licensed, certified mortgage loan originator

[Andy V.]

I have been contemplating investing in the mobile home industry (units, not parks) to compliment my SFR investing. However, the more I dig into it the scarier it seems, largely due to my wanting to sell on terms to tenant buyers. I believe that one of the Dodd-Frank and Safe Act things to be aware of is that I would need to have a licensed mortgage loan originator included in my deals. I presume this is not a state issue, although Indiana state law may require an even more stringent conformance. Is this accurate? Where do I find one? I've asked 2 brokers I know and got conflicting feedback. How do I buy and sell legally? Also, do I have to become a dealer? What about taxes? I heard I may have to report and pay taxes on the full income from the loan (over time) in the year of the sale? Some of these questions likely apply to SFR land contract sales as well. Obviously an attorney's advice is in order but I couldn't find anyone in my area familiar enough with Dodd Frank and the Safe Act to help. Any recommendations anyone? Hopefully I will hear back from some folks actually doing this regularly, not just someone wanting to sell a boot camp..................

[Curt Smith]

OMG Andy,  At least you are aware enough to even ask.  So many aren't even to your level.  If you search in BP on "dodd frank" you read for a week.  "lonnie deals lending to occupants" you'll do more reading.

We own a park, and 20 double wides on their own land.  Bought the lonnie deals books way back, waded through the Dodd Frank threads here some 1.5 yr ago to 1 yr ago then it died out (thankfully).  None of the experts in those threads has any more gas to post a single more word.  :)

You posted in the MH forum so you are in the right forum.  Go back 6 mo and read all the threads "I want to buy my first mobile home" type threads.  The reasons why I recommend you avoid lonnie and his out dated model today and it isn't just because of Dodd Frank, today the park manager and owner are MUCH different than in the old days when it was possible to work a park as an investor synergistically with the park owner and manager.  This is no longer the case in so many parks today.  Some are ok for investors but theres no telling they won't flip on you mid stream, stranding you with a MH and no way to rent it (because the park no longer will approve your renters...).

Buy double wides on their own land. A much safer model. Yes same issues in play when you go to offer seller financing. Since renting any thing "mobile" is a big PIA!!! But culling prospects for "move up aspirational" by offering rent to own, seller will finance solves many of the quality / turn over / damage / high mantenance nature of MH renters. Yes you do need a LMLO to originate, follow DF, 43% DTI, full doc to verify ATR etc etc. But this is all doable and you control ALL aspects of this deal. MHs in parks you control 1 variable out of 10.

You find LMLOs who will originate private investor loans by calliing all your title offices, closing attorneys asking who they've seen originate private investor loans.   99% of LMLOs are tied to a lender.  Very view independants out there...   But rent to own of double wides on their own land:  10 minutes to a major freeway, 30 minutes to a good jobs center,  buy a 1996 or newer for $15k to $25k tops, rehab for $10k or so, keep all in < $35k, mark up 2x for a sale price to the occupant and you have a nice cap rating business.  Here in GA a doublewide rents for $850 up to 900 in most markets now even that much in small towns.  This works out to 25% cap rate and higher.

Why mark up 2x? You basically running a flipping business. Min profit from a flip is $20k to $30k in my business rules. Plus comps for a 3 bed / 2 bath 1500 sqft home is easily way way above $70k. Its nearly impossible to find non-distressed sale comps for double wides. When I do $90k is a good price. You selling for 2x mark up if your all in is $35k is a fair price. Problem is, your area may not offer deals at this low a purchase price and there are NO lenders to investors of ratty shape mobile homes. Its a cash business. DO NOT use SFR pricing rules when buying doublewides. I only bought REO from auction.com or found via the zillow manufactured filter which pops out both auction and REOs. Ingore the asking price for REO. Offer $15k to $25k tops. Let the bank sit on the offer for a few weeks even month. Keep pestering the listing agent that she submitted your offer, cash, no inspection, fast close. 80% of our buys we did not see the inside of the home (auction). No horror stories. No big deal to re-pipe a mobile home! $1600 tops, I've paid $800.

Rent to own for 12 months!!! long term cap gains now.  You must not seller finance from day one.  Has to be a rental for at least a short period to qualify for installment sale tax treatment.  (google installment sale of "investment property" which is different from installment sale of "inventory").   Investment property is a rental.