BiggerPockets

Shoot holes in buying MH's using Lonnies system?

Ive read the book, I know there is no " get rich quick" schemes, thats not what I am looking for. It seems pretty basic as to how to do the deals.

In my opinion the only two obstacles would be 1. Finding a cheap MH and 2. Finding MH owners/managers that would let you keep your MH on their lot.

Ive seen a few of you talking " Lonniese" on here, and would love to hear your experiences good or bad.

Thanks in advance!

Woops my bad, I usually figure if I know it " everyone" knows it......LOL

Here's the basics.

1) Buy a mobile home at well below FMV say 2 to 3 thousand.
2) Sell the mobile home, seller finance it, with small down 500 to 1000 and 12.75 percent interest rate.
3) Rinse Lather and repeat!

Now what I want from you all is, do your best to talk me out of why I should do this, and I will do my best to defend my posistion!

Thanks in advance

Yes paying cash

Not any homes " listed" at 2/3k, you have to find motivated sellers and you make them " name the price" (negotiation tactic detailed in book)

1) One of the prerequisites is to build a good raport with park owners/managers if you cant, dont use the park
2) Its all about margins.......nobody would by a sticks and bricks house if the numbers werent gonna work, dont buy the house if the fixing up costs blow yer budget
3) I have no response for this, except if the MH you are looking at is a terd, then dont buy it.
4) You would qualify the buyer(as would the park) as a tenant. Now here is the beauty of the deal. The person is not a tenant, a MH is not real estate, it is personal property. If the hot water heater goes out at midnight in the middle of January, they WONT call you, its their problem, not YOURS they own the MH, you only own the note.
If they dont pay, you take the MH back (no foreclosure process, its much quicker) then you sell it again, get another deposit, and start over.

If they just skip you put it up for sale again, get another deposit, and start over. Ideally you WANT the people to defalut on the loan. Done right it SHOULD be paid off in one year, then you can just keep selling it.

How can you not turn a profit on something that is FREEEEEEE!

excellent point, I can only say that if you had a tenant in a rental the same thing could happen, but you would owe several thousands of dollars. If its a MH lets hope you have your money back out of it, and you can just scrap it.

This is what I was looking for, this contigency never came up when I was reading the book

Im not sure you could trash a MH that bad, I could be wrong

I'd call MH investing a " watered" down version of what you do. Most MH candidates dont have 3-5K to put down on a house or they wouldnt be buying a MH.

Thats why you can attract buyers pretty easy, and carry the note for profit. I am sure its not without headache, every business has problems, but please continue to talk me out of this venture!

I appreciate you comming up with objections, Ive racked my brain and I cant see too many reasons not to pursue this. I asked my wife the same question and she came up with some of the ones you did.

We just dont have a lot of experience in the RE area, and I just wanted to see if I could carry on a decent " arguement" while defending my posistion, with people that deal in REI. The whole if you wanna get smarter, surround yourself with smarter people than yourself(shouldnt be all that hard) :rofl:

Yes, in answer to does the seller carry insurance, thats a big affirmative.

That would be awesome!!! :mrgreen:

Here's my question.

" If they dont pay, you take the MH back (no foreclosure process, its much quicker) then you sell it again, get another deposit, and start over."

If you don't have to foreclose, then how do you get them out, an eviction?

Why not rent until you recoup your investment and then resell after you first tenant moves out? This way you get your money back quicker, but you do have the headache of being a LL?

you'll be responsible for things that break down on the property. the beaty of lonnie deals is that they own it so you dont have to be a LL, just collect payments. Also if you rent it out, you'll have the same issues as selling it on a note. It's similar monthly payments, so why not just sell it on a note for less headaches? With a note you can also get a DP and start a new deal.

I'm a total newbie but i have done a ton of research in setting up my LLC to do these deals. These are in no particular order and not all problems, just my thoughts on these issues:
1) insurance
Paying insurance on a vacant MH is going to be ~4x as expensive as if it was occupied (roughly 200/yr). Ideally you get a trustworthy buyer and they maintain insurance after they buy it, while you hold the note. You can add a default clause or you can set up an escrow type of thing. Same for taxes. I don't know what's best, to be honest. At first I'll be using a default clause. If there are problems, I will move to creating an escrow for T&I.

2) problem buyers
-damage
-not paying
-etc.
You just have to make sure every deal has enough margin for you incase soemthing bad happens (which no doubt it will). But I think the most important part about this is going to be screening people. There are screening service companies that do credit/criminal checks for $35. Then just use intuition to screen as well as you can. But again, not having close margins is very important, in my opinion.

3) park managers
As said above, some parks are not receptive to dealers. It's going to be important to present yourself well and get a foot in the door to the park. There are two parks around here that are extremely unreceptive and where I will probably never do a deal in. I put an ad in the paper, something like " wanted -mobile homes will pay cash, up to $5000" I got a handful of phone calls from one of those parks. Now, on the other side of the classifieds is a phone number to the owner/manager of the park that says " 2&3 bdrm's for sale (xxx) xxx-xxxx" . If I had to guess this manager is making the sellers lives miserable and forcing people into allowing him easy lonnie deals. This is clearly speculation but an example of how a manager can screw you over. He's not letting people into the park unless they buy through him.

4) What lonnie didn't tell me
It is illegal in Lonnie's home state to sell mobile homes without ~$1100 in licensing fees. Why didn't he tell me this? Why did I have to find this out on my own. In anycase I beleive that I can personally still profit huge in my area, however I think it's bad form. I'm also wondering what else I'm going to learn along the way (as I've pretty much only set up the business and ran into a problem during my first step)

Here's what can go wrong:
1. You are responsible for lot-rent until the place sells or unless you've got a very desperate park owner. This can Kill your profits if you don't take it into account. My first 'deal' was in a senior park (dumb) and I bought a single for $500. It took me 1 year (at 450 a month) to sell the thing after I spent 1k and numerous weekends fixing it up a bit. I sold for 3k cash as all my buyers were not interested in financing. Oops.

2, If you get over-anxious, you will over pay. It's very easy to rationalize your profits away and work for free. Around here, older DW sell for 25-40k retail. If you can get a place for 20k, you've still got plenty of room for profit right? Lol. I did that and managed a 18% yield on that note. Bought for 18, 2 to fix, 3 to hold, sold for 30k with 3k down at 12%. It's going to take a few years to get my original down payment back there all because I was impatient and failed to negotiate.

3. People don't pay sometimes. When this happens, yes it's not an eviction, but it isn't the cheapest thing in the world to ge the paperwork together for a repo. Luckily, I've not had to do this yet due to a small move out bribe.

4. You HAVE TO be a people person. This is all about shaking hands and listening to stob stories in order to get a decent price. If talking with people and wheeling and dealing isn't your thing, then don't bother.

5. Fires. If your buyer fails to have decent insurance and something BAD happens, you are out your investment as the people who bought it are pretty much judgement proof.

Also to the person who talked about people trashing the place. Yep, that can happen. But, they own they own the place and tend to (thus far) take pretty good care of it. If you were forced to repo a trashed place, it could cost you a little to clear the crap out, but then you just resell WAY cheap and get someone willing to fix the place for you. If it's beyond that, you've lost some money.

Why do it? My best deal thus far is a 82 DW in good condition I bought for 4k and resold in 1 month for 24k with 2.5k down at 12%. I'll have my money back out in around 6 months and will collect a nice payment for years. I've now got around 1.5 a month coming in passively - just xfer the money from one bank account to another from their auto-pays. That's real nice.