How to Have Your Tenants Pay for Your New Car….
I am writing this report as a case study for my next car purchase. Right now I have been driving a Honda Accord for the last 9 years. I have about 95,000 miles on the car and was hoping to keep the car until I broke the 100,000-mile mark. However, we just had our second child and the size of the Honda Accord is becoming restrictive for our family.
Plus, my wife has been hinting for few months that she wants a new car. Its funny how she does it so subtly. She will point out new cars on the road that she likes without ever saying that we should get a new one. At this point we are in are early 30’s and are reluctant to get a mini van, so we are considering on of those costly sport utility vehicles. The two Sport Utility Vehicles that my wife keeps hinting about are the Honda Pilot, or the GMC Envoy. Both of these cars cost in the range of $32,000 to $35,000. Oh, by the way, we need the one that has the DVD center for the kids…. Where were these cars when we were kids? I had to play dumb license plate I spy games to stay occupied...
Enough about the background, lets get to the good stuff…
Over the last few years, Robert Kiyosaki’s books have heavily influenced me. You probably have heard of them, the “Rich Dad, Poor Dad Series.” The idea that Robert presents is fascinating to me. He teaches that…..
You can buy whatever you want in life; however, you should create the cash flow to pay for it. You shouldn’t have to pay for things that you want out of the money you earn from your job! This turns you into a slave to your job!
Great lesson, but how do you do it? Over the last 11 years, I have read almost every investment book that I could get my hands on. I have tried hundreds of investing strategies from stocks, mutual funds, options, network marketing and real estate. Well I have picked an investing plan that I will implement to buy a new $32,000 car for about $10,000.
Here is my plan: I am going to invest money into an asset that pays me for owning the asset. (By the way, this is another lesson that Robert Kiyosaki teaches!) With the money I receive for owning the asset, I am going to pay my new car monthly loan payment.
In order to figure out how much income I need every month from my investments, I need to figure out how much the monthly payments on the car will be. I just did two real quick Internet searches and found:
2003 EX Honda Pilot with Leather & DVD Entertainment System is $32,370
2003 GMC Envoy with DVD System is $35,000.
Lets assume that I end up buying an SUV for $32,000. I prefer to purchase the car, rather than leasing it because it’s a better financial move. I will show you why later in this report. (The strategy I am teaching you actually will work better if you lease the car because your monthly car payments will be significantly less.)
Per my calculations on the automation website, if I buy a $32,000 car and I pay a $500 down payment, my car loan will be $31,500. If I take a 5-year loan and have an interest rate of 4.5%, my monthly care payment will be $587.
Wow, can you believe that a car payment could be so high? I just bought a little rental condo and the total monthly payment including the condo maintenance fees is about $325 per month. I guess the condo doesn’t include a DVD...
Ok, if I buy one of these sports utility vehicles, I need to create a monthly income stream of $587 for 5 years to cover the payment. If I have about $10,000 to invest, how can I do this?
I can use either homes or mobile homes to pay for this new car. Homes are probably better; however, I am going to use mobile homes this time.
I know you are probably thinking, mobile homes – give me a break….
Don’t judge the idea until you read further. In preparation for my new car challenge, I just purchased and sold a mobile home and have created some massive cash flow from this investment. I found a 1967, 2 bedroom, 1 bath mobile home for sale about 5 miles from my office. The seller of the mobile home was asking $9,900. I bought the mobile home for $5,250. This mobile home was actually in decent shape. I didn’t make one repair inside this home. I didn’t touch a screwdriver, paintbrush, or a cleaning towel!
I simply ran an advertisement to sell the mobile home and set a few appointments to show it to prospective buyers. On my third showing of this mobile home, I found a buyer!
I sold this mobile home for $11,900. Not too shabby right? Well here is the good part; I sold this mobile home with financing. The buyer paid me a down payment of $1,500 and is making four years of monthly payments of $277.72. All said and done, I probably invested about 12 hours of my time to complete this transaction. This includes buying the home, showing and selling the home. Because mobile homes are treated the same way as car titles there are no banks, or title companies involved which allows you to flip them very quickly. Understand that I sold the mobile home to this buyer, which means that I am not a landlord. I am not responsible for any repairs or problems with the mobile home. I will sign the title over to the buyer and put a lien on it to protect my interests!
Why does this investing strategy work so well?
This approach is so successful because mobile home buyers struggle to get financing from a lender to buy a mobile home. I simply offer to sell the mobile home with owner financing which eliminates their struggle. How hard would it be for you to buy a mobile home and resell it offering to finance it with a low down payment? It’s actually very easy because your phone rings off of the hook!
Back to my new car challenge…
At this point, I have monthly payment of $587 dollars to cover; I just covered $277.72 of this payment with my monthly income from the mobile home investment leaving me a balance of $309.28. Well that worked so well, lets try it again:
Here is my second quick mobile home flip:
I purchased a 3 bedroom, 2 bath, 1981 mobile home in a park about 20 minutes from my office. This mobile home needed some work. I only paid $7,000 for this home. I signed the papers yesterday to sell this home for $16,000. Because the home needed some work, I told the buyers to invest the down payment into the home. They financed the entire purchase price of $16,000 over 5 years with monthly payments to me of $362.00. Their loan to me is at a interest rate of 12.75%!
Well, how did I do? Here is the summary:
New Car Monthly Payment of $587
Monthly Income from the 2 bedroom mobile home flip ($277)
Monthly Income from the 3 bedroom mobile home flip ($362)
Extra Income in My Pocket After the Car Payment is Made $52.00
Lets now analyze what has happened. I invested a total of $12,250 into two mobile home flips ($5,250 plus $7,000). This $12,250 investment created a reoccurring monthly income to me of $639, which completely covers my new car payment of $587 plus gives me an extra $52.00 each month for gas.
However, the 2 bedroom mobile home buyer paid a down payment on the home of $1,500 which actually reduced my out of pocket investment from $12,250 to $10,750. So I have in essence bought a new $32,000 car for $10,750.
Here is why I prefer to purchase cars rather than lease them:
When you buy the car as compared to leasing it, you can sell the car to generate money to buy a mobile home to flip. I prefer to reinvest the sale proceeds of my old car into an income generating mobile home. My new SUV will have a resale value at the end of the 5th year. I can sell my SUV to a buyer and use the cash for a mobile home flip. You see, you should be working to create a continuous money stream. If I were to lease the car, I wouldn’t have anything to sell to generate cash for future mobile home flips.
You still might be thinking that the idea is good, but I am actually somewhat short in my income. On the first mobile home, I will only be receiving monthly payments of $277 for four years leaving me short a year to cover my car loan. And you are exactly right.
Remember that I have a 1994 used Honda Accord. My plan is to sell the older 1994 Honda Accord for cash and use the money I receive in the sale to buy another mobile home. This 3rd mobile home will provide enough cash flow to cover the last year’s payment shortage plus provide me with money to save for the next car. Lets say that my Honda Accord sells for $4,000. I plan to buy a used mobile home for $4,000 and sell that mobile home for $8,000. If I sell the mobile home with for no money down over 5 years and charge an interest rate of 12.75%, the monthly income to me will be $181.00. This extra money will be savings for me for the first four years and will cover the shortage in the fifth year.
P.S. I ended up buying a used 2003 Envoy without a DVD player. I knocked about $10,000 off of the price. My total monthly payment is below $500.
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