Should I lend money on this mobile home and carry the note?

7 Replies

I have the opportunity (and cash) to lend 33K on a mobile home that is worth 37K.  I would have a promissory note recorded to guarantee the payments from the homeowner who will live in the home.

The deal would be for 96 months at 6% interest.  

My concerns are the risk of default and how hard it is to take back the mobile home.  The home is in a park that charges 400/month lot rent.  I don't want to be paying lot rent while trying to get the home back from someone who stopped paying.  

I am also wondering if the Dodd-Frank act applies here.  This is Arizona if that makes a difference

I am trying to search the site, but haven't found a real clear answer yet.  If there is a real clear answer in another thread, please kindly point me in right direction.

Thanks,

Russell

that's a high risk loan with little equity and very low interest The first item of business is to find out if it's real property or personal.The fact that there is a lot rent indicates it's not real property . Arizona law does not allow for defiency judgements in most cases I hope this is a family member or very close friend
that's a high risk loan with little equity and very low interest The first item of business is to find out if it's real property or personal.The fact that there is a lot rent indicates it's not real property . Arizona law does not allow for defiency judgements in most cases I hope this is a family member or very close friend

@Russell Fugitt I don’t think that the Dodd-Frank act would apply much here unless you were creating a mortgage but I’m not an attorney so I’m not sure. You’ll probably want to ask an attorney. I agree with what @Steven Picker said that the interest seems pretty low and you may not own the land so if things don’t go as planned you may be paying a lot  for lot fees.

You may want to study up on mobile home investing or manufactured home investing before doing this deal if this is the way you want to go. 

6% interest is ridiculously low and you definatly will need to research Frank Dodd.

Your risk is high with little up side. 

If I owned the park I would do it on a 10 year loan at 12% interest otherwise I would not do it.

Thanks for the quick replies everyone.  I think I can find a better place for my money.  I was aware of the risk of the lot fees, and thought the interest rate was a bit low.  I didn't consider that the Mobile home might depreciate significantly over the next few years.  

I agree with the other guys. In my 15 years in real estate, I've been involved with lending and also borrowing for my deals...biggest take aways that would apply to your scenario:
1. Only lend on real property
2. You need more equity in the deal to protect yourself. (LTV)
3. You can earn around 8-12% (California market) plus 1-5 points.
4. Term could be 6-24 months

Best of luck.

Good to know.  Are the rates you mention realistic for the 30K range, or more for bigger loans?  Is there a good place to find these deals, or just networking with other investors?

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