Selling Mobile Homes with Owner Financing

[Michael Noto]

The podcast with John Fedro really opened my eyes to the strategy of buying mobile homes and selling them with owner financing.

I just had some basic questions regarding this strategy and specifically buying the mobile home in a park/association setting:

-What is the typical term length and interest rate that is offered to a buyer buying a mobile home though owner financing?

-How much is typical for a down payment in these types of transactions?

-Once you sell the mobile home, if it is in a park the new owner pays the lot rent fee to the community, correct?

- If priced aggressively and if favorable financing terms are mobile homes relatively easy to sell? I just am thinking in terms of holding costs between the time you buy until you can sell.

Any help with answering any of these questions would be great. I am thinking after listening to John's podcast some may have similar questions.

Thanks!

[Manny Cirino]

@Micheal Nato

- The terms and lengths of the terms depends on the price, you do not want a 30 year term for a $5,000 sale. I suggest studying more about Seller Financing in general and then you can apply that to pretty much anything.

- Down payment depends on the amount you have into the deal. You can do a 10% 20%. What ever makes more sense. And you never want to limit your self early you always want to see how much the buyer has first.

- Every community is different you will have to see there regulations. for the most part that is optional you can role in together but on a seller finance deal theywill hold the title with a lien on so it is easy to just leave them the responsibilty to pay it and include a clause in your seller fi contract that obligates them to pay there lot rent and have the cpmmunity aware they need to contact you in the event they do not pay.

I have lived in CT for a while and never seen to many mobile homes/parks were do you usually see them?

[Michael Noto]

Thanks for the response @Manny Cirino.

I was thinking no term longer than 7-8 years, but again this is something new I am looking into.

As John said in his podcast the goal is really to get all the money you put in back in 10 months max. That is the part about the strategy I like the most.

[La Nae Duchesneau]

I do lease to owns on mobiles and I ask for $500 down and then my monthly payment for 2, 3, or 4 years depending on how much I bought the mobile for and how much I put into it.

I charge 10% interest. Lot rent is included in the monthly rent because you do not want them to not pay the lot rent and then you don't even know that they didn't pay it and they get evicted plus you get evicted. So always pay the lot rent for the lease to own term. They will pay the lot rent when the contract is over and that is when you sign the title over to them.

They are super easy to sell and you will get 50 calls.

Remember they own the mobile so you are not liable for any repairs. However, if there is a repair and they cannot afford it, I will pay for it and they can pay me back. You don't want your mobile to fall into disrepair during the lease to own period.

[Michael Noto]

@La Nae Duchesneau Thank you for chiming in.

I guess what I am confused about is this. So you set up a lease to own for lets just say 2 years.

In a normal lease to own it is done in lieu of the tenant finding financing, so would you then finance them once the 2 year lease to own term is up?

If so, how much more would you require down and how long is that term typically for?

Thanks again for the info, your last post really helped me clarify some things.

[La Nae Duchesneau]

I do not understand what you are asking. After the 2 years is up, they own the mobile. At the point they have paid for it in full.

For example, lets say you buy a mobile for $5000. Lets say you want to make $3000. So you want $8000 total. They put $500 down and finance the $7500. $7500 at 10% interest for is $347 a month for 2 years (24 months). Now you have to add your lot rent (you should pay this during the lease to own). Say lot rent is $310. So your deal is this, $500 down and $657 for 24 months. At the end of 24 months they own the mobile.

[Michael Noto]

@La Nae Duchesneau I understand perfectly now. Thank for breaking it down.

[Colin Kloezeman]

Originally posted by @La Nae Duchesneau:

I do not understand what you are asking. After the 2 years is up, they own the mobile. At the point they have paid for it in full.

For example, lets say you buy a mobile for $5000. Lets say you want to make $3000. So you want $8000 total. They put $500 down and finance the $7500. $7500 at 10% interest for is $347 a month for 2 years (24 months). Now you have to add your lot rent (you should pay this during the lease to own). Say lot rent is $310. So your deal is this, $500 down and $657 for 24 months. At the end of 24 months they own the mobile.

 I realize this post is 5 years old, but I figured I might as well reach out. I live in Arizona and the lot rent around me is anywhere from 500-650 a month. An average studio is around a grand and a 2/2 is around 1400 a month. If I have a 2/2 mobile home and want to do owner financing, would it really make sense to charge them 1500-2000 a month?

[Matt Bonestroo]

@Colin Kloezeman

I have found that a majority of the families that can afford $1,200/month start looking for a single family house. 

In Arizona, the sweet spot seems to be $800-950/month -- lot rent + utilities + insurance + house payment. 

Most AZ investors try to cash flow $200-400 a month on each property... Hope this helps! 

[Rachel H.]

@Colin Kloezeman In my experience, the most motivated buyers and renters of mobile homes are those that have family and friends living in the park. If they can make the monthly payments, they want to live there. Hope that helps! 

[Britt Loukos]

@Michael Noto and @La Nae Duchesneau are y'all still interested in doing lease to own mobile homes?  I have a park in Ridgeland SC, we could use some mobile homes here!  I recently purchased, only 19/57 lots are currently leased.  Let me know if you want to make something happen!

[Cheryl Foster]

@Britt Loukos

Send me info! We are in Greenville SC area.

[Coley Mitchell]

Originally posted by @Britt Loukos:

@Michael Noto and @La Nae Duchesneau are y'all still interested in doing lease to own mobile homes?  I have a park in Ridgeland SC, we could use some mobile homes here!  I recently purchased, only 19/57 lots are currently leased.  Let me know if you want to make something happen!

Hi Britt,

Would be very interested to know more about your Ridgeland property as well.  I am in Greenville, SC.

Thanks,

Coley

[John Stilwell]

So I just spoke with an attorney. He said selling mobile homes with owner carries is regulated and you need proper documents, truth and lending Act, and licensing. A different attorney said I didn’t. What to do? 

[Daniel Ryu]

@Colin Kloezeman

Typically we'd want the lot rent + mortgage to be less than 80% of the market apartment rents.

In research that Dr. Becker, PhD from Duke, did on MHPs in the Great Plains Region, generally the competitive housing for a MH resident is renting an apartment, not buying a home. There are exceptions in markets where housing is extremely constrained and SFRs are quicker to develop than MF.

It sounds like @Matt Bonestroo has some more specific metrics for the AZ market, which is great - always good to hear from those with local market experience.

[Jack Martin]

@John Stilwell this area is definitely regulated and you should be using a mortgage originator to stay compliant. If you plan to focus on mobile homes, connect with your state MHCA and ask for a referral to a MO that specializes in mobile home loans. 

[John Stilwell]

@Jack Martin thank you. Are you a MLO or mobile home investor? Do you know the items that may be needed?

[Jack Martin]

@John Stilwell I manage a portfolio of parks inside a fund.  My business partner serves on the board of the Arizona MHCA and sits next to the attorney who's father wrote the laws and regulations for MH/RV parks in AZ, so we run our business in accordance with the law.  While the federal regulations will be the same across the US, each state is likely to have different compliance measures, so it would be smart for you to gain clarity from an attorney who has specialized experience with mobile home parks.  The best place to start in search of that attorney will be through your states MHCA.  (they may call it something different in each state, but that is the Manufactured Housing Community Association here in AZ). That attorney can point you in the right direction as it relates to a MLO, but it will be best to understand the rules and regs so you know what compliance looks like in your state. 

[John Stilwell]

Thank you!