Stay Focused On Your Area

Some real estate investors invest in a concentrated area.  Others work huge, multi-county areas.  In our case, we work a five-mile circle around the Cartersville, Georgia Wal-Mart.  This allows us to better manage our rental properties, plus, when a seller calls, we can quickly get to their house.

Staying in our five-mile circle takes a lot of discipline.  We often get calls from motivated sellers a county or two away.  Having a great deal placed on your plate, then having to pass it on to another investor, flat out hurts.

For example, last week a seller called, desperate to sell quickly.  She owned a three-bedroom, two-bath mobile home in a trailer park.  The home was in great condition and needed little work.  We agreed to a purchase price of $4,500.

These kinds of deals are called Lonnie Deals.  A Lonnie Deal is when you buy a mobile home in a park for cash (you own the trailer, not the dirt), then sell it on time to an owner/occupant.  You may think this is a silly deal, but believe me, Lonnie Deals are the highest yielding deals we do.

Let’s look at the numbers: We’d sell this nice mobile home for $9,000.  The buyer would give us $500 down.  Here are the terms of the note: $250 per month, for 48 months, at 18.07% interest.  So what’s the yearly yield on a simple deal like this?  Would you believe 70.08%?  Try finding a bank that will pay you 70% interest on your savings account!

So this wonderfully profitable deal fell squarely into my lap.  Only one problem – the home wasn’t in my area, it was in Cobb County.  If this happened to you, what would you do?

At first I said, “The heck with it, I’ll do the deal anyway.”  But the more I thought about it, the more I knew I was making a long-term mistake.  Every time I had to make a 45-minute drive down to that home, because it’s so far away, I’d regret buying it.  With short-term glasses, it was a great deal.   But with long-term glasses, it would be a mistake to do this deal.

So, I gave this deal to two investor friends, Mike Tarpey and Joe English.  They have a lot of experience with Lonnie Deals and they work that area regularly.  What did I get out of it?  Breakfast at Waffle House with two good friends.

You may wonder how I learned that it’s better to work a smaller area rather than a larger one.  The answer: Experience.  At one point, Kim and I owned investment properties in five counties.  But what we learned is that you don’t find deals driving.  You find deals sitting at the seller’s kitchen table.  Remember: The more time you spend at sellers’ kitchen tables, the quicker you’ll achieve financial freedom!