This story has been a while in coming, so forgive me if I tend to be a tad bit wordy. Yes, the title wasn't just a headline to get you to read this story. Indeed, I am totally physically blind. No, the blind are not magic people. We don't hear better than others, have better senses of smell, or anything else the media would have you to believe. We live the same lives you live--just in the dark.
How do I do my business blindly? Well, technology is a wonderful thing these days. My computer talks to me. My calculator (financial, no less) talks to me, watches, cell phone, thermometers, etc. all talk to me. Everything but my family talks to me! Ha!
Actually, the concept of a blind real estate investor didn't start with me either. If you have ever been to Las Vegas and visited The Mirage, Bellagio, or Wynn Resorts, you have been inside of hotels that were designed by a blind man. His name is Steve Wynn, and I hate that he beat me to being the first blind commercial real estate investor!
Okay, with the introduction out of the way, on to the deals. They were not exactly spectacular in their numbers. What may be of more interest to you, is that I did all of them from over 400 miles away.
Can't find deals where you live? Look elsewhere
I live in the heart of apple country in north central Washington state. I marketed here for almost one year, but found no deals to be had. This valley sits between two mountains, so land is at a premium, and people think that their mobile homes are worth a fortune, even though they sit on leased land. Go figure.
No, really--people want $7,000 for a 1967 2 bed/1 bath home, $30,000 for a 1978 20X40 double, and the like. That being the case, we shifted our marketing to Eugene, Oregon, some 400+ miles away.
So, here is what we did...
Our marketing consisted primarily of postcards sent into the mobile home parks. We found the parks in which to do business literally by looking them up online, calling them, and explaining that we wanted to buy a home for a family and sell it to them on payments. The magic phrase for most of them was, "We will list them as owner, while we will be listed as lien holders."
Once we had around seven cooperative parks, we began mailing our postcards, advertising that we paid cash for mobile homes. Upon receiving some phone calls, we had a problem. How do we know exactly what we are investing in?
A solution to our problem
We decided to ask our park managers if they knew someone who wanted to make $10/hour inspecting mobile homes. Indeed they did! We were introduced to a very nice lady who was living in one of our parks and needed some additional work. She works for us to this day.
The fact that she lived in a mobile home meant that she knew what to look for, so we had to do very little to teach her what to watch out for in the homes.
She went out to drive the parks for us too, so we would know what these parks looked like. She took down the names and numbers of people selling with only a sign in the window. She sent us written descriptions via email. By the way, none of our employees knows that we are blind. Shhhhh! Don't say a word!
Our first deal!
She only inspected two or three before we got our first good bite. A woman "wanting out" to move in with her boyfriend called us to buy her home. She offered to take $500 for it. When I hesitated a moment, she actually said that she would take less.
After asking several important questions (lot rent up to date? Taxes paid?), I found that she owed $70 in back taxes. Lesson: Ask, ask, ask! Upon checking with the tax assessor, I found that she actually owed $90 in back taxes. Checking with the park manager, I found that she had failed to pay her lot rent for that month. Lesson: Check, check, check!
Without going into all of the details, after deducting all of the things she hadn't paid, we ended up paying her just $145 for that home. It was a 1982 Hillcrest 14X60. It had a large yard, carport, storage sheds, a large bay window (the thing that sold it), but was in pretty bad condition.
Like the foolishness of so many rehabbers, we spent way too much renovating that home. At the day's end, we had about $5,000 in the home, not including the hold time. Lesson: Figure what your hold time may be and not just your rehab costs.
A second deal in that same park
We bought another mobile home just days later in the same park. It was a 12X60 and was built in the early 1970s. This was a referral from the manager. We paid $1,000 for that home (way too much), and it was in pretty bad condition too. We pulled over 2,000 pounds of garbage (including dirt from the guy's indoor pot farm) out of that home.
We found our contractor on craigslist, and he has been a great guy to deal with. Even the managers and other park residents have commented at how good his work is. Currently I am partnering with him on a deal and will write a separate article with those details.
Our third deal came from a referral from a manager in a different park. It was a bank repo. Again, we paid way too much for this home. We paid $5,000 for this home because it was clean and needed very little in the way of repairs. Also, the manager assured us that the home would sell quickly. Lesson: Managers know management (sometimes), but YOU are the investment expert.
I will never buy from a bank again. I bought from them under the assumption that we could form a business relationship. I ended up paying too much, and it bought me nothing in terms of business. Lesson: Don't overpay in your attempt to win favor with ANYONE!
We were dealt an "October surprise" when the managers demanded that we replace the back deck. It was a large deck, so the cost was significant at $850. This dealt us a blow in terms of our return on investment. Lesson: If you "get the feeling" that one of your managers is on a power trip, look for another park in which to do business.
There are plenty of parks out there. If there aren't plenty in your area, look in a different market--you CAN do this (with good employees) from out of town.
Drum roll, please
Here's what you have been waiting for...the numbers. This is how our deals shook out. The numbers are not the best, but we are relatively comfortable with them. We figure that we are learning, and that we will learn from our mistakes and move on.
Deal #1 Purchase:
Purchase price: $535 (including back lot rent and back taxes)
Rehab costs: $4,000
Hold time costs: $1,740 (lot rent, utilities)
Grand total: $6,600 (Way too much!)
Deal #1 Sale:
Sales price: $10,500
Down payment: $1,000
Interest rate: 15%
Term: 44 months
Monthly payment: $291.95 (Some closing costs were added to loan, so this number isn't exactly correct for a $9,500 balance.)
Annualized return: 29.94% (Pretty shabby, but you can't get it in the market.)
A cookie cutter of the Deal #1. The differences are hardly worth mentioning.
Deal #3 Purchase:
Purchase price: $5,000
Rehab and cleanup: $975
Holding time costs: $1,700
Grand total: $7,725
Deal #3 Sale:
Sales price: $15,500
Down payment: $1,000
Interest rate: 15%
Term: 31 months
Monthly payment: $554.38 (The buyers chose to make a higher payment.)
Annualized return: 52.41% (Better than the others--maybe we ARE learning a thing or two!)
For the new real estate investors out there having problems like mine, let me say that this wasn't easy. At times, I felt like giving up. At times, things seemed impossible to work out. At times, it appeared as if we would fail. At times, I truly feared that I did not have what it took to be a real estate investor. At times, my new bride and I took turns (day by day) telling each other it would be okay.
I say none of this to discourage you, but only to let you know that if this is happening to you, you are normal! Just resolve yourself to seeing it through no matter what and you will figure it out. Hey, you can always go back to the J-O-B! Hmm, or can you? Maybe you should just resolve yourself to figuring it out! Seems less risky, no? (Smile.)
Our average return for the three deals is 37.43%. No, not the best. But in the end, I am working a business that I love, and I am able to travel with my new bride. She is a professional speaker who shares my disability and speaks on the subject all over the U.S. I am living a dream! Thanks to all who contribute out here!
Our 5 to 10-year plan has us continuing to buy and sell mobile homes, buying a park, and possibly a self-storage unit. At some point, I hope to teach investors how to invest "blindly"! Ha! Thanks, especially, to Lonnie Scruggs--a visionary in business if I ever saw one!