Where Do the Pros Invest Their Cash?

A recent question asking, "Where do the pros invest their money?" triggered the idea for this article. I would like to share a couple of deals we just did, and I hope it gives you some ideas. This is a simple system we've been using for years with excellent results.

We started off using other people's money (because we didn't have any of our own). When you don't have any money, you learn how to really negotiate.

After years of dealing in rental property, mobile homes, and mobile home notes, we now have more cash coming in than we have good places to reinvest it. (Always some kind of a problem!)

Use your money to buy long-term, secure cash flow

So we now take the cash that builds up from our short-term "cheapo" mobile home deals and put it into something long term that will provide us a good secure and steady income and with very little, if any, of our time to manage those investments.

Here are our last two deals just completed this past week, plus another one that we will close on next week.

We just bought two more mobile home lots in one of the local parks. (We have two "condominium parks" in my area where the lots can be bought and sold individually.)

We paid $12,000 (cash) for one and $14,000 (cash) for the other. The cash came from our short-term, cheapo mobile home deals.

These lots are assessed for $17,000 and normally sell for $17,000 to $20,000 if you can find one for sale, which is very rare. We were negotiating with two very motivated sellers who needed all cash and needed to close yesterday, which we were able to do. That's why we were able to buy at least 20% to 30% below market value.

Deal #1

We bought a 1985, 14x60, 3/1 in very good condition for $2,000. The move and setup cost another $2,185 for a total of $4,185. We sold that home for $8,900, $1,200 down and 42 payments of $228.23. (Someone figure my yield on this deal). We get $225 monthly lot rent, which nets us $190 after taxes and park dues. On a $14,000 investment, that's about a 16% return on the dirt.

Deal #2

We paid $3,000 for a 1983 14x70, 3/2, in very good condition. Move and setup cost another $2,135 for a total of $5,135. This home was sold for $10,900, $8,000 down (that's right, $8,000--it does happen sometimes), $257.66 for 12 months. I tried to figure my yield on this mobile home but my calculator just keeps saying "error." So I'll just consider I made a reasonable profit.

The lot rent is the same, $225 gross, $190 net on a $12,000 investment, about 19% return on the dirt. A couple in their 50s bought this home and said they would probably live their the rest of their lives, so they were concerned whether I would want them to move after a year or so.

I assured them as long as I got the rent on time, and they didn't cause a problem, they could pay me rent forever.

Deal #3

We have a signed contract to buy six lots in a park in Virginia Beach. The seller has owned these lots for many years, but is now in financial trouble and needs all cash and a fast closing. We are able to solve his problem. The seller started off wanting $17,500 per lot and we settled on $15,000.

It's not as good as I would like, but still a very good investment for us. I didn't push for a better price because I didn't want to take the chance of losing out to someone else. (Don't get too greedy. Pigs get fed, but hogs get slaughtered.)

Once again, we could pay cash (thank goodness for cheapo mobile home buyers) and close as soon as the paper work is ready.

Five of the lots are owner occupied and paying $225 lot rent, with a net of $190. The rent is way below market and will be increased $10 to $15 per month immediately. On a $15,000 investment, that's a 15% yield. Still not bad for an investment that requires very little time and management.

Once this deal is done, I can spend my time doing something I enjoy doing, and the rents are still due every month. I will have no tenants for the homes, no management, and no maintenance. And the dirt doesn't cause us a problem.

One lot is vacant, so I'll be placing a home on that lot and selling it just like I did in the first two examples.

If I can place a nice home on that lot that costs $5,000 or $6,000 and sell for at least double my cost, get a reasonable down payment, plus a mobile home payment for many months, I have decreased the overall cost of that lot tremendously.

And let's hope some of the tenants that are on the other lots will move. Most park owners dread to get a vacancy, but I jump with joy if I get one.

Use your excess cash to pay off debt

We have also been able to pay off a lot of our debt with the excess cash we find ourselves with from time to time. For instance, we sold one of our rental houses about six years ago using a wrap mortgage. The underlining mortgage was 10.5%.

Last month we paid off that mortgage, and now we get the benefit of that interest instead of the bank. And we now have a first mortgage instead of a second on a nice house with good equity. If the buyers default, would we be in a bad position or a good position?

Hope these examples will give you some ideas of what to do with excess cash you may have. My suggestion is to find ways to invest that cash so that it will give you a good secure and safe return that doesn't require much, if any, of your time and management.

Put your money to work, so you won't have to work.

Learn from the pros and take action

For some of you who are starting out in the investment world and looking to make your fortune, let me make several suggestions.

First, decide exactly what you would like to do. Then, try to learn from the most successful people who are doing what you want to do. Don't take your barber's advice unless you want to learn to cut hair.

Be willing to pay the price and attend seminars given by qualified teachers who do what they teach, not someone just selling books and tapes. And last, TAKE ACTION! The best teachers, books, and study courses won't do you any good if you don't apply that knowledge.

Fear, procrastination, and excuses are your worse enemies. You must learn to defeat them, or they will defeat you. The opportunities for your financial security are everywhere.

Learn to look for them, recognize them, and act on them, and you will be able to enjoy the financial security and the financial freedom that you deserve. Best wishes for your financial success!

P.S. It's the 2nd day of the month, and Joanne just came in from the mailbox with a handful of checks. Some of you know what our goal has been for years, but for some that don't, let me tell you what it is:

Our goal is to never let the mail carrier pass our house without leaving a check. Why not make it your goal?

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