Frank & Dave's Famous Zero Down Deals

Frank & Dave have successfully completed nearly a dozen deals for zero or nearly zero in down payment. In this lecture, they will discuss these deals and how they were constructed. They will also review in detail what the key drivers are to creating these opportunities, and some of the hidden ramifications that you need to consider in this type of transaction. If you’ve ever wondered how you can buy a property with nearly nothing out of pocket, then this event is designed specifically to answer those questions.

If you want to learn skills to succeed with mobile home parks and make your own zero down deals, consider attending our Mobile Home Park Investor's Boot Camp. You'll learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks. The course is taught by Frank Rolfe who, with his partner Dave Reynolds, is one of the largest owners of mobile home parks in the U.S. To learn more, Click Here or call us at (855) 879-2738.

Frank & Dave's Famous Zero Down Deals - Transcript

Welcome to another event, and today we're going to be going over something we've never actually talked about much, but I know it's of a lot of interest to people, and it's titled Frank & Dave's Famous Zero Down Deals. Now, let me say from the onset, I absolutely hate that title, because many people, when they hear about zero down deals, what they think of is some kind of get rich quick scheme, or something whereby you're sliding something through on an unsuspecting seller, and I hate that because that's now at all, to me, what a zero down deal is all about. A zero down deal to me is a very normal construction in certain cases, it's a win-win for the buyer and the seller.

So, tonight we're going to go over how that construction works, the raw material you need to do it, and then I'm also going to give you some case studies of deals we've done, and how that zero down element is what made the deal possible. But again, this is not what you're expecting if you're expecting to hear all about how to buy a mobile home park with nothing out of pocket, with no risk, and easy shmeasy and everyone can do it, kind of the same pitch that people use on I think these days on flipping houses and home wholesaling. That's not what's the case here. What we're going to be talking about is the very real business of doing deals with very small amounts down, based on just being smart, watching for the right opportunity, and understanding how that can be a win-win for both buyer and seller.

So, let's first start off with the definition of what is a zero down deal. And when I say zero down deal, I want to also say I'm talking about deals that may not be zero down, it might be 5% down, it might be 10% down, but it is a deal where you do not have a lot of capital in it. You know, a standard bank construction is 70-80% LTV, that's a 20-30% down payment. So, when you're talking much under that, when you're talking about buying something at a 5% or a 2% or an 8% down payment, to me, that falls not quite in the category but very close to the whole idea of being zero down.

I also want to point out on the front end, that everything I'm telling you would be of no value if we all try and cheat and lie to ourselves and say, "Oh, yeah, I'm buying this deal for zero down. But then I have to pour a couple hundred thousand dollars into it to make if function." That's not a zero down, that's a pretend zero down. That's a deal where you're still going to have ... Let's say you bought that property for $1,000,000, zero down, but you had to put 250,000 in it, or the health department's going to shut it down. Well, so what have you really done? It's not a zero down deal, right? That's a $250,000 down deal. That's not 100% LTV, that's a 75% LTV, so I just wanted to get that also clear on the onset. So, a lot of what I'll be talking about tonight doesn't have to include no money out of pocket, just very little money out of pocket.

So, let's now start off with what is the raw material needed to build a zero down deal? And I've got six items here that you have to have. It's like you want to bake a cake, you have to have these items or it simply does not work. So, the first one is a willing seller. That's probably the most important one. You've got to have somebody who really wants to get realistic and sell. I use this example way too frequently, yet not frequently enough, because not everyone I think is still grasps it. But I have to give you a parallel for my favorite show that I love typing the newsletters in front of, and that is the show known as Pawn Stars. I like to watch Pawn Stars and American Pickers. For some reason, while I'm typing, there's a certain rhythm to it that I find very easy to watch, and it entertains me, because it's very similar to buying mobile home parks, you know, trying to buy an old beat up mobile home park from a mom & pop, you're out there trying to buy an old beat up antiques from moms & pops, so for some reason, I kind of feel like I'm in the program all day.

And there was an example on a Pawn Stars episode a while back, in which a guy brought in a Rolls Royce that had belonged to Johnny Cash. And it had, he had a title, and it showed that Johnny Cash owned it. So, he brings it into the Pawn Stars pawnshop and he says, "I want to sell it?" And they said, "How much do you want?" And he said, "I want $300,000." And they said, "Okay, well, we have no idea what a Rolls Royce owned by Johnny Cash is worth, so we're going to call in our car expert." And if you watch the show, they very frequently call in experts on everything from rare books to autographs, to cars, to everything known to man.

So, the car expert guy comes in and he says, "Oh, a Johnny Cash Rolls Royce." And they said, "yeah, well how did you know that? because you just looked at that outside and how did you know that?" "Oh, well, because this is not the only one. There are in fact many of these. There's like eight or ten of these in circulation. They're all identical. They're all black exterior, black interior, they have a little brass plate on them, and A & M records gave on to Johnny Cash every time he had a million selling record." So, the guy says, you know, "I know about them." And they say, "Well, what do you think this thing is worth?" And he said, "Well, let me think. I think it's worth about $52,000." And they said, "Well, how do you figure that so accurately?" "Oh, well, because one just sold at auction a couple months ago." "Really?" "Yeah, and then another one sold at auction, you know, less than a year before that, and it sold for like about $49,000." And so, Pawn Star guy said, "Okay. Fantastic."

So, the guy leaves, they turn to the seller, and they said, "Okay, you heard what the guy said, and you know that we have to make a profit, and we like to buy things at basically half off retail. So, we'll pay you right now in cash, 25 grand for the car," to which the seller said, "I won't take a penny under 300." And they said, "Wait a minute here. We had a guy come all the way down here from across Las Vegas, you heard that these sell frequently. This is not the only one, and it's not that desirable, and they sell for 50 grand." And the seller said, "I don't care. I want $300,000." Why did I even tell you this story? Because that's a perfect example of a seller that you can't work with. That's not somebody who's willing. They're not really willing to sell.

A smart seller, when faced with the facts, if they really wanted to sell, say, "Okay, you know what? I was wrong. I thought this was way more valuable than it is, but you're right. I guess it sells for 50, you're offering me 25. How about 35?" And they could probably split the difference and they probably would have gotten 30 grand or something. But that was about a tenth of what he was looking for, so he refused to accept that. But to do a zero down deal, you have to have a very, very willing seller, because what you're proposing is a very unique construction. And if the seller doesn't really care about selling anyway, it's unlikely he's going to go with anything that's out of the ordinary, because

The next time, you're going to have to have to do most zero down deals is very strong bonding with the seller, all right? And we're going to over that here in a little bit. But bonding is basically the magical result of spending time with the seller, such that the seller likes and trusts you. Because again, if you think about it on a zero down deal, they're taking a huge leap of faith that you're going to be committed, since you have almost nothing into the deal, to follow the project through. So, bonding, very important. I don't think it's possible to do a zero down deal with a seller that you do not share some degree of friendship. I just, I can't see it because I don't think that they would trust you.

Third item is you've got to get seller financing. There are many banks out there who love the mobile home park industry, you know, conduit lenders, regular banks, small town banks and now even the federal government thought Fannie Mae and Freddie Mac, the new very popular agency debt programs that we've been doing a lot of, and people are raving about. But they don't do zero down. They typically want to do 70%, 80% LTV, but they don't do 98% LTV. So, who does the only person out there who does is seller financing. If the person you're buying the park from does not have the property free and clear, it's very hard to construct zero down, and that does not mean you can't do it.

I will tell you right now, and this is a corollary, and it doesn't really tie into what I'm going to go over today, because it's a very, very unique deal, but I bought a property in San Angelo, Texas, at one time. And it was offered to me on the front end as a zero down deal. And there was a first, and a second mortgage on it. And I think there might have even been a third mortgage, now that I think about it. But it was a very odd deal, and let me tell you why it was offered as zero down. There was really no other way to get anyone interested in it. It was a very, very large property, but it only had one tenant. So, you know, most people out there don't want to buy a 200 plus space property with just one tenant, because it would be so capital and effort intensive to fix it, it would be near to impossible. But again, that started with seller financing, right? The first lien, seller financed. The second

So, when I'm saying seller financing, I'm saying to you it has to be in the absences of bank debt, basically, because bankers just don't want to play ball with zero down. Occasionally they will. We've had cases of loan assumptions, where they allow you step into the shoes of the other buyer with zero down, but that's a very rare case. So, traditionally, for tonight, what we're going to be talking about are cases where to make it happen, the seller has to own it free and clear, and have the ability of making their own debt.

Now, the next item you have to have for raw material, is you have to have a mobile home park with a huge problem that scares off most everybody, something that's just nasty---not you're typical little issues, not one dead tree, two potholes, a couple park owned homes. I'm talking stuff that's just awful, so that the average buyer would pull into the property, say, "Oh my gosh, no," throw it in reverse and peel out. So, you got to have something that's just really, really bad. The next item you have to have is a situation where those problems that are so horrible are actually not that expensive to fix. So, you have to have on the one hand, something that scares nearly everyone, but then you also have to have something that although it scares nearly everyone, it's only because they're ignorant. They don't realize it's really not that big a deal.

The sixth and final item is, you have to have a desire to create a win-win end result. Now you're going to say, "Now wait a minute now. I thought this was a deal on zero down how can zero down have a happy ending?" Well, we're going to go over that in a minute. But traditionally, when we've done zero down deals, it has been through a very painstaking strategic method with the seller in the loop, of how to piece the deal together for everyone to win. And what it shows in the end, when you take everything that needs to be done, that it needs to be a zero down deal for the benefit for both the buyer and the seller, which we'll go over in a minute. So, you have to be really a problem solver. Zero down deals are typically revolving around horrible problems that really aren't that expensive to fix, but they sure scare people to death. And then having the seller kind of in with you, almost in a joint venture relationship, thereby carrying the paper on it, carrying the paper because they believe in you and they bond with you, and they're very, very willing to get this thing sold and get this thing fixed.

So, now how do you build, given that rare raw material, how do I take those items and build that into a zero down deal? Well, the first item is finding those mobile home parks that scare people. Let me give you some examples. We bought a property in Illinois once, where they had not mowed the grass in two years, not even brought out the mower and gassed it up, not turned it on, not anything. There was a health issue with the seller, mom didn't know what to do, and so since he couldn't mow it, she didn't know what to do, and I guess they didn't want to spend the money to pay someone to do it, they let the grass go wild. So the grass, as you can imagine, with two years of growth, would have been chest-high throughout the entire park, both vacant lots and common areas. So, it didn't even look like a mobile home park. It looked somewhat like a nature preserve, or maybe some kind of Aztec ruin that's been overtaken with vines and brought back into nature. So, trees out of control, where they hang down the trailers, or they're dead and limbs are laying on the trailers, coupled with grass that's out of control, that's always a very good situation when you're buying, because visually it's stunning and it scares people.

Next item are tenants who have no pride of ownership, and just happen to fill their yards with junk: washers, dryers, refrigerators, car tires, it doesn't matter. And hey, let's make it even better and let's put a pit bull are two on a string or a rope out in front of the home. Those kinds of situations where people pull in, it scares them to death and they think I could never own this because I don't think I could collect from these people. They scare me. I don't want to be here.

Another mobile home park you should look for are those which have permitting or legal issues that are not expensive to fix, but very strategic to fix. For example, the city says, "You can't run this park anymore because we don't believe in grandfathering." And the premise is it scares everybody away but you, and you alone are going to come up with the solution to solve it.

Next item are parks where the costs are completely out of control. We've bought properties where the manager was making $100,000 plus per year. We bought a property once that had a $60,000 a year water leak that had been going on for years. Things that you can cut, so costs that are just crazy, crazy, crazy but they're not set in stone, and you're going to go in and you're going to chop those costs off. The last kind are parks that have a huge amounts of vacant park-owned homes, that look really, really terrible and scare away so many people. So, lets say the park is a 50-space park and it's got 30 park-owned homes in which 20 are abandoned. That's the kind of blemish that scares most everyone to death. So, in all five cases there, trees and grass overgrown, tenants with no pride of ownership throwing everything in the yard, permitting/legal issues, out of control costs, and vacant park-owned homes, those are typical items that scare everyone but are not that capital intensive to fix.

Now you might say, "What about a failing packaging plan?" Okay, that doesn't work, because the failing packaging plan is going to result in an expenditure of who knows what, a half a million dollars or more? Hardly the raw material you can build a zero down deal from. What about that park in San Angelo with one vacant lot ... I mean, one occupied lot out of 200? How about that, would that work? No, because it's going to take a huge amount of capital to fill those vacant lots, so again, you're kidding yourself if you do that zero down, it's not really zero down. It's zero down maybe at closing, but then later on you end up being 20, 30, 40% down in terms of capital required.

The next item is you've got to bond with the seller. Now, what the heck am I talking about? You may be thinking that means you get out your packet of super glue, and read the directions. No. Bonding with the seller is, and we're all guilty of this. Have you ever done anything in your life that made no sense economically? Just made no sense? I was once at the airport. I saw a little kid crying inconsolably. It was a situation where the parents were divorced and they were putting the kid on the airplane with no parental support, or no one riding with them, and so I walked over to the kid and I said, "Hey, kid, here's 20 bucks. Why don't you think about what you're going to buy when you land at the other end?" The kid immediately snapped out of it, was like, "Hmm, 20 bucks. Wow. I can buy a Barbie, I can do this, I can do that," right?

Now that made no economic sense for me at all. I mean, why would I do that? Why would I just go throw $20 at some random person? Well, there's this thing floating around in the atmosphere, in the universe, that's called wanting to help people, right? And a lot of your sellers are of an age where that's sometimes more important to them then money. So, they are happier taking a lesser amount and a lesser down payment, if they like you, than to get a higher amount of money in their pocket from someone they don't like. So, bonding with sellers is absolutely critical.

Now, to bond with the seller, it's really all about spending time. Now, of course there's more to it than just that, because if you are a die hard liberal, and the seller's a die hard conservative, if you spend time with him it's probably not going to work, because unless you can find some other common ground, they're not going to like you. But given that you have something in common with the seller, if you spend time with him, either by phone or in person, the end result typically is very, very advantageous, because once a seller likes you, they're much more willing to bend over backwards and make something happen. And that means additionally, you're going to be able to get some really good terms, as far as down payment, financing and everything else.

Now, how do you bond? My favorite opening line to bonding is, "So tell me the story of how you came to own this mobile home park?" That's like the greatest question ever, because the answer to that question starts sometimes when you're born. It could even start back with your parents. You know, the guy can start off saying, "Well, my parents were really into the idea of owning real estate, they didn't have much money, but they bought a rent house and I thought, wow, owning real estate's a really good way to build wealth, and duh duh duh duh," and then it goes right into their early childhood, and throwing newspapers, and going to college, and working their way through college selling clothes at Foley's and then dropping out of college, and getting the idea to build a mobile home park, et cetera.

So, what's important there is I'm going to get the seller on a very lengthy narrative, I'm going to let them talk a lot. I'm going to listen a lot, and hopefully, we're going to bond together. So, that the seller actually thinks I know what I'm doing, or the seller may ask you questions to try and figure out what you're all about and what you think. But bonding, super important to do in zero down deal, you got to have the raw material, you got to have the bonding.

Next, you've got to come up with the plan. Now, what's the plan? Often what's going on here is that mom & pop have a problem and they just don't know how to fix it. They just can't figure out what the heck they should be doing, and your role almost consultatively is to come up with that plan, and so it's a very weighty endeavor, because you're going to go in there and you are hopefully going to come up with the solution to their problem. And by giving the big reveal on what the plan is---as you'll see in a moment---the end of the plan is that they're going to have to carry all the paper. Some of them are so pleased that you're willing to fix it, to give it the shot, to put in the effort that they're very, very willing to work with you because hey, you've got a plan and they don't.

Next, you've got to get the seller to carry the paper, and in this case, they're going to have to carry the paper with virtually zero down. So, it can't be a situation where they're going to carry the paper conventionally, with 20% or 30% down payment. That's not going to work, and we're going to go over in a minute why they would agree to that. But they're going to have to carry the paper, otherwise, you can not do a zero down deal because banks won't do zero down. Now here's the key item. You're going to explain, as part of your plan to fix the property, why you've got to use that down payment to make repairs.

So, as part of your plan, you're going to say, "Hey, I can fix this park. I can make this happen, but here's the deal. Here's the plan. Here's what we're going to do. We're going to go in there and remodel these four homes, mow down the grass, fix a couple potholes, re-market it, all these many things, but those all cost money. So, I'm going to have to use my down payment to make those repairs," and you tell him that as part of this process, you're actually making the property more valuable, right? So, really you're putting more down than if you just put down cash. If you put down cash, then basically if he gets it back, he has a property that's still got a problem, nothing's been fixed. So he got some cash, that's great, but that's not really going to do it for him or her.

So, if you fix the property, however, and he gets it back, well now he's got a property that's fixed. It no longer has to scare him. It's no longer operationally scary. And so what's going to now happen is, if he should get it back, which of course he's not going to get it back. You'd have absolutely no reason ever to give it back once you've fixed it, right? But if it should happen, for whatever reason, he's miles ahead because now he has something that's easy to sell. It's liquid. He can go ahead and find a buyer for it. So, again, that's one of the key elements to it is you've got to convince them that the down payment is still going to happen, but it's going to happen as opposed to money down on the deal, it's going to be money that's used to actually fix the property. Or, additionally, this money you have to have around, just as a security cushion, because the deal is so darned ornery.

Now, the next thing you have to do to properly construct this is, you have to make sure in due diligence that a) you can fix the problem, then b) you can do it on a very small amount of capital. Let's go back to the case of the park that's completely overgrown. Grass is chest-high, trees are laying down on tops of homes. To do that deal properly, you're going to have to convince the seller that the property needs significant work, which is true, but you're going to have to have may bids and know that you can get that done for not a huge outlay.

So, you've got to find situations where a) whatever the problem is, you can fix it, and b) that you can get it done for not a lot of money. If it's going to be a lot of money, it's no longer a zero down deal, right? So, if the problem is the old packaging plan is bad, then you don't really have a zero down deal. What you have is a time delayed regular down deal, because you're going to have to put the cash that should have been on the down payment, now to work on the property. Even worse, you now may have more money in the property than it's worth. If you valued at $1,000,000, and now you've put an extra 250, you actually paid 1,250,000, and your cap rate just declined by 25%. So, you've got to have cases where the actual fix is not that expensive.

And then the final step is you have to actually close on the deal, and get it all fixed for very little capital, and make sure that all of your estimates on how to do it were correct, and manage it properly. If you buy it and then you let your foot off the throttle or the brake and do a horrible job of turning the property around, it didn't really help you very much. You could have gotten it fixed for $10,000 but you ended up spending 100 because you didn't pay attention to it, or made horrible mistakes with it, so that really didn't do you any good.

So, those are the basic steps that you need to transform that raw material into a zero down deal. Again, let's rehash them. One, you have to find a mobile home park that scares most people, either real high grass and trees laying down everywhere, or tenants who have no pride of ownership and just the simple sight of them would scare people to death. Think of the mobile home out of the movie the Deliverance. Number three, huge permitting and/or legal issues that render most people uninterested because it just scares them too bad. Fourth, completely out of control costs, that are not that expensive to fix. For example, manager making 100,000, should only make 20. Easy fix. Fire the manager. Fifth, a lot of vacant park-owned homes, that are really, really rough condition, that you look at them and the average person has absolutely no idea what to do with them. Next, you've got to bond with the seller, you have to make the seller like you and trust you, and believe that you've got a plan and that you will enact it, and not let him down.

Next, you've got to come up with the plan, a very formalized plan, and say, "Here's the plan. Here's exactly what I think we need to do to fix this property and make it great again." So, you've got to have a plan. Next, you've got to discuss the fact the seller will have to carry the paper. There is absolutely no chance of bank debt at all. So, seller financing is absolutely required. You cannot do it with bank debt, because with bank debt you cannot do zero down. Next you've got to explain to them, as part of your plan, that you've got to use the down payment to make the repairs, or to sit in the bank as a safety cushion to make sure that you have no further problems, since you already know that the park is a wild animal.

Then, you have to make sure during due diligence, you've now signed it up with the seller, he's agreed to the plan, he's agreed to zero down, he's agreed to carry the debt, you've got to make sure in your due diligence that you can actually fix the problems, and it can be done for a very, very small amount of money. And then finally, you've got to go forward, close on it, and proceed with the plan and fix everything and stay completely on budget, and not take your eye off of what the heck you're trying to do.

So, now, if those are the raw materials of how you do it, let me give you some case studies of deals we've done to kind of illustrate these points in action, because its often easier to explain these issues giving an example than it is just theoretically like I just did. Let's first start off with a true zero down deal, and that would be a deal I did in Oklahoma City. The problem with the deal was, and what scared everyone off, is that it made no money. It was a little under 200 pads, but it was only showing an NOI of $6,000 a year, which means $500 a month. And the seller was trying to get roughly $850,000 for it. Now, when you're trying to get $850,000 for something, it's sure not going to work on a 6,000 NOI. A 10 CAP of a 6,000 NOI, you'd be at 60,000 NOI, which you're still nowhere even close. You're not even ... You're more than 90% off making that thing happen.

So, what was going on here? Well, I knew it had to be something going on inside that office at the mobile home park, because even though it was roughly 199 lots, it already had about 100 of them occupied. It had five used car auto pads occupied. It had a smattering of RV lots and a little RV section occupied. And when you took that amount of money, you knew there was no way you could only net 500 bucks. That option was off the table. So, I knew there was something going on inside that office. And of course, what I suspected---which turned out to be true---was it was embezzlement. So, but for the moment, here's a seller with an intractable problem. They have a mobile home park that makes no money, they can't sell it, they don't want to look at it. No one even ponders it would work. And then on top of that, the seller says he will not carry paper.

So, how do you solve that? Well, the way I solved it was I had to get my foot in the door with the seller, to bond with them, to have them have some degree of faith that I can solve the problem, and that they would want to carry the paper. So, that was actually the biggest part of that deal, as far as making it happen, was getting in the door with the seller, who really had no interest in personally meeting with me or anybody. I eventually wore them down and met with them, and we found in meeting that we hit if off really well. In fact, after I bought the property, I talked to the seller at least once a year for a long period of time, probably over a decade, just because we got along well. It was interesting to see what they were doing with their life.

So, now here I am, I've got this thing tied down, with basically zero down, but it's still only making $6,000. But I know there's not a problem with the location, or the density, or the infrastructure. It's something's got to be going on in the office. So, with a little sleuthing, and a little luck, I find the manager has a second account, they've actually, they don't have just one account for the mobile home park, they have two accounts. Now, you might say, "Well, gee, is one deposits and one checking?" Well, yeah, that might be the case, but in this case that wasn't what was going on. The manager had a very, very interesting embezzlement scheme.

Now, the seller was adamant they could not take cash. So, cash is typically where embezzlement happens, but in this case, the seller knew that. So, they thought they had cured any possible danger. But here's what they did instead, pretty bold. The manager went down to a bank, not the same bank that the park's checking account was in for the park itself, but a different bank, and they set up a checking account there for the mobile home park with themselves as the only signer on the account. So, here's what they did. They knew monthly how much they needed to have to pay all the bills, and then they wanted to have a little more than that. So, let's say the bills of the park were 10,000 a month, they would deposit into that account 10,500 a month so there was 500 left after the checks were paid. But let's say the park was making 20,000 a month, they would take the other 10,000 and put that in the account with them as the only signer on the account.

And then they would periodically draw out everything from the account in cash. Therefore, they were able to takes checks and money orders, and deposit them just as you would any other situation, but instead of going to the owner, it basically went to them. So, can I fix that? Sure I can fix that. The way to fix that is I've got to fire the manager and then end the embezzlement, which is exactly what I did. Now, upon firing the manager, suddenly, park cash flowed just fine.

So, it's a very, very simple fix, didn't require any capital, but at the same time on the front end, we didn't know what the problem was. We weren't sure if it was some horrible problem that would require some degree of capital, so I was able to conserve my cash that I would normally have to put as a down payment, as a safety cushion, the security blanket in case it needed work. Of course, it really didn't need work. So, again, it was a problem that scared people away. You couldn't possibly cash flow at 850 mortgage, and it was something I could fix but firing the manager, very inexpensively. It cost nothing to fire the manager. I was able to get the seller to carry the financing, and I did that through bonding. So, and they agreed with my plan. My plan was to go into the office and start from scratch, and figure out where the money went, and what was going on. So, there's one example.

Now, let me give you another example, which is entirely different. That was my very first mobile home park, Glenhaven. So, here's the story on Glenhaven. Glenhaven, as some people may know, I called the owner of the park, not wanting to buy a mobile home park. At that time I had just sold my billboard company and I was trying to get a handle on all the other kind of businesses out there, since I'd been in a vacuum for a decade and a half, done nothing but billboards, I had no idea what else people do, or what they invest in or anything. So, I just started calling random people, most of which were landowners of billboards I had built. And I had built two billboards on this mobile home park, and so I knew the owner.

And so I called him up, and right there on the phone, in no time flat, he offered me a deal I couldn't refuse. He would sell it to me for $400,000 with 10,000 down and he would carry 390. Now, it's not a zero down deal. That's a 2.5% down deal, but in my book a 2.5% deal is so close to zero, I'm going to put that in the category of zero or low down deal. Now, why was that possible? Let's analyze Glenhaven for a minute. Glenhaven was completely out of control. You had an out of state owner, he didn't know what was going on at Glenhaven. All he knew was he wasn't getting any money. In fact, he was losing $2,000 a month. He had a manager who would never answer the phone, the property showed horribly. It'd become literally over time, although it was very, very nice in the 1950s, it had kind of become just kind of a campground for the lowlifes of the Dallas area. We had carnival workers, we had hookers, we had every kind of crazy person imaginable in that property. And so, it showed terribly.

So, you know he tried to sell to other people. It wasn't like I had any magical spell. He probably had even talked to a broker or two, "Hey, you want to put a listing on Glenhaven?" But they looked at it and said, "Oh my gosh, no. Are you kidding me? There's people living in school buses, there's loose dogs everywhere, it's unkempt. It's just horrible." So, he was kind of getting desperate. He needed a plan. He needed a solution to this deal. So, again, it fit the same mold of doing a good zero down deal. It had a problem---which we'll go over in a minute---of why it was negatively cash-flowing, plus it looked awful. I had bonded with the seller already because since I'd been paying him ground rent on billboards for years and years and years, he knew me and trusted me to make my payments.

I was able to give the seller a plan, and the basic plan was I was going to start officing in the park every day, from nine to five, which I did for a year. And in so doing, I would solve why it was negatively cash-flowing and improve the appearance, so he felt that that was going to work. The seller was willing to carry the paper with zero down, or nearly zero down, 2.5%. I was able to convince the seller that I needed to hold my capital back to make the necessary repairs, which was true, and I was confident in due diligence, although I didn't know then what due diligence was, so thank God there wasn't anything really crushably bad, that the problem was solvable, and that I could get the thing to cash flow, and then service the debt.

So, what I did with Glenhaven, well, here's the situation on Glenhaven. The reason he was running 2,000 a month negative, was that he had very unwisely agreed to provide cable to all of the residents of Glenhaven at no charge. Now, why did he do that? I have no idea. I think he did it because some person called up from the cable company and they were a great salesman and he somehow became convinced that offering free cable was very important to Glenhaven's future, which of course we all know that was completely wrong. Now, where he really, really messed up is the cable contract he got was a horrible contract. Number one, it was cable for 83 lots, but he was only half occupied, so he was providing free cable to 40 vacant lots, which makes no sense. And b) they did not give him a commercial rate. He was paying the full face value of cable, like you and I would pay, with no volume discount at all. So, here he is paying the full amount per lot, which that's crazy, but now heaping more craziness on it, he's doing that while at the same time, half of those lots are empty.

So, what did I do? I went to the cable company, and said, "Hey, what is the term of this agreement?" "Oh, well the agreement already has rolled onto month-to-month." So, I canceled it. And the cable company said, "You can't do that. If you cancel it, those people will have no cable." And I said, "Well, I've driven through the park, and they all have little satellite dishes on the top. I assume they're on DishTV or Direct, so I'm not too worried about it." And I was right. We turned off the cable. A couple people called and said, "Where's my cable?" And I said, "Hey, you'll have to get it yourself. We no longer provide it free." But most everybody didn't care, because they weren't even using the cable. So, basically, all that time he'd been spending over $2,000 a month, every month, and no one actually cared at all. So, that was the solution.

Next issue was I was able to cure the vacancy issue by, in this case, being pretty lucky. I found a park that was shutting down, and I was able to get them to move homes from that park to my park at no cost to me, because the owner of the park had agreed, as part of the shutdown, to pay relocation. So, that made that very simple. And then as far as reclaiming the property from looking like a horrible jungle. Again, those fixes, although they look really hard, they're not hard. Anyone who's tried to reclaim a property, it can be single family or whatever it is, the mowing although it looks terrible and just makes the property show awful, basically you bring in a Brush Hog, and then you go over it again with lawn mower and it's done. So, the actual reclamation of the property was really no big deal.

So, again it kind of followed the same exact format. I had a plan. The guy trusted me, we had bonded. He was willing to carry the paper, and willing to allow me to use my down payment to make repairs. Now, in this case, again, my repairs were not very expensive. So, canceling the cable bill, zero cost. Mowing the property down, it was in the thousands, but it wasn't in the tens of thousands, so again it was relatively inexpensive. And bringing in those homes cost me nothing. So again, kind of a textbook low down, though not zero down deal, but again, 2.5% to me is pretty darn good.

Next, is the park I had over in Lake Worth. Now this one was probably the oddest of the group. It was offered to me for $65,000 with $5,000 down. So, it was a 7% down deal, not a zero, but again, close enough to me that I'm going to qualify it as a low down deal. And on that situation, what happened was what scared people off of the park, it had no financial records at all. None, zero. The guy did not even know the names of the residents. He'd inherited it. It scared him and so he never bothered to invoice anyone, show up at the park or do a darned thing with it. He just sat there, he kept paying the water, sewer bill. He didn't want to be on TV. He kept paying the tax, didn't want to be served by a constable. But the people were all living there for free. And so, even though he was offering the park for $65,000 with $5,000 down, he had no takers for it. Most people were way too afraid of buying something that was so absolutely out of control, that it just didn't work for them.

So, how did I fix that? What did I do to make that a successful investment? And the answer is I basically went door to door, and rebuilt the rent roll, got a handle on all the expenses, did the regular things that you need to do to turn something like that around, and in the end it worked. And let's again go over kind of our mantra here. It had a problem that scared everyone away, which was the fact that it was effectively abandoned. I was able to bond with the seller. I didn't spend a lot of time with the seller. They didn't want to spend a lot of time. They wanted nothing to do with this. They were very upscale. They were really horrified that they had inherited it, and didn't really want to spend any time, although I did talk at length with the seller, and the seller did trust me. So, that's kind of a bonding, but not nearly as good a bonding as the other two examples.

So, again, I bonded with the seller a little, not a lot but enough that the guy trusted me. I had a plan and he had confidence I could complete the plan. He was willing to carry the paper, so that was not an issue. He fully understood the fact that there would need to be capital spent to turn the park around. And I knew in due diligence I could get it done, that going around and rebuilding the rent roll, and a few other minor items that it had, none of that was a big deal. And so, again, it was a good example of a typical zero down construction, whereby we've identified that the park has issues. I've bonded with the person, I've come up with the plan, and now I go and I enact the plan.

Now, what's the take away from this? The take away from this is that zero down deals and low down deals are based on a win-win construction. We talk all the time that we always are trying to do win-win deals, and win-win deals means, by definition, both buyer and seller are happy, and they feel like they got a good price, and they feel like they had a winning ending on it. But some deals just require to have a win-win, a zero down or low down construction. It's the only way you can make it work.

So really, when you're out there looking at different deals, I mean, there's deals out there right now that you may be looking at, that you might be able to maneuver into a zero down format, and there are deals out there that you're going to find in due diligence have to be in a zero down format, based on different difficulties that they've got. You also should always be on the prowl, looking for these kinds of situations. When brokers say, "I have this deal, but it's really kind of screwed up," those may be some of the best deals you can find, particularly if you're someone out there trying to really get a really strong deal, but you do not have a lot of money for capital. You really need to seek out situations.

Now, you would not tell the broker, "Hey, I'm looking for deals I can buy for very little down." That's a turn-off to them. They think, that translates to a broker as you saying, "I don't have much money," and therefore the broker thinks, "Well, this person will never close. This is never going to happen. I'm not going to waste my time." If you instead seek out really screwed up deals, but then no discussion of the down payment, that's actually a turn-on, because the broker's thinking, "Oh, I have this deal and it's just awful, and maybe this is the only person in America who will buy it." So, don't approach these deals looking for zero down. Approach looking for really, really screwed up deals.

For a long time in my career, particularly in my early career, that's all I was after. I was seeking out deals that were completely horribly screwed up, because I knew I could buy them for a penny on the dollar, with seller financing, with a low amount down. But that's how I did that, and that's how Dave did it. You have to seek out things that seem irreparably damaged, that you know that you can fix and solve, and do it on very little amount of money. And so, you need to actually seek out those type of deals. And when you find those deals, go right into a consultative win-win approach with the seller. Don't lambast the property, say, "Oh, my God, this thing is a disaster. I don't know why I would even talk to you about it. It's just awful." That's humiliating. That's embarrassing. Remember that mom & pop, they caused the situation most of the time. So they elected not to mow the grass. They elected not to fix the park-owned homes. They elected to hire the manager and overpay them three times what they should make. If you trash the property, it's like slapping them in the face. So, don't go into that mode.

Find the property that's all screwed up, go to the seller and say, "You know what? I love a challenge. I know I can fix this. Let's work together and solve this. That needs to be your pitch. And if that's your pitch, and they trust you and you come up with the solution, then doing zero down is very attractive to them because that's the way to solve the problem, and they fully understand that. So again, if you came on to tonight's call thinking I was going to tell you that you go to sellers and you say, knock, knock, knock. "Hello, can I help you?" "Yes, I want to buy your park for zero down." Enough times they'll do it, that is not how you do it. But if I go out and find deals that have inherent problems that seem unsolvable for the average person, and I come up with a plan to solve that, and I'm enthusiastic and reasonable with the seller of how I will solve that, and they believe in me and they believe in the solution, then I can get a zero down deal that's not only attractive to me but also a win-win for all parties.

Also, don't forget that as part of these deals, there's seller financing, so you will be talking to that seller for a long, long time. And by virtue of doing that, you're going to feel more motivated often on these turnaround deals than you are for regular deals, because you're going to feel bad if you let the seller down. So, you're going to try as hard as you humanly can to win, because if you don't win, then you're going to feel like you cheated the seller, or that you've let them down. So again, it's a win-win construction. It's a specialty construction, but it's not something that you probably expected to be hearing tonight, which is going to be that it's just some easy old crazy thing. Like half of what I read or hear from people in the single family home flipping market. It's not that kind of a model, yet it has a much better final impact.

Bear in mind, one final thing to discuss on any topic of zero down or a low down, is the very subject of cash on cash return. Remember that cash on cash is based on the amount of money that you put in. And if you don't put any money in, you're return is in fact infinity. So, if you buy a property for $500,000 and the seller carries $500,000, then you have nothing in it. Then all the cash flow after the note goes straight in your pocket, then your cash on cash would be infinity, right? If, in that same example, if you look at Glenhaven, with only $10,000 down in Glenhaven, if I'm able to take that 2,000 loss and make it into a 2,000 positive, that's a 240% per year return on my investment, a far cry from the kind of return levels you get when you put a lot of money down on a deal.

In fact, zero down or low down deals are on paper, the most profitable mobile home park deals in existence. Now, you're going to say, "Well, gosh, that's not entirely accurate, because you're talking a very high rate of return, but on a very small amount of money." And that's true. However, for a lot of people, they're looking for an avenue that they can do something amazing with not a lot of money. So, it's still one of the best constructions when you can do something with very, very little out of pocket.

There's one other item I wanted to discuss on this topic before we open up the lines for Q&A. And that is, when people ask me, "Is this possible? Can I do this?" The answer is yes, if you put in enough effort. I have to give you a parallel from again, another parallel from automobile collecting. At one time, I used to collect cars, because I had a really bad car in high school. So you have a bad car in high school, you have a huge chip on your shoulder. So, I wanted to have cool cars when I got a job and became an adult.

So for some reason, one of the cool cars I wanted to have was a giant 1930s, 1940s car, like a giant classic car, these huge boats that used to be on the highways in that era. And so, I went looking for them everywhere. I read every ad in Hemmings Motor News, and Autotrader, and newspapers, and everything known to man. And lo and behold, one day I saw a listing that came out in Autotrader, with a terrible photograph. You couldn't even see the car. It was like almost a completely black picture where you could see there might be a car somewhere in the picture.

I called on the ad, and talked to the guy, and lo and behold, it was exactly what I wanted. It was a car that was in a service bay in an old car dealership in Iowa. And it had been in the window of the dealership for decades. And then the owner had died, and the son who took it over pushed it into a bay and left it, and proceeded to put a new model in there, and change the dealership from being all about nostalgia of old Cadillacs to the new modern Cadillacs. So, it had just been sitting in there gathering dust, and then one day he decided to get rid of it, so he ran this ad in Autotrader. I saw the ad, I called the guy up, he gave me a price on it. As I recall it was like $7,500, which is insanely cheap for that. So I jumped in my car and I drove all the way out to Iowa, bought the car.

The car was immaculate. It was original, and it needed almost nothing, except for a few problems, like it wouldn't go into gear. That was its big issue. The engine revved, but it wouldn't go into gear. So, I had to have it towed over to someone to fix that. And so I took it a guy, he was an old car restoration place, and when I go in the car restoration place, I notice he has the most expensive classic car at that time in existence. It was the 1929, I think, Cadillac, the boat-tail model which looks like a Chris-Craft yacht. There's two little round areas with little half windshields, and your passenger sat behind you in this thing, and at that time---this is decades ago---it was about a half a million dollar car back when cars rarely were up in the six digits.

So, I asked the guy, "Well, who owns that car?" Because here's my little crummy 1940 Cadillac, which is worth probably 20 grand, and here's this half a million dollar Cadillac in this next bay. And he said, "Oh, well that one's mine." So, I thought what? That makes no sense. So I said, "So you own this car?" "Yeah." "I don't get it. How do you own the car? Nothing personal, but you're an auto mechanic in a three bay car shop. How could you possibly own one of the most expensive cars in the United States?"

And he said, "Well, here's how it happened. I was scrounging and scrounging and scrounging for cars. I love classic cars. I look at every ad but I got no money. So I just kept looking. I'd go to every car that came on the market for sale. I'd drive here, I'd drive there. And one day I saw an ad in the paper, and it said, 'Old Cadillac parts, just free if you take them.' And being a car guy, I thought wow, free old Cadillac parts. I got to do it. I drove down there immediately, and lo and behold, in the garage was this complete car, it had been completely disassembled. So, I put it on the trailer, I brought it back to the shop. I assembled it and here it is."

Now, what's interesting in the story is I thought I was a good scrounger, right? I had done the same thing this guy had done, and I ended up with a $7,500 kind of barn find in a old car dealership. But this guy had done way better than me. He found a car that was worth 20 times more and he paid nothing for it. So, even though I thought I was really good and an aggressive buyer, he was even better than I was. And the moral of that story is it's all about how much apply yourself, right?

Whoever's on this call, looking for an amazing deal, that works in the manner I've described, you're going to find that if you're willing to turn over enough stones to find it. So, if you call every broker on the mobile home park store dot com's broker tab, and say I'm looking for really, really tough screwed up deals, what have you got? If I look at every listing on mobile home park store, looking for the same thing, if I ever ... Every time I drive by a mobile home park that looks like a catastrophe, if I put that on my map and contact that owner, the harder I do that, if I of that with enough passion and enough enthusiasm, I'm going to hit a bunch of stuff. That's what I've always found in both my billboard business and the mobile home park business, is if you really, really work it hard, you'll be amazed at how quickly you will fill your pipeline.

I used to have, back in the billboard business, I had an erasable board on the wall, with a bunch of lines on it. And my goal, back then all I wanted in life was to own 10 billboards. That's all I wanted. So, my goal was to own 10 billboards that could make like 50-60 grand a year---now this is back in the '80s---and I thought that would be like the coolest use of time ever. And I filled up that little board within a year and a half. I thought that little board would take me a decade to fill up. So, what happened there? Basically, when I really got into it, which sounded kind of difficult in the front end, I got in a groove where it was really almost too easy. I had to go out and buy another board, right? Nearly immediately just started filling up that board.

But again, if you really, really put yourself to a task, if you really focus on it, amazing things can happen. If you understand the correct strategy to do these zero down and low down deals, and you take to heart everything I've said over the last hour, you could do the exact same thing that Dave and I have done, a little over a dozen times in our career. But it requires effort, it requires intelligence, and it requires drive. And it also requires a big part of the desire to solve problems, and to create win-win situations with older moms & pops, who've got themselves into trouble and they don't know how to get out and now you're going to come on the seen and solve it for them and show them how to do it.