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How to Build Long-Term Security

by Lonnie Scruggs   

Finding and keeping a good long-term customer does more for your financial wealth than a "one shot/one profit" deal. If you do one cash deal, you get one check. But a long-term, good-paying customer will make you payments for many years. So regardless what business you're in, if you want to be successful, you should focus on repeat business from your best customers.

I don't know about you, but I'm finding it harder and harder to find people with a decent credit history. I would guess that I wade through at least 12 to 15 calls before I get one that I'll even take the time to show a home to. I don't know if there are more irresponsible dead-beats in the world now, or if I'm just meeting more of them.

The bankruptcy laws are structured so that the debtor has all the rights, and the creditors have none. I can remember when it was very embarrassing, and humiliating if someone had to file bankruptcy. And they would try to keep it quiet and hope their family and friends wouldn't find out. But these days, people seem to think it's a status symbol and brag about it.

I had a call recently from a young woman who didn't sound like she was more than 20 years old. When I asked about her credit history, she said "I just filed bankruptcy, and my lawyer said it would take about 90 days. Then I won't owe anybody, anything!"

She was so happy and excited, you would have thought she had just won the lottery. I couldn't help but tell her that she was all mixed-up in her thinking, that she still owed the money.

The only thing that changed was that she was able to use the judicial system to screw people out of what she owed them. Then I asked her why should I expect her to pay me, if she wouldn't pay anybody else. That wasn't exactly what she wanted to hear.

The value of a good customer

Here are a couple of case histories to illustrate the value of a good customer. I sold a mobile home to a couple about nine years ago. The home was, and still is, on my lot. I financed the home for my buyers for three years.

When the note was paid off, they wanted to borrow some money. They said they could get the money from their bank, but would rather do business with me. (Wouldn't it be a terrible blow to your self-esteem if your customer said they would rather do business with a bank than with you?)

After learning what the bank terms would be, I let them name the amount they wanted to borrow, the interest rate, and the monthly payments. They dictated their own terms, (after a few questions from me) based on what they had been told by the bank.

They gave me the title back, I gave them a check, and it was a "done deal." I didn't even have to leave my house to do it, and I now had a new loan with a 23% yield. (Maybe I should write another book titled The Lazy Man's Way to Wealth.)

They've now paid that loan off, plus a lot rent payment every month. Now they want me to find them a newer home. I just checked my files on this one good customer. Over the past nine years, they've paid me over $38,000 in mobile home payments and lot rents.

What if I had simply done a one-shot deal with this couple, made one profit, and only got one check. How much would I have lost?

Stay in touch with your best customers

Each year, around the first of December, I mail some of my best customers a notice offering to make them a loan if they need money. I only made one loan out of my last mailing, but it's another monthly check. And it only cost me a sheet of paper and a postage stamp to do it.

But who knows what that mail-out might generate in future business. Those folks now know they can get money from me, instead of a bank.

Two months ago, one of my customers needed to borrow $2,000. I made her the loan, added it to her mobile home note, restructured her payments so they were affordable, and I have another happy customer. And my mail carrier has another check to deliver.

Three years ago, I sold a mobile home to a couple. In addition to the mobile home payment, they've also paid me lot rent each month. So far, in just three years, they've paid approximately $18,000 in rent and mobile home payments.

Yesterday, they called saying they had the chance to buy a double wide on a 1/2 acre of land. They want me to buy their home back and loan them the difference so they can buy the double wide.

They said they could probably get the money from a bank but, like the other couple, they preferred doing business with me. If I help them get what they want, I'll probably be able to create another 6 to 8 years of payments from this couple. Plus, I'll be able to make a profit from their home.

The value of monthly payments

This week, I sold two mobile homes. One is a nice 14 x 70, 2/2, which sold for $11,900. My buyers paid $1,200 down and signed a note for $10,700, payable 12.75%, $261.42 for 54 months. If the note runs the entire term, I'll collect $14,116 in payments. I'll also collect at least another $14,000 in lot rent. I had approximately $5,000 in this home.

The other is a 14 x 70, 2/2 in not-so-nice condition. One bathroom needs a complete rehab, and the other bath has a cracked tub. I paid $2,260 for the home, and sold "as is" for $7,500. Got $500 down and a $7,000 note payable 12.75%, $331.97 for 24 months. I'll also collect at least $260 lot rent each month.

Suppose I had been able to make a cash sale on both these homes, how much would I have lost in profits? I could probably have found a buyer for the first home who could have qualified for a bank loan. And if that were the case, I would have made a one-time cash profit of about $7,000.

But then I would need to find somewhere to put that $7,000 to work. By selling on terms, I'll realize over $10,000 profit.

Considering the condition of the other home, no bank would have made a loan. But I was able to sell that home in less than a week, by offering financing and affordable terms.

If that note runs the entire term, I'll collect $7,967 in payments, plus the $500 down, for a profit of $6,207. I'll also collect at least $260 lot rent each month. That's another $6,240, for a total of $14,207. And all I have to do is cash the checks.

Here's another important point I'd like to make. On the first deal, I've got approximately $4,000 earning me 75%. On the other one, I have $1,760 earning me over 200%.

If I had sold both these home for cash, where could I have invested my profits to make these kind of returns? And also, I now have two satisfied customers who might be a source for future profits.

Long-term security

I see so many people who would rather settle for instant gratification, rather than long term security. You can spend your time, money, and energy doing one deal, and get one check. Or, you can spend the same amount of time, money and energy doing one deal, and get checks for years.

So rather than settle for instant gratification and one check, think long term, and get many checks. And once you have a good customer, with a good proven track record, hold on to them as long as possible.

About the Author:

lonnie scruggsLonnie Scruggs owned, rented, and managed his own rental properties for 24 years. He became a burned-out landlord, sold all his rental properties and started investing in discounted notes. He soon developed his own specialty in used mobile home notes, with little competition and earning high yields.

Lonnie tells all and shares his inside secrets in his book: Taking the Mystery out of Money

 
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