Who has done Lonnie deals?

Question

i like the concept of buying a mobile home in cash, fixing it up a little, then structuring the payment terms so that the home ROIs 80+% a year for 3-4 years. But is this a feasible scenario?

I don't know anything about the tenants that live in these mobile home parks but I imagine they are transient and possibly have little respect for where they live. I'm scared that a tenant might just take off the day before the rent is due, trashing the place and leaving me the bill for the lot rent.

Is this a real problem with mobile home investing? Have you guys done anything to mitigate the risk?

Marc Faulkner · Answer

I totally see where you are comming from Mike!  Mobile homes are still rocking in my neck of the woods!

Mike Matthews · Answer

YES IT IS A PROBLEM . They just take off or you throw them out. However it is easy to get a new buyer in the home. And you only lose lot rent each month it is empty.  I lose !,300.00 plus every month my sticks and bricks homes are empty. Also I make more cahs flow with the mobile homes. So do you see where I am coming from.

Marc Faulkner · Answer

One of the biggest keys to doing Lonnie deals is to make sure that you are working in parks / manufactured home communities (I prefer to call them) that are dealer friendly.  Good communities will pull credit and check criminal backgrounds and verify income in an effort to make sure they are getting a good tennant.  As mentioned, "money down" also creates security and the more the merrier.  I also like to get a co-signer if possible because two people on the hook is always better than one.  When showing the home ask questions that allow you to get a level of comfort with the potential buyers situation.  Since you are offering seller financing it is up to you what your underwriting criteria is.  Don't go outside the guidelines you create for yourself and you will be just fine.

David Alexander · Answer

Ashan...

lonnie deals (Lonnie is a good friend of mine) are a great way to get started and how I got started investing...

Yes, the default rate is higher...

Collect very tight and get a decent downpayment typically at least 2 weeks of a paycheck...

Which will be $750 -$1500 down...

Then finance the rest...

My average yield back them was right at 80%... 78% if I remember right...

Nice place to put extra cash when starting out...

Rachel H. · Answer

Hi Ashan,

There's risk in most types of real estate investments -  you just need to learn how to manage risk. Probably the most important thing when doing Lonnie deals is to know your market and know it well. Also, know how to screen prospective tenants/buyers - it's important. Yes, there is always the risk they may default especially in this economy but it's just knowing how to manage the risk and being prepared for the worse. Hope that helps!