Lonnie Deals in action
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.