Advice on first Lonnie

19 Replies

Don't know much about mobile homes. Have remodeled houses, have contractors, etc but this would be my first Lonnie deal. One of the largest U.S. manufacturers of mobile homes is located in my area so there is a decent amount of them around. Here is what I know and I'll post pictures soon as he is going to email them.

2/1 12x70

Needs floor work in kitchen and living room, outer pane of glass broke in kitchen causing leak, roof needs new coat of Cool Seal (3yrs since done), leak in roof caused floor damage in living room before seal was done, LR and Hall carpet cleaned/replaced, will Not come with heat/air, will Not come with appliances.

I will have to move the property because they purchased a new MH. Talked with a mover and to move it into the city where I live, located in an outlier of my city about 45mins away, it will cost $3k. I could also move it somewhere inside the city it's now, I'll have to find a park to move into.

Asking price is $1200 obo. Similar sized homes sell for roughly $7500

I strongly advise against moving a home on your first deal. It's a lot easier to learn in smaller increments than taking on a project of that size with so many figurative moving parts to begin with.

The quote you got to move the home (assuming it is just for moving the home) is really high. You don't mention where you are located but you could probably get it done for $1500. However, when moving a home you'll also have to pay to have the plumbing and electric hooked up. So altogether it's probably around $3500.

The home sounds like it is old. You didn't mention what year the home is but based on your description and that similar homes sell for $7k, I'm guessing it's a late 70s or early 80s. Homes that old are not worth moving because of their condition and you'll spend more on the move than the purchase of the home.

If by chance it's newer than I think, you might be able to have a park help pay for the move.

Based on the information you provided, I'd pass and find a deal with less headaches and bigger margins.


I'll try to help by chiming in here. First things first, (at least for me) is what is your exit strategy? Are you looking to sell it retail for cash? Looking to wholesale? Guessing by your post title you're looking to finance it as a "Lonnie". So, for the sake of conversation I'll assume that's your exit.

With financing as your exit bear in mind it's tough to start moving the homes and wrapping that cost into your financing price. Most of the time (and here no exception) the cost of the move is more than the cost of the home. Then you're immediately in the situation of needing to sell a $1200 home for $4,200 to break even.

Now, about the move.

I may be off here, but this is what I tell folks that I move for. And believe me, before I got my truck I did NOT know about all the "extra" stuff there.

Your move and set (assuming it's a move and set as that's the "going" rate at $3000) is literally that: tear it down, move it, set it back up on blocks (you pay for blocks if they don't transport or there's not enough), tie it down (you pay for anchors) and level it out. Again, I am making assumptions here, but based on my experience (and what I tell my customers up front) there is cost in the following:
-Maybe axles/wheels/tongue
-Skirting (it's not guaranteed the skirting can be re-used at the next site. Depending on where you can buy from skirting may cost you as much as $800 to buy all new. Then you pay someone $250 to install it)
-Decks/Landings: Is the mover taking the decks for you? You'll need decks to get your permit at the new place. About $500/deck to get a contractor to do them new...give or take. Again, price may vary and you may reuse the decks, but there's no guarantee they can be used again.
-Did the mover include the water/sewer hook up? If not, cost there.
-Permit cost
-Plumbing cost to hook up all lines and get operational
-Electric: Cost to hook up the home

The above are not necessarily ALL the costs. Before I knew more about the process I really had to do some scrambling as I moved a home to be financed to a new location; my $3,000 quote literally turned into about $5,800 paying others to do it before my tenant could move in. Now, that's inflated as we had a few repairs to make, but you get the idea.

I'll be the first to say "go get 'em, tiger". In this scenario though, be careful what you're getting into.

The 12' wide leads me to believe the home is older? Based on rules in my state (Virginia) and the local municipalities, (as is my entire input in this post) make sure you are allowed to get a permit on this home for the new location. If it's older than 1976 you could have trouble. Make sure if you're moving it to a park the park will allow it in there.

Sorry, I'll stop there. I'm sure others will chime in with help that you should certainly use. Hopefully I helped shed some light on at least the moving part of your deal. If you want more I can keep going...

Best of luck with it.

Blue Ridge Mobile Homes

P.S. There is certainly an opportunity to make money on your deal. I don't want to sound pessimistic, only trying to help educate!

@Bill W. got in there before mine posted and said things much better than I. Kudos to him and well put. Agreed on the park help for the move. Parks in my area were giving $3000 cash recently to have a home pulled in there. Great point.

Bill. You echoed some of my very thoughts. I haven't gotten all the details but the seller is sending me pics and more info soon.

I live in Knoxville, TN. Clayton Homes is located in the area so there are a good amount of MH's in the around. This leads to me to think there would be a good amount of Lonnie deals around and maybe I haven't dug deep enough but the majority of homes in my area seem to be selling for $15k, $20k, up to $50k. The only other low priced home I've found was $2k for an abandoned MH that had to be moved. When I saw a $1200 price tag I was surprised.

I'll probably pass but will update with pics and info when received.

@Sam Parkins : that is a lot. I'm not surprised, I just hadn't gotten to that point yet in the process. I guess I'm not correct on calling it a Lonnie because right now I am in need of capital so I would sell it for cash only unless a buyer has a DP that cashes me out.

Here are some more details I got from the MH owner tonight in an email (apologies for the length, even if I don't move on the deal I want to learn as much possible by using it as a case study):

1973 2/1 846 s.f. clean title. 1 current leak through the kitchen window, leaks damaged LR floor, and water rings on ceiling in bedroom.

pics provided:

The $3k was to move from city to city, about 45mins. Don't have to do that. I also drove through some parks today and found a trailer in decent shape, asking price is $5k. Will call on it tomorrow.

@Christopher B. you seem to be on to something with the reaction there!

Yes, if you needed funding then it's not the best option (your first deal). In addition, it was as I expected that the home was older than ' my area no park will take that and most counties won't allow a permit to allow it to be set up.

In my area, depending on my volume of leads and my time available, I would approach the seller and let them know this information. I would tell them I think $1200 is high for that year and the amount of work needed, and see what you can get him down to. If you get him lower and you think you could wholesale the home, work with him in a co-marketing capacity much like a realtor and try to sell the home for him. At least in that capacity you can build a buyer's list with advertising and at least start to establish your presence with a home in "inventory".

Which, smoothly transitioning here for you, I wouldn't do that if you haven't thought about setting up that buyer database. And if you haven't, I would highly recommend that database to start to catch your leads.

And all the information is great here for you. Correctly so, I would imagine there are TONS of mobile homes available around Knoxville.

Furthermore, the thing with Clayton is you'll have to take their homes "down" (buy) with cash. They won't allow you to option their homes thus preserving some of your working capital like you could do with a private seller.

Hope that helps!

Blue Ridge Mobile Homes

@Sam Parkins thanks for the reply, lot of good info!

I passed on the 2/1, it was 48 miles away and just too much work for me in addition to its age.

Building a buyers database is something I'll have to begin doing.

I have a question for you that I asked on the main forum but nobody has answered. Due to the Safe Acts, etc is mobile investing as good as it was and what precautions should I take?

It seems owner-financing is out the window legally, but I am seeing lots of ads on craigslist, in parks, etc advertising terms and owner financing. I just don't want to back myself into a corner

@Christopher B. I'm sure @Bill W. will chime back in here on this, but you're right, it's a big can of worms here recently and it's all over this blog. I just finished writing one but don't know how to track down the post for you.

In essence, the SAFE ACT does not necessarily need to change your thoughts about the business, only change your strategies and procedures.

I mentioned in more detail in the other post that I've switched to a lease/option instead of the financing outright. The contract is still with my attorneys (multiple for checks and balances) but it seems we're moving that direction.

You can STILL do the traditional financing, however may have to have a mortgage originator close the deal for you or an attorney...obviously adding a few extra bucks in overhead. However, those extra dollars can be absorbed into the deal and are certainly better than the trouble you might get into.

I mentioned in the other post that I am NOT trying to circumvent the legislation, rather the opposite - get in full compliance. The lease/option (it's a variation) seems to do all it's needed for this. Though it's been very much modified to make sure everything is RIGHT.

Try checking out some of the other long threads on it. The one with a ton of information started in '10 or '11 and has been picked up recently.

Certainly don't mind elaboration more if needed.

Best of luck, and I wouldn't give up on the business, it's a great business and I love it!


@Sam Parkins great response, excellent information for me here.

The lease/option makes sense. How do you structure the terms though? I assume there has to be a balloon payment of some kind, otherwise you would simply be calling owner financing lease/options?

So a $7k trailer with $3k down, 7% ($179.09/month[limits to rates that can be provided?]) amortized over 2yrs with a balloon/option to buy after 12 months for the remaining balance of $1851?

Is that in the ballpark?

@Christopher B. You got the right idea.

We do long term, but that can work as well. The important thing as mentioned is two fold:
1. Keep the park happy and make sure they know that it's not a rental, it's a rent-to-own so they allow you to work in there.
2. Keep the government (and your family) happy by staying out of trouble and making sure that you're not holding the home as security in the "financing".

We tried to get to the point where we could lease with a gift at the end and just give folks the trailer. Apparently though, that is called out regarding the IRS' definition of "security" or something like that and it would not qualify for the SAFE ACT. I'm digging into technical territory on that and didn't take notes from my conversation with the attorney, but suffice it to say that it can't be gifted at the end. It does need a balloon and the balloon has to be representative of "market value". However, after a rental period, there can be depreciation on the home (I believe it's 5% per year for a max of 50% in most localities at least around here...if I remember correctly) and therefore you can offer that lower balloon amount.

I'm not the expert on this stuff, only can say that we are transitioning to that model as well.

And after reviewing your post, I realized you gave the balloon after 12 months of a 2 year lease. We have set it up to collect for the full lease term and then offer the balloon at the end for a lower rate. That way there's more depreciation and payment in on the home. So in your scenario, I would lease for the applied payment for 24 months and then offer the balloon at the end. The lease turns to a month to month if they don't have cash or they can pay the balloon and get the home.

Hope that helps.

P.S. If I were selling a $7K trailer, I would have purchased around $3500 (Lonnie model). It would look like this:
Previously with financing:
$7,000 Sales Price
$3,000 down (good for you for getting that much, I don't normally get more than a $1000...I need better buyers!)
Call it 10% interest for 2 years and the payment would be about $185 PI.
Lease to own:
Lease for 2 years at $200 (cover insurance) and balloon at the end for $500 or so. Something like that. You make slightly more money that way as you've made your money on the lease and then the option is just a give-away to them...making sure to keep that value close enough to market value. That would be saying a $3500 trailer now would be worth $500 in 2 years. I honestly would probably change the payment (lower it) and put it out for 4 or 5 years to earn more depreciation just to make sure I could "argue" the market value closer to that lower number at the end.

But that's my buyer pool, they typically don't have excess cash. Again, the goal of mine was to mimic financing but make sure it's fair and legal. The perfect scenario would be to lease to them for the $200 for the 2 years and then give it to them. That would be the same as the financing, you get paid and they're happy as they get a home for payments!

@Sam Parkins Excellent response, again!

I like your model. I was worried that Lonnie deals were dead but this model seems to have riddled that. After this discussion I have taken more notice in my market and this is exactly how other investors in my area are selling on terms (lease to own).

I have another question though. I have some capital at my disposal right now. My original plan was flips and multi-unit's but I don't have enough capital for that currently am currently reviewing other investing strategies which is why I am here in the mobile homes investing forum.

To the point, have you had any success in flipping/wholesaling mobile homes for cash? I LOVE collecting monthly rent checks (own a duplex currently) and like your model, but I am also in need of capital. Basically I have to use my current capital to build more capital otherwise in the near future, otherwise I will create some monthly cash flow but end-up putting myself out of the game for 2,3, 5 years. Given the current market condition and the wealth of opportunities I really don't want to do that.

Originally posted by @Sam Parkins :
Christopher Bush I'm sure Bill W. will chime back in here on this, but you're right, it's a big can of worms here recently and it's all over this blog.

I'll only chime in to say that Sam Parkins already nailed it. Good post.

@Bill W. thanks for the follow up and comment.
@Christopher B. It can be slightly more tricky to raise [quick] cash from mobile home investing. The two main hold backs are 1. You OWE cash by sitting on the home waiting for your buyer and 2. The market to purchase the homes for cash is smaller. There aren't too many mobile home purchaser's with wads of cash in their pocket...

I have sold for cash and you'll get some. I wouldn't make it your only exit strategy to sell for cash, but it certainly can be done if you get a good enough deal. IF YOU GET A GOOD DEAL, THE CASH WILL COME. Hence the reason I sell all my homes at wholesale values: To get them sold quickly and to give the opportunity for someone to pick it up for cash. I make very little on each home but my model is volume of sales.

It helps to sell for cash if you can strike a deal with parks for lot rent concession. However, you'll find a lot of your cash buyers have land and want a cheap home to MOVE to their land...putting you in a fix as to strike that rent concession deal the park will make that home stay in the there.

The best time of year to get cash is right now, tax time. If you get an option on a mobile home and it's a good deal, market it out there and see what bites you get. If you can't get it sold for cash you can turn it back to the seller (not ideal) or you can try to line up private funds to take it down and finance it. Assuming you want to keep the current capital you have.

Like any other business it's a game of cash flow. At some point or another cash needs to come into the business. IF you can forego bigger amounts of cash early on and build up decent monthly cash flow, it allows you to make bigger cash in the future as you've got the means to recycle your cash and can sit on some all cash deals instead of financing.

Year 1 of full time mobile home investing: Roughly 30% homes sold for cash and 70% financed.
Year 2 of full time mobile home investing: Roughly 20% homes sold for cash and 80% financed.
Year 3 is probably about 40-60% so far. By marketing good deals and getting word of mouth I've attracted a lot of park owners looking to fill their parks as well as other investors looking to a mobile home as an investment on their land.

Remember, nothing happens overnight. Project out your cash flow and figure out where you need to be to see what you can do with your own individual model for success. Run a business plan based on that income and see what your income looks like in a year, 2, 3, etc. Then figure out what it will take to get those numbers where you WANT them.

It's a lot of hustle but the upside is well worth it in the end when you can project the fruits of your labor into the future.

Well said @Sam Parkins !

I don't have anything to add just wanted to mention that this is a great thread that every MH investor should read.

How great is BP that we can all get our questions answered like this. @Christopher B. just saved himself from a skinny and stressful first deal. :)

John Fedro


@john Fedro I agree

@Sam Parkins Thanks for the response. I've been running some #'s and still like what I see in the mobile home business even though I wont be able to cash-out immediately. I went and looked at another mobile home today but have some hesitations (first-time buyer cold feet I guess). If any experienced MH investors care to throw their .2 cents I'd appreciate it.

Asking $5k

Offered $2500, stated they want $4k as they're moving to Cali.
Wont pay more than $3k

85 Clayton 14x60 (70?) title didn't say length and I didn't have a measure. Will have to get good at measuring just with my eyeball

No heat/air unit, power not hooked-up. Will need some paint (inside and out), maybe kitchen vinyl, fridge ($50 from a local apt complex), and few other small things. What I am worried about is it seems they attempted to "pretty" it and fix some issues but did a poor job. Not a huge deal because all small issues and paint isn't expensive. However, the ceiling in the master is bowed a bit and shows signs of water damage. I wonder if they tried to hide anything else and since I have little experience don't know what to look for.

What do heat/air units run and where do I get one for a mobile? Do you put used units in that can be located by contacting a local heat/air company? What does it cost to re-seal a roof as it looks a bit rough (dry) and the master ceiling leads me to believe there may be an issue?

Also, the doors and door handles didn't match. The counters were odd and 1 was out of level and the pantry doors were too short. I assumed this wasn't a huge issue in a $7-$10k home, am I right?

Pictures (from phone with no light in the house)

@Christopher B. Values can be tough to gauge market to market. They also vary throughout geographic locations as well as time of year. I buy more liberally in late winter/spring to make sure to have inventory for the tax season rush.

That said, guard your cash like a mother bear. Last time I checked, none of the MH investors out there came from CEO positions of Fortune 500 companies with tons of cash in hand...we all worked our tails off to get where we needed to get - and CASH is KING!

Get yourself an option on that home if you like it.

What happens if they don't sell? Can they go to Cali if they don't? Do they have other buyer's? Will they finance some to get to the higher price? Will they owe money if it doesn't sell? Find your leverage point and squeeze it. If you can't get to where you need to be AND have to use cash immediately, it may not be the right home. You've got something that looks decent, but the curb appeal is not great outside and it LOOKS like a $3000 trailer. Keep that in mind as you negotiate. Do you think you're selling that thing for $3500 within a week if you even get them down to $3000 today? And that's just making $500...

The home will need some sort of heating. If it has nothing (what happened to it?) you'll need to throw in a furnace at a minimum. New furnace with install should be ballpark $1200. Used for less, around $600 to $800. I got lucky with my furnace guy as he's the son of a mover I worked with. HVAC companies probably won't have any idea. If anything, you're looking for Manufactured Home Service and Parts places. Call them and ask. No luck, call movers and ask them. They're usually well in tune with others in the business.

Doors, counters, carpets, floors, etc. often don't match. It's your call to put yourself in the buyer's shoes and think about what would make you buy or not. Detach yourself from the situation and think like the buyer.

This all goes back to value. I'll just put the ball in your court here and tell you what I tell ANYONE I've ever worked with/mentored/friend-ed regarding the business.

1. You have to know value. I have a real estate background and created massive spreadsheets with comparable sales, assessed value, market trend analysis, etc. to valuate a potential real estate property. As we all know that is not possible in mobile homes as there's no unified valuation system (for the most part). YOU'VE GOT TO DO THE WORK! This is not going to be fun, but I called every seller within 150 miles of me and created a spreadsheet with home details, location, and asking price. I asked them questions as if I were going to buy. I must have had about 60 to 80 at one point, and it was a full time job! Then I called back as time elapsed and asked if they sold. If they didn't, they were over priced. If they did, I politely asked with a loose script what they sold for. I got cussed a couple times but roughly 50% to 60% told me the sales price of what amount of cash they received. And then I had it, I had sales comps to be able to analyze the value and time it took to get that value. None of us know the values getting into this business and you have to start somewhere. If scared, use an option (I would each time anyway) so you minimize your risk. But don't go throwing them around all over. The manufactured home community is a word of mouth community. Of all the homes I've optioned, I've only had to back out of 2, and in both scenario's the seller's actually backed out and I was let off the hook. I tried VERY hard to close any option as that's your reputation on the line.
2. Read "Deals on Wheels" to understand the business in and out. Educate yourself.

I'll step down from my "pedestal" now and hope that helps your valuation of that property. Unfortunately there's no magic number that experience gives you; experience gives you the ability to set your own market values in your area. I now buy with my own properties purchased as comparable values for any new purchases. It works out very well as the values are always where I need them or I walk away.

Based on what their answer is if they don't sell, give them a 3 option offer. The highest price being 100% seller financed and maybe that's the $4000 that you said is their minimum. The second is $1500 down to help them get across country (ALWAYS ASK HOW MUCH THEY HAVE TO HAVE IN POCKET FOR THEIR NEXT STEP - USUALLY THEY'LL TELL YOU AND TIP THEIR HAND TO THEIR LOWEST SALES PRICE!) and the rest financing with a price of $3250 or so. Third is all cash at $2500 or $2700 or wherever you're comfortable. Closing in 3, 5, 10, or however many days you can "buy". Weight the option you want by making the other two un-desirable based on their scenario. I did this once and because it clouded the scenario of my offer and put the seller in the frame of mind that it was 3 options or nothing, and got the home for about $600 less than what he'd paid for it a week earlier. He explained that he couldn't wait on his money and so decided taking a loss was better than his other options...when previously had given no indication to his lowest acceptable offer - which I wrongly assumed was what he paid for it.

@Sam Parkins Incredible information! Knocking them over the fence

"guard your cash like a mother bear." Hilarious and very true as I have money to invest but no longer am working a job that can generate working capital (just covering my bills as I focus on REI). The investment decisions I make now are very important as they HAVE to help me generate more working capital. I am leaning towards pulling back buying for a moment as I spend more time gaining market knowledge because of this fact.

Great negotiating tips as well, I've worked in sales a bit but will add this to my toolbox.

Question: I have found a buyers that is moving into my area and looking for a mobile home. I considered sending them pictures of the MH and offering it to them As-Is for $6k or $9k if I make all the needed repairs. Have you even done something like this and do you consider this a good tactic?

thanks for everything. I am going to save the many nuggets you've provided for later reference.

@Christopher B. Thanks for the kudos and I'm glad I can help!

As for your question, I most certainly do work with buyer's in that capacity. I mentioned being a realtor previously and certainly as a realtor work via the "buyer" lead capacity as mentioned. It also seems common sense to me that if you can bring in that buyer you've solved half of the sale...seller and buyer.

I work with lots of buyer's in this capacity, and the only downside to this is that it takes time and follow up systems. I try very hard to make the sales process an "auction" type process where folks keep an eye on my site and contact me when they see a home they want. That way I'm not spinning wheels working on buyer's that may not ever buy. However, in dealing with so many buyers, there are those that will "raise their hand" and follow up enough with me signalling the opportunity to go find something for them based on their needs. I usually do this when they meet a couple criteria:
1. Large cash available or larger down payment. That way their ready to jump on something.
2. Good background making it easy to get approved in a park. If I'm trekking into "unknown territory" by means of looking for deals in parks I've never worked, they need to be solid so that I know when we do find that home they'll get approved.
3. Solid amount of monthly income to be able to afford the monthly payment if "financing" (lease/option).
4. Maybe the most important or as important as #1 - A sense of urgency. Be careful here though, I've been duped by people taking advantage of my tendency to want to help. I had one guy get a contract on a place just to show residency to scam the government in another state to prove he had occupancy so he could continue collecting from them monthly. He didn't need the place, just needed the contract and wouldn't return my call when I needed to rescind my contract because obviously he never paid anything.

With that said, if you have the time and availability to work specifically with buyer's it absolutely is a positive. If this guy jumps on this or any other available home, you get the contract on it for less than what he wants to pay and you close the deal and put the buyer in there. I've done it plenty of times. Though, if dealing with a cash buyer I've also had buyers go behind my back and take the deal from me. I even had a contract with a seller one time and brought them a $25,000 cash buyer and the seller disappeared on me and never paid the "commission" was an 80 year old widow and her version of selling her home was telling the park - ONLY. There's no chance without a sign in the window or advertising she'd have that thing sold. I brought in the buyer from out of state, and he came the first time to view it based off my ad!

It's a great route, just be aware of the downfalls of doing it. Time and the chance it backfires.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.