Doug,
Could you expand upon your quote, “Sam Walton model of wealth generation = high volume low margin.”
I am not certain I see where such a analogy would apply to this business of mobile home parks, lonnie deals, land/home properties.
If we were taking the wal-mart approach, would we not be doing a very high volume of deals with very little profit per deal? Money only being made, as you wrote, through the high volume, low margin?
This sounds like exactly the opposite of what Lonnie teaches. He makes a large profit on fewer deals, better protecting his investment capital, expenses as well as risk.
Risk needs room for compensation and high volume, low margin seems quite contrary to safe investing.
Most every time we see advice suggesting break even or low profit there is a fall out that ends up in court either through a bk or through adverse court action.
If I’m not mistaken, this is the exact mentality that got some investors in trouble here in NC that ended up with them feeling the weight of the attorney generals office. Little room for error left them and folks like them unable to protect their deals which lead to them not performing. The next thing they know they are in legal trouble that has resulted in the pendulum swinging so far that this state and other states were looking to all but ban creative real estate investing. Ask John Hyre about this scenario as he was one of the attorneys hired to try and mediate the fallout from this type of high volume, low profit investing.
I contend that we don’t need to do high volume at all if we do low volume correctly. Less is more when you have the phones ringing with nothing but problems and little spread in the deal. This not only burns out a new or seasoned investor but also burns the wallet.
I don’t know many investors, even the high volume lonnie dealers such as Karl (OH) who would want to do high volume with low profits.
As a park owner, I can sort of understand that there is an argument that your profit is not made in the lonnie deal IF you are infilling lots to get lot rent rolling in but even that is a double edged sword. Unless you are cashing out each deal quickly in the high volume, low profit margin approach, we as park owners will run out of capital quickly. If we are flipping for high volume, low margin there is also the tax burden to consider. Capital gains and the dealer status issue would be hardships.
I may well have misread or mistaken your post so please correct me if I am wrong about your advice.
Tony Colella
Start with Lonnie’s book deals on wheels and taking the mystery outa money! The both of them MIGHT cost ya $60 and you can order deals on wheels as an ebook cheaper if you google it.