BiggerPockets

For those doing "Lonnie Deals," what are your thoughts on paying the lot rent for your buyers?

In other words, having an agreement with your buyers that says that they will pay you the total amount of your Note + Lot Fee each month, and then you turn around and pay the lot fee for them?

The disadvantage is obviously that you have created more work for yourself (paying the extra bill each month).

But, there are obvious advantages as well:

- Park manager knows he'll get paid on time;
- You know for certain the bill is getting paid;
- Buyer only has to write one check each month;
- You don't have to worry about surprise evictions;
- etc...

Thoughts?

I found some relevant info in another thread:

I guess it really depends on the park manager, but if it were my decision, I would opt to collect one payment from my mortgagor and pay lot rent to the park myself. J Scott already listed a few advantages, and the one disadvantage I think could be negated by a $20 monthly "note servicing" fee.

No prob J Scott . . . be sure and give us all a briefing when all is said and done, to report how the deal panned out.

I noticed one other thing when looking at the information I found in other threads. The poster who supported paying lot rent directly to the park manager referred to his "tenants", indicating that he is maybe a bit more intensive in screening buyers and managing them once they have moved in. By contrast, the fellow who didnt want to bother with the "extra responsibility" mentioned that the advantage comes from being the bank rather than being the landlord.

So we have two schools of thought: the landlord and the banker. If you are paying some of the bills for your "tenant", are you no longer merely a banker?

One other issue: if you are structuring the deal as a lease/option, wouldn't it be absolutely the right thing to pay lot rent directly to PM (at least before the option is exercised)? After all, you technically do have a tenant now. How do lease options fare against the more common "lonnie deals" in resident owned parks?

Hope i'm not taking this thread too far off topic . . .

I believe in making the buyers responsible for the lot rent, taxes, insurance and all upkeep/repairs. You want to run your buyers through the parks approval process to make sure you are working with folks that are approved to live in the community and that they / the park knows what is going on. If you have to worry about the buyer paying the lot rent then you should find a better buyer that you have more confidence in.

Why do business with someone you don't trust? If this is what you're doing you are not doing a "Lonnie Deal"........

Mike,
I have done a bunch of "Lonnie Deals" and I am not broke yet! I have also traded millions of dollars in mobile home notes and have done a bunch of business with dealers in Texas doing installment sales contracts vs. rent to own or L/O. I would dare say some of these good old boys are flat out rich.... Also I have never been able to place any lease option paper in the secondary market. Since I love having the option of selling my notes and teach that as an exit strategy, I never looked into the subject much. I have had a firm mind set that I always wanted to work with owners verses renters and the headaches that go along with them.
I have recently been asked to research the subject so I am now trying to look at with an open mind. Please note that I am in Michigan and our state requires the buyers of used mobile homes to pay a 6% state sales tax when they buy a mobile home. Title can not be transferred and liens can not be placed without doing this. Now I am finding out that if you do LO's in MI that the state wants to collect a monthly use tax from the contract holder. This sounds like a big pain to me!

Thanks Mike. Most of the better parks here in Michigan will not allow lease options but, that is most likely because they have not taken the time to understand them. The thought is that the better parks want the residents to be "owners" and have a sense of pride on onwership. I have always felt the same way myself. Sounds like we are buying homes in the same years and price ranges as well.
Again I am on a mission to research this subject as it relates to doing business here in MI because that is where I am located. The rules regarding how you conduct business and handle taxes are different from state to state to be for sure. I am always open for ways to do business more profitably as long as they are legal and work better than what I am currently doing.

I'm just getting started, but collect $450 a month of which $300 is the loan payment/taxes and insurance and $150 is lot rent, which I pay to make sure the park owner is happy.
I also have a lease purchase option where the lessee pays the park directly. I've notified the Park owner to inform me if there is a problem.

I agree with Sterling. Why would you want to escrow for taxes and insurance as well as put yourself on the line for the lot rent? This seems like a crazy way of doing business to me and I know dealers that have gone bankrupt over getting into such agreements with park owners. If you are helping the park fill lots, why would you pay them lot rent? Also I will say this again-why would you ever take back a seller financed contract of any sort when you do not trust your buyer enough to pay for insurance, and all the other costs of "ownership?" I want to create owners/not renters who call me in the middle of the night to plunge toilets and complain about noise...... Am I missing something here? Renting mobile homes is nuts in my book.

Great thread, I am trying to figure out if I will pay the lot rent or not but I doubt it.