I always thought anything that didn't perform was more of a liability than an asset. But according to bankers, it's an asset--it just doesn't produce any money. Huh? In fact, it's costing the bank money to keep that "asset" on the books.

I suppose that term sounds much better to the stockholders who have their money invested in the bank. I recently bought one of these bank "assets" and changed it from a non-performing bank asset to a Lonnie performing asset.

I had no competition

I received a fax from one of the banks on a mobile home they had repossessed. They wanted me to make a bid to purchase. The fax contained information about the mobile home: the size, make, year, etc., but no address for the park.

Instead of an address, there was a hand drawn map with instructions on how to find the home. So it was necessary for me to form a mental road map in my mind in order to determine exactly where this mobile home was located. And it turned out to be in a park that I was well familiar with, having done business there for years.

I then asked myself, "Why didn't they just give the park address and lot number?" But I was glad they didn't because someone else might have found it, too. Then I thought, "If I had trouble finding the home, as well as I know the area, how much competition would I have?"

As it turned out, I had no competition. When I checked the home, I found it to be in good condition with all the appliances and central air. All it needed was about an hour of cleanup.

I had to find some competition

I called the lady who had faxed me the bid sheet and learned the bank had been paying lot rent for several months, had not received any bids, and was now anxious to get rid of this "non-performing asset." (No wonder they hadn't received any bids. No one could find it.) I also learned there was an outstanding lien balance of $16,000. (It's amazing what you can learn just by asking questions.)

The bank's policy was to get three bids and accept the highest bid. I advised the lady handling this that I would send her a bid, and I would see if I could get her two more bids from people I knew who dealt in used mobile homes. She soon had three bids, and mine was the highest.

I bought the home (the bank's $16,000 "non-performing asset") for $2,120. I also paid for two months lot rent and some advertising. I now had a total of $2,850 in this mobile home.

A 138% yield = GOOD ENOUGH

I sold this home in 28 days for $7,500. My buyer made a $1,000 down payment and signed a note for $6,500, payable in 36 monthly payments of $218.23 each month at 12.75% interest (my standard rate). I now have a $6,500 note with $1,850 of my money still in that note. If we plug in the numbers, that's a 138% yield. Not bad for a non-performing asset, huh?

So far, I've received 12 payments ($2,618), so I already have a profit. And I still have 24 payments left which amount to $5,237. The total amount of the 36 payments and the $1,000 down payment amount to $8,856. Subtracting my original investment of $2,850 leaves me a profit of $6,006.

Do a little work one time and get paid for a long time

Now I'd like to ask a question. As long as my buyer sends that payment each month, what else do I have to do in order to get paid? Nothing....but wait for the mail carrier and take the check to the bank. My work is done. The buyer is the one who must go to work every day to make the money to send me a check. And he gets to do it for 36 months.

Now, I'm often asked, "What happens if the buyer stops paying?" If that should happen, wouldn't I have a free mobile home to resell? Couldn't I sell the home again, receive another down payment, and start receiving payments from a new buyer? Is this a great business, or what?

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