Mowing my own grass this morning (for a change) I thought a little about the unusual business model post below and i would like to share some thoughts about it. In 6 years i have completed over 85 L/H pacs and we were able to place 35 properties free and clear into our individual portfolios. My half were done as Notes with 10K down and 8-10% interest 10-15 year term. my partner sold some and rented some. My 17 Notes have become 10 and in January I will have 9 performing Notes. 2 were cashed out (Thanks Wachovia) 5 were foreclosed. This is with 10K down…average age at foreclosure 25 months. I am not even trying to resell, these foreclosures are now rentals. So I basically got 30% of my homes back within 2 years time. In my L/D’s this number was almost 50% in one year’s time. Talking to others in the infill process this number is fairly constant (some very much higher) in Parks. I understand that these can be resold etc but it takes time and money to get them show ready again.
I question if this idea of “gifting” homes is a very viable one. In my limited experience, folks are much more likely to walk away from something they have zero dollars of their own invested in than something they scrimped and saved to come up with down money. Anyone else have ideas on this?
The other big problem I have with this is control. I want to be the one to pick tenants for my Park. The minute an Owner gifts this home to a charitable provider, they give up some control of the screening process. I know there has to be established criteria for the Agency’s placement of folks but my problem is probably subjective.
I’m not an ogre but there are professional tenants that know the system and every crack in it. We had some new tenants move in the first of last month and the 25th they had us fill out a 3 day notice for them to give to Brother’s Keeper for rental assistance. The young girl knows exactl how much they can gross each month to qualify and her boss adjusts her hours to keep them within the paramaeters. They also get food stamps, and make weekly jaunts to the 9 local food banks for their groceries. I have some real problems with this lady and I don’t believe these programs are designed for a maintenance approach rather a one -time emergency approach. My buddy kyle kills a beef every year and I always get roped into helping him kill, skin, hang the thing and transpo to Interfaith Agency for disbursement to needy families. A very good man and he tells me it is the same families year after year lining up for free beef. I believe in sharing the wealth, but the thought of having an Agency (any Agency) controlling who would get a free home from my checkbook is more than I can stand…it won’t EVER happen.
I know this is not a perfect analogy, but I can guarantee I can give my 2008 Tundra away for free in one hour today. What would impress me more is to get someone to sell this truck for all cash for the 29K I bought it for in June…or even 20K. See where i am going with this? I don’t care how strict the requirements are for this program, the homes will be coming back in record numbers with zero down money. Every bit of experience tells me this. Am I wrong? Folks are not shy about telling me when I mess up. Giving anything away for free just does not set well with me…ever.
A much more appropriate dynamic is to infill using private money, creating good, strong Note, seasoning the Notes and selling the Notes, rinse, repeat. This has been done (and is being done as i type) to great effect all over this country.
I didn’t want to write abook on the subject, but this approach just does not set well with me for several reasons. i like each deal I do to stand on it’s own…we have several dozen infill specialists on this forum.
What do y’all think?