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!

Update: 3/2 Singlewide Mobile Home In a Park (Bank Owned)

Thought I'd give everyone an update on the mobile home I mentioned in this post - I've been in negotiations with the bank on this one.

So, I got all my numbers together on the fix up work needed to bring this home in marketable condition. And, I presented my offer to the bank. Here's what I came up with:

$1800 - condenser air conditioning unit (none there)
$1325 - carpet, padding and tack stripping (carpet gone in all rooms including hallway)
$776 - skirting (skirting gone)
$783 - front porch to be built on site to park specifications (none there)
$297 - back porch to be built on site to park specifications (none there)

$4981 - total fix up work

(Note: This is why it's important to build a team. With just a quick phone call, I can call up my contractors and they can estimate for me what these items would cost).

In addition, I made it a stipulation that the taxes must be paid and brought current (there were around $500+ in back taxes owed) as well as the lot rent (2 months back lot rent - $1000+).

Along with my offer, I also noted that the home will stay in the park if my offer is accepted.

(Note: Per the bank rep, I was advised my offer had a better chance of being accepted if the home were to stay in the park).

So, how did I come up with my offer?

Well, going into it I already knew the market. I knew a home like this would sell owner finance around the mid 20k-high 20k range. I knew the down payment amount would probably be around $2500 and cash flowing in the $500-$600/month range.

Based on these numbers, I knew the most I could get myself into this (total) would be around 13k. I worked backwards based on the fix up work needed. So, I came up with an offer of 6k.

(Note. When negotiating and making offers, you always want to give yourself some room to negotiate. Most times, I go in with a lower offer than my maximum allowable offer. Then, I expect some countering back. If I can arrive close or at my maximum allowable offer, then I'm able to make the deal work).

When I presented my offer to the bank, I justified my offer to the bank rep. I told the bank rep there's just no way I could go higher with all the things missing that the home needed. The bank rep understood and told me it's actually a decent offer.

Furthermore, I told the rep I'd be willing to up my offer if the bank were able to provide all of the items or some of the items needed. I told the rep my main concern was the missing a/c condenser unit and the front porch, which are very big ticket items. If the bank were able to provide these items, then I'd be willing to up my offer.

Though, when I said this the bank rep responded with a "Uhhh, we don't do that kind of stuff. We're just trying to sell this thing "as-is." But, I was trying to be the good investor so that I could give them options. And, the bank rep told me it was much appreciated as most investors they run into just give them really low ball offers with no justification whatsoever.

In any case, the bank is mulling over my offer on this one. So, we'll see.

(Note: I don't really spend all that much time with the banks. Usually, the homes that I pursue with the banks are only those that are pointed out to my by the park managers in my favorite parks. For this one, the park manager told me about it as the eviction took place 2 months ago - it had not even made the bank's distribution list of homes taken back yet).

I hope this example will help give you a better idea on how I go about negotiating and making offers.

Speaking of negotiating, I've been in negotiations on quite a number of other mobile homes. This time of the year (spring and summer) is one of the best times to find both sellers and buyers - people are moving out as well as moving in.

To give you an idea, here are a couple of other things I'm working on:

3/2 Singlewide In a Park, 16x80



3/4 of an acre mobile home lot with 2 mobile homes





2/2 Singlewide In a Park, 14x76



These are just a couple as there are quite a number of them with the time of the year and all. Though, I will continue with the updates along with the case studies since many have said they have enjoyed reading them.

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!

Bank REOs

With the end of the year approaching, my new angle is to work the bank REOs in addition to working with individual sellers. Surprisingly, the banks have been more than helpful. Personally, I was a little apprehensive working with the banks as I've heard they are hard to deal with and have been unresponsive to most people. I don't know if it's just me and my personality, but the banks have been pretty cool to deal with. Maybe my studies with Gitomer had something to do with it. Go figure!

So, today I checked out another bank REO located in one of the parks I work with. Guess what? As soon as I drove up to the house, I could tell the home had some issues. I didn't even have to set foot in the house. What tipped me off? Check this out:



Hmmmm....What's wrong with this picture? Can somebody say roof damage? And, let's not forget about those lovely wood panels with the moisture issues. Can you see the wood breaking up? Here's a closer look:





Ok, so is it just the outside with issues? Here's what I found when I went inside:

Water damaged wall



Mold



Water damage ceiling



Door entryway water damage



Clearly, the house had some issues. As soon as I walked into the house, I could smell the mold. Surprisingly, the park manager didn't think it was that bad...until I came and pointed out these issues. But, what really confirmed my feeling about the house was not the house itself but the neighbor who lived next door.

The neighbor was a friend of the prior owners. Let's just say people talk...And, they talk a lot. Most people want to talk, talk, talk. But, I've found out that if you listen to what people say, you'll learn a heck of a lot especially in this business.

I start talking to the neighbor and asked her a couple of questions about the house. The park manager was with me and really didn't think the neighbor really had that much insight into the situation. Little did she know what the neighbor knew. The neighbor told me about all the water and moisture issues with the house. How did she know? Well, she was the prior owner's neighbor and friend, and regularly came to the house to visit. Whenever people have problems, they talk about them to their friends and people they know. Pretty logical stuff.

So, the neighbor goes on about the house and tells me how the house was always leaking, moisture was getting into the walls, how one of the water pipes burst, how the prior owners would complain water kept getting into the house, etc, etc. Wow, the list goes on and on! Then she goes on to tell me the a/c unit outside is gone - someone stole it. And, there's always been a major leak in the bathroom. Plus, the commode in one of the bathrooms doesen't work anymore. Honestly, this is very important information to know.

What I deduced from the situation was that the roof probably has not been sealed for quite some time. Somehow moisture has made its way into the house and will continue until the problem has been found. However, it's already been to the point where mold is growing and moisture has seeped into the walls. The insulation is going to need to be torn out and replaced with new insulation. Probably the roof will need to be sealed again. All of the walls with the moisture will need to be replaced. Plus, the wood paneling outside will also need to be replaced. Clearly, this house is a much bigger project than what I'm looking for. It will take more time and work to get the home ready and safely habitable. So, I decided to pass.

Lesson learned. I have learned to be humble and listen more to people when it comes to this business. Most people want to talk and think they know what they are doing even though they don't - a big mistake. I learned the hard way. Let's just say my mistakes in the past have cost me a lot of time and lot of money. Now, I have learned to listen when it comes to matters of the unknown.