BiggerPockets

Originally posted by Jesse R

I just had a couple question's on mobile home investing.

Are Lonnie Deals the primary method for mobile home investing?
Are there any other popular method's that I'm unaware of?

Jesse,
Some people will buy and lease the homes, though I am not a fan of using mobile homes as rentals. The really money is in owning the entire park though. If you know how to spot a park with upside, you can make hundreds of thousands in a very short time by flipping a park.

One thought here... I do know people that bird dog mobile homes to move into peoples parks. One guy in Denver finds the homes, puts them U/C to purchase then flips the contracts to people like me that move them into our parks. For what it's worth, I am looking for 17 homes in the Lafayette Indiana area right now... and I need 6 more in Hastings Nebraska... and one in Canon City Colorado. So as a park owner, I will pay a finders fee to someone that finds the home. In some cases the bird dog knows the movers and coordinates the entire move.

So there is another way for you...

Greetings and welcome. I buy and sell several mobile homes every month. Some... actually very few are flips. Most of the homes I buy get resold on financing I carry. Most call these "Lonnie" deals after Lonnie Scruggs. I have studied Lonnie's books and also have a couple of mentors that are local to my area I have learned under. In this thread I will be happy to answer any questions you might have once we have entered that phase of the investment. I will post to this thread as I have time and it will take several days to finish.

So lets find a home and make an offer.

There are several ways to acquire a mobile home and in here we will talk about the ones i use.

1) Drive a park and call on the for sale signs. This is how I find about 25% of my homes.

2) Post an ad in the newspaper. Costs but works.

3) Develop a relationship with the park managers and they will sell you homes, tell you of homes for sale or my favorite... give you homes. If they give you a home you might have to pay some back space rent. This is how I get about 75% of my homes.

Before making any offer talk to the park manager and ask if the home can stay in the park. Also make sure if something has to be done to the home you know how much it will cost. You should also know about the holding time for each sale. My average holding time for double wides is 10 days. Single wide 3/2 (3 bed / 2 bath) is about a month, and a 2/2 or 2/1 is about 45 days. You need to know that so you can figure out what space rent will cost you.

I have a pretty simple way of making offers and I hope I can put this across in writing. Bear with me.

A 3/2 single wide built in the mid 80s- 14 x 70 that needs no work. I can sell this home for payments of 300 to 350 per month for a total of 12,500 to 17,500. As a rule I try to be out of my total down-stroke at the longest in 18 months. Space rent is $450 per month.

So- 300 x 18 - 450 = 4950

If the home needs anything it comes off that price. Most of the homes like this I will have a total of $3000 or less in by the time I have bought, fixed up and sold it. If the home is new and nice I might pay a bit more. The lower your down-stroke the better your return so keep it small! Do not get attached to having to own every home. It is business. When an offer is accepted I give them $100 via check and sign a purchase agreement. The get the rest when the home is delivered to me clean and empty. I always get the title at the closing and always look at it before I sign a purchase agreement. In Colorado there are taxes that get paid each year so I always check for this figure and bring a copy of what is owed to the closing. I deduct that from the sales price and write them a final check.

Remember when offering to fully take into account what needs to be done to the property and start low! Most people can not afford the space rent once they move out so you are doing them a favor by making that payment.

Calls and questions

OK- The home-
We will do a mock sale on a home I have in my inventory-
This home is a 1978 Windsor 14 x 70 3/2 listed at $12,500 pmts of 350 per month.

Well soon after placing a sign on the home the calls will start coming. Most will ask about the home and for an explanation on the financing.
So here we go-
The home is a 3 bedroom / 2 bath single wide.
The payments on the home are $350 per month and
The term will run between 5 and 8 years.
If you would like to see the inside I will be happy to show it to you.
( in some parks the management shows my homes- so I send them there)
If you like the home, you put an application in with the park. Once you are approved with the park I automatically approve you for the financing and you can move in within hours of the approval.

So, after a few calls someone wants to look at all of my homes, in every park. They are hooked on the financing part of the deal and are going to buy something I have in inventory.

They settle on this Windsor today and here is a replay of the questions and answers.

First, they put in an application a couple of weeks back and have been park approved.
He wanted more info on the terms, length of payments, fees etc. With time you will find most people want a deal of some sort, so I gave him one. I dropped the payment from $350.00 to $250.00 per month.

Side note: I try to keep my terms under 8 years- sometimes, depending on how I got the property, I can take lower payments and not worry. This home I have $ 3,500.00 into this home at this time. I did have to pay one months worth of space rent on the home at $449 which is added into the $ 3,500 number. Lets see how I do…

So we settled for a price of $12,500, payments of $250 per month and he never asked about the term. He moved into the home today and will sign the financing papers in the morning. So let me give you the number right off my note-
Price- $12,500
Closing costs and Document prep- $500.00
Space rent to seller- $225.00 (half January)
Service Fee monthly- $15.00

Side note: Service fee is a charge to the home owner I charge for servicing the note. I can pocket the fee and service the note myself, or pay someone $15 monthly for each note they service for me. Servicing is picking up the check, sending late notices, entering the accounting each month.

Note- $ 13,225.00
Interest- 15%
Finance charge- $ 11,432.60 (interest)
Total payments- $ 28,020.00
Total payments after service charge $ 29,850.00
Payments- 112

Yield on investment- 75% yearly for just over 9 years (excluding service charge)
Overall yield is about 800%

I am out of my down stroke in 14.89 payments.

When I look at a park, and I do not care about the size, I am looking for FSBO signs. The park probably will list and sell homes, and has some traditional financing sources but that is where you are not the competition but the solution. With the larger lenders most applicants will need a fico of 650 and 20% down. I have no down payment requirement (most of the time) and really do not care about the credit score. So a larger park here, 450 spaces, I will sell 25-30 homes in this year. They sold 4 of their own last year. Other homes will turn over in the park but I will clearly buy and sell about 60% of all the homes that move in the park. What you are looking for regardless of the parks size is friendly management. If they see the value in you keeping the park full you will have a great working relationship. Remember solving the parks problems might come at a price from time to time. I have paid a bit much for a park owned home- but it takes it off their books.
Example- The park has a 4/2 double wide in their inventory but it has not sold. If I am in a "cash happy" month I might say to the park the following-
I will give you the $9000 you want for this home if you presell it for $30,000 on payments of $465/month. This home comes with a space rent concession which gives one year of space rent at $199 a month, down from $449. I want that space rent to stay with me as a credit I can use anytime and at will. I might give a month of it to a buyer to 'entice' a sale. I might keep the credit to pay for my homes if I need to pay space rent. Lots of options here.

geesh... I am rambling....

Also.... I look for older homes. I do no business with parks that are aggressively upgrading their parks. Wait... not true. I will go to these parks and offer my service of moving homes they do not want out of their parks for a fee. They will get a title and then pay you PLUS give you the title to remove the home. Then you find a park that needs homes and pays you to move them into their park... are you following this. You get paid on the pull and placement of the home. So you might want to stop in these parks and offer that as a service.

ramble... ramble... ramble...

Hi Jesse,

Welcome to the world of mobile home investing! Sounds like Jim answered your ?s. If you're interested, here's an article on some ways to invest in mobile homes:

http://tinyurl.com/mnho7s

Happy Investing!

No problem, Jesse - glad to help!

Originally posted by Hiethem Badawi

Hi Rachel and Jim,

I have been following the MP forum for a while now and I have done a little bit of marketing for Lonnie Deals. I'm in California, so as you know, the prices of most the the MP's here are fairly high. The only MP's I have come across that would fit the Lonnie Deal price range are very old (ex. 1959). I love the concept of creating notes with MP's, but I'm a bit cautious about this type of business in the California market. Lot rents that I have come across out here are about $700 all the way up to $1500. I know it is the concept of the Lonnie Deal that I should be implementing and adapting to my market, but I'm still in doubt. Any insight from you would be greatly appreciated.

Thanks

Hiethem,
The California market on the coast, from San Fransisco to San Diego is a market all unto itself. I do not live in that area, though I visit San Diego on a very regular basis. I would tell you to go inland enough to find parks and homes that are more reasonable. It is probably important to understand I much higher return on investment than the California market yields UNLESS your speculating in the California market, where I know there is huge money. My 'Lonnie Deals' in Colorado, Texas, Nebraska and Indiana return my full investment in 18 months or less, or I do not do them. To be clear, I live in Colorado where most of my Lonnie Deals are, and I have 'Lonnie Deals' in the rest of the states only in mobile home parks I own.

Thanks Jim and Rachel for your helpful comments and inspiration.

This has been great info so far. I am interested in learning more about MH investing. I live in NY on Long Island and I am not seeing too many good deals and there are very few MH to buy. Do I really need to physically see a mobile home to know if it's a good deal. I know I SHOULD see it but it would be a far ride to some of the parks that would be considered close to me. What do you do in that case?

Hi Jim,
Alot of the homes near me are going for about 12K. Even if I did buy them and try to sell for 250 a month payments it would take a while to recoup the money. I don't have anybody to take a look at homes out of state so i'm not really sure if this is going to work for me. I f I buy a home here that goes for 25K I could take a mortage on it and have payments of about 200.00 a month but now I need to find a buyer that will pay back my 200.00 plus additional cash flow and I don't know if that can be done.