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Big Mistake Lead Us to a Business We Love

by Mark A. Jackson and Mark L. Johnston, Adrian, Michigan   

My partner and I formed D & B Assets, LLC to combine our thirty-six years of knowledge of landlording in order to buy distressed houses, fix them, and carry a more hassle-free income stream. Craving more knowledge, we discovered Creative Real Estate Online and decided to invest in further education by attending the annual convention.

As the computer literate partner on our team, I registered and paid the tuition to CRE Online, booked non-refundable flights, booked the rental car and hotel room (late, so we had to stay elsewhere) Then I discovered a slight scheduling error: Instead of the 2003 CRE Online Convention, we were going a month earlier to the 2003 CRE Online Mobile Home Workshop!

We made the best of the situation

Not wanting to "waste" my portion of our non-refundable money and knowing that my partner, (a licensed contractor specializing in disaster, fire, and flood restoration) hated mobile homes and refused to work on them, I waited until the plane was off the Detroit runway to tell him we were going to learn about mobile homes, mobile home parks, and mobile home paper!

Since my partner couldn't turn the plane around, and security had removed any weapons he normally carries, the next morning found both of us alive and well listening to a man named Lonnie Scruggs open our eyes to what quickly has turned into a cash flow money machine.

The first seminar night we took advantage of the expert round table. We had just purchased a land/home foreclosure for $28,000. This beautiful one-acre, nicely wooded lot in the country was home to a decrepit, old Liberty two-bed, one-bath mobile home. The roof leaked, the plumbing was frozen, and it stunk! The lot alone was worth $35,000.

Lonnie Scruggs opened our eyes to opportunity

Our question to the experts: Do we junk the trailer and sell the lot for a building site or do we junk the trailer and put a quality manufactured home on the lot?.

Lonnie came alive: "Boys, you don't understand what you have here? You see a lot, but you have a home to sell already in place. Sell it 'as is' and take back the paper." And we did May 22, 2003 for $59,900 with $3,000 down and the balance at 11%. That evening alone we made at least $24,000, plus we saved the cost of demolition.

In June 2003, we found (or got up enough nerve to leave our comfort zone) our first mobile home "deal," a 1987 Liberty 14 X 70 purchased for $8,000. On August 18, 2003 (with another $933 clean-up and carrying costs later it sold for $17,900 with $1,000 down and the balance at 11% payable $195 per month for 180 months.

We thought we had the world by the tail and ordered both of Lonnie's books [Deals on Wheels and Making Money with Mobile Homes] and the Deals on Wheels Home Study Course. Upon reading the books and listening to the tapes we again heard, "Boys, you just don't understand," from Lonnie. In retrospect we paid too much, charged too little interest, and stretched the payments too long.

How do we know that? Because we now have bought twenty-nine more with twenty-seven sold on terms at our "market rate" of 13%, with amortized payoffs within three to seven years. Most recently we purchased a 1971 Buddy for $2,500. One week later we had $1,000 down payment and a buyer's promise to pay us another $255 per month for thirty-six more months.

My "mistake" took us into a business that fourteen months and twenty-nine deals later has $234,325 invested at an average rate of 12.8% annually. (Remember, we were too cheap on the rate in the first few deals.) We have had one given back (after the first three payments covered the purchase price; it was really BAD!) And have one delinquency.

An added benefit: The next generation

We found that the excitement of a deal turned the next generation on to investing. Two of our four children have done most of the mobile deals from purchase to resale to the extent that they buy (and they buy a lot cheaper than we can) and set the new price and terms. We pay the kids a commission on the purchase and on the sale. After our costs are recovered, we will split the remaining cash flow in any deal they bring to us.

After searching for years for a way to pass on our investment philosophy to the next generation, Lonnie's books, tapes, and the deals he taught us turned them on to the business. Three of the four kids will be in Atlanta for the 2004 Three-Day Money-Making Workshop to see "Lonnie Live." How can we say THANK YOU enough to Lonnie and Creative Real Estate Online?

Our background

D & B Assets, LLC in Adrian, Michigan is owned by Mark L. Johnston and Mark A. Jackson. Johnston has been a landlord since investing his Kroger store-closing severance in his first rental in 1984 and has been a licensed contractor specializing in fire, flood, and storm restoration since 1985.

He has gone from owning over sixty rentals to thirty rentals with twenty-five land contracts (Michigan's Installment Land Sales Agreement), not including the twenty-two real estate and twenty-nine mobile home deals D & B has done.

Jackson has been an estate and business planning attorney since 1982. He bought his first eight rentals in 1986 as he acquired his real estate brokers license and is currently down to three units.

Not a member of the Board of Realtors, he has never listed a house for sale, but occassionally uses the license to "earn" a buyer's broker commission. Mark does the paperwork and collections for the company. Just don't let him book your trip!

 
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