil down to interpretation and enforcement, which can vary from area to area.

For those who are still concerned, I have read this special report which does have some good commentary and points about the Act. Hope that helps!)

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!

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