How to structure a mobile home investment deal

[Sandy Uhlmann]

I currently own two mobile homes in my SDIRA that are rented to tenant buyers. I have an opportunity to purchase a couple of mobile homes for a fairly good price. Rather than hassle with buying the homes, fixing the homes and renting out the homes I am considering purchasing the homes then financing them to another investor for 12% interest only with the principal due within 5 years. Lending money seems like a good way to get a decent yield without all the hassles associated with the ownership of the mobile home. If I finance this deal, what is the best way to structure the deal so the loan is secured? Do I have to purchase the mobile home first then finance to the other investor in order to have a secured loan or can I just lend money at the rate discussed and put a lien on the home so I can be sure that I get paid. Note: I plan to use my Self Directed IRA funds for these purchases in case it makes a difference in the structure of the deal. Also, I do know this end investor well and he is very familiar with mobile homes and mobile home repair and has lots of experience with tenants. I think this could be beneficial for the both of us.

[Gail Greenberg]

I would sell them on a "Contract for Deed" or land contract. Depending on the state, this would vastly simplify taking the home back if the borrower defaults. Under this structure, you retain ownership of the home until the borrower finishes making all the payments - like a car loan. Many states have a "forfeiture" process to end a CFD - it's essentially just cancelling the contract. But some states require full foreclosure even for a CFD under certain circumstances. Important to know - even though this is a simpler transaction than creating a note and mortgage, you should still use a Mortgage Loan Originator to insure you're fully compliant with the Dodd-Frank rules for making mortgage loans to borrowers.