Lon­nie Deals in ac­tion

Calhoun Times - - OBITUARIES - Real Es­tate 101

him is that as soon as he gets home from a class, he tries to fig­ure out how to put what he learned into ac­tion. Now that Teah is part of the team, they are go­ing to be dou­bly ef­fec­tive. Ask me how I know.

The day after the Chat­tanooga BIG meet­ing, Mike and Teah were out look­ing for Lon­nie Deals, which is where you buy a mo­bile home on a rented lot for cash. The in­vestor then sells that home and of­fers owner fi­nanc­ing. A typ­i­cal Lon­nie Deal for us oc­curs when we buy a home for $ 2,000 cash and then sell it for $ 500 down and 42 pay­ments of $ 300 a month.

Mike and Teah aren’t your “typ­i­cal” in­vestors. They are way bet­ter than that. The text I got from Mike said they had pur­chased a mo­bile home for only $ 1,000. They im­me­di­ately put the home on mar­ket to sale and within a week got a buyer will­ing to put $500 down and make pay­ments of $250 a month for 36 months.

Let’s put their num­bers into the fi­nan­cial cal­cu­la­tor to see just how good Mike and Teah did.

Re­mem­ber that there are five in­puts on the top of a fi­nan­cial cal­cu­la­tor. They are as fol­lows: N= num­ber of pay­ments in months, I/ YR= in­ter­est or yearly re­turn, PV= present value of the loan or in­vest­ment, PMT= pay­ments and FV= fu­ture value. And in or­der to do a cal­cu­la­tion, you need four of these five pieces of in­for­ma­tion.

We want to mea­sure how well Mike and Teah did on this deal, which means we want to know what their yearly re­turn ( YR) will be. YR tells you how much of your ini­tial in­vest­ment you will re­ceive back each year. The greater YR is, the bet­ter the deal.

In or­der to de­ter­mine PV on this one, we need to take the amount Mike and Teah paid for the home and sub­tract what they got for a down pay­ment. So they paid $ 1,000 for the home and got $500 as a down pay­ment. That’s a net neg­a­tive $ 500 for PV. That gives us one piece of in­for­ma­tion; the other three we can plug and chug from the deal. So:

N= 36 monthly pay­ments. I/ YR=? be­cause that’s what we’re solv­ing for. PV= -$ 500 PMT= $ 250 a month and FV= 0 be­cause the loan will pay off at the end of 36 months.

That means Mike and Teah’s first Lon­nie Deal has a yearly re­turn of 600 per­cent! That’s a su­per high re­turn. How is that even pos­si­ble you may ask? Well, after the first two pay­ments of $ 250, they have all of their money out of the deal. The rest is pure profit. I told you these guys were smart. And that’s how you put a Lon­nie Deal into ac­tion.

Joe and Ashley English buy houses and mo­bile homes in North­west Ge­or­gia. For more in­for­ma­tion or to ask a ques­tion, go to www. cashflowwith­joe. com or call Joe at 678986- 6813.

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