All Forum Posts by: Jim Johnson

Hi Jim,

Could you give a brief detail of the dialogue a newbie should have with a park manager. What you say to make them feel comfortable with you, how you add value to their park, when they should call you, etc...

I wanted to stop buy and talk to a couple today, but kept driving because I was not completely sure of how I should start the conversation.

While driving through the park I noticed many homes that were for sale by a dealer/realtor, so I'm not quite sure what to say to the park manager when I explain to them that I am looking to buy Mobile Homes and they have homes with for sale signs in the park.

Your insight would be greatly appreciated.

Well, I would walk in and ask if this is a good time to talk for a few minutes. After I knew i was not pressing them...
I would tell them I own a small finance company that lends money on mobile homes. I am always looking for parks I might want to include to my list of communities I look in. I would ask them how they screen the residents... if other lenders are actively lending in their communities... etc. I would say I really look for a community where we benefit each other, as if I choose to lend in the community, we have a shared interest in the community. In most cases, I will approve the resident if the park does. I ask they check income and are sure the ratios work with my payments worked in. I let them know I collect home payments on the 15 so we are not competing for the same paycheck. I point out, in this lending environment, I can quickly facilitate homes transferring ownership. I then go into how I buy a home, then market it with my financing in place. That is my basics... remember I have history in the business so I do pull out that card as well...

4 Votes

Originally posted by Chip Brault:

RE: Jim,

I am personally talking about selling. Its like too many transactions for them to manage or handle or something...like they just want a plain ol' simple buyer live in type and nothing more advanced than just that...

Chip

Chip,
The key for me with managers has always been to show them I add value tot he park. Because lending is tough to find, and I am a lender I can help them keep the park full. In a local 450 pad park a few years back I sold/financed about 30 homes in a 12 month period. That accounted for about 50% of all the turnover in that park. Finding the key to working together goes a long way for park managers- especialy in this era of challenging occupancy.

3 Votes

Originally posted by J Scott:

Originally posted by Jim Johnson:

Lets see if we can figure this out. I read in one post, that the parks do not allow 'non owner occupied' units.

Jim -

I'm planning to start doing Lonnie deals, as I have a bunch of cash I'd like to start generating a decent return on... (I currently rehab/flip houses for a living, so I'm comfortable with RE in general, but not mobile homes).

My question is...I've driven through a few parks in the past few days, and I've noticed a number of homes that appear to be for sale by investors doing Lonnie deals. Do the park managers generally work with a single investor? Or would it still be worthwhile to talk to the park managers and see if they'd be willing to work with me in addition to any other investor(s) working in that park?

Should I offer the park manager a "bonus" to bring me buyers and/or sellers ahead of other investors they might be working with?

I always will sit and have a long talk with the manager before investing in the park. The manager can really make life easy on you, or make it so you will fail in that park. In most states a manager can not restrict who buys the home so long as the home owner is approved by the community. As a dealer, you will have a pass on this 'approval' process and really need to only be sure you are paying space rent, following the rules etc. That said, if your looking for something special, like the manager to show your homes, or space rent consideration etc... you better make sure you and the park manager (or regional manager or owner) are all on the same page.
As a dealer with a very good track record in Denver, I can pick the parks I want to work in. The fact of the matter is, most parks I do not want to work in.
In almost every case I set up a 'bonus' of sorts if the manager helps me sell a home. In the parks I really like, I never show a home. Even if the home is a repo, I do not need to visit the park. To this point: I jsut had a repo in a park where I hold about 50 notes... the manager got into the home after the people had left, I had my contractor go in and do some touch up work, the manager showed the home and sold it. I sent the documents via email to the manager, he closed the deal. Total time between entering the home after it was empty and closing on the new buyer- 3 weeks. Two of those weeks I was in vacationing with my family in California. I never visited the home or park. For that... I make sure in some way, shape or form the manager gets $500.
For what its worth, this home was a doublewide, sold for $20,000 on payments of $450 per month @ 12% interest...

2 Votes

Originally posted by Joshua Dorkin:

I guess I probably should welcome you to the site, Jim, even though you've been here for a bit!

Thanks Joshua,
I like to walk in, look around, test the water a bit before opening up too much. You have a good site here, which as you know is not the case across the board. Since your in Denver, someday we will have to meet up for lunch.

0 Votes

Lets see if we can figure this out. I read in one post, that the parks do not allow 'non owner occupied' units. Well, as a park owner and a lonnie dealer, I do not allow non owner occupied units either. But... being a lonnie dealer you are really just the lender, and your selling the unit and transferring the title. So your not renting, your selling. When I go into a park I would say I buy repos, or homes for sale, fix them up and then I sell them to a new owner. I will sell the homes for cash, or if the new owner does not have enough cash, I will carry the balance. I transfer the title but attach a security agreement to the home. You can use a car as a analogy. Just ask if they make payments on the car they drive. They still own the car, but owe the lender. Your doing the same thing with the mobile home... your a dealer and a finance company.

So are you guys talking about renting or selling?

4 Votes

Originally posted by Dick Green:

Hi Jim!

Welcome to the group. Great intro! I'm looking forward to chatting with you.

What are some basic ways to locate good mobile home park deals?

Dick,
Great question... really I use several ways of locating parks. The easy way is through internet searches. The real deals though are found by locating the parks, and contacting the owners. So I have a database of about 45,000 parks nationwide and I send postcards, mailings and call the parks directly. I should add, I get leads for real estate brokers, other investors etc. So I pay referral fees, bird dog finder fees and the like for deals that are brought to me. I also have other investors bring me deals they have located or are under contract with to partner on. So lots of ways to find the deals...

0 Votes

Hi CJ,
What to read concerning the financing of mobile homes is a great topic and I am sure many have an expert they follow. I have read most of what is out there and there is some good in all of it. Remember each author writes from their own point of view, and from the kknowledgegained where they invest. So what I know is great if you invest in Denver, or one of the other areas I work out of... but much of what I would do will never fly in California for instance. So here is what I would tell you... the books give good general info on how things are done... but to really understand what to do in your area, you need a mentor of some sort. Someone that really understands what is happening with the parks, the managers and the market. Also, someone can write all day how they do things, but to watch them, or hear them is a whole new level of learning. I ahve always been willing to share me stuff, but the thing hard to share is the stuff inside. How I do things, why I do things, how I act, react, think etc...
The analogy I like to use is one of Tiger Woods... would you rather have his clubs or his swing? For me the clear answer is the swing. The club is the 'fact' stuff... like paperwork, numbers, business plans etc... the swing is how he puts all that inside stuff into motion to make that ball fly...
So hit the books for the facts, get a mentor for the swing...

ps- with a good enough mentor, you really do not need the books... I did not read my first mobile home investing book until after financing about 15 homes... the the book was really reinforcing what I was doing, not teaching me much of anything...

1 Vote

Originally posted by Jim Johnson:

Remember I am a cash on cash investor with mobile homes, not a yield investor. So how I do thins will be different than others...

Can you elaborate on this a bit more?

What do you mean that you're a cash-on-cash investor as opposed to a yield investor?

Well, let see here.
To be correct, a cash on cash return is the return you receive from the first year of the investment. So a $3,000 homes, that pays back $3,000 in the first year is a 100% cash on cash return. Lets say the note was 48 payments. Now the return is 300%.
This is a cash purchase...
Now lets say you borrowed the money to do the deal... so you borrowed the $3,000 from your home, lets say a equity line and that equity line had to be paid back. Maybe the line was to be paid back over 4 years, and you were borrowing it at 7%. Now your return look different, because you have underlying debt.

To be very accurate, let say you paid $3000 for the home, and sold it for $10,000 on a note. And the borrower gave you $500 down. Really, in the first year you have a taxable event. The IRS will argue you owe taxes on the 'value' of the sale. So the value might be $10,000 less your $3,000 so a $7,0000 taxable event. That is income, not taxable gains. You might make the argument that a mobile home note is worth something less than the face value, because of default etc... matbe the value is what you can sell the note for to a note broker, or another investor that buys notes. Maybe the value is $6,500. So now you have a taxable event of $6,500 less the amount you have into the home, so minus $3000. So you have $3,500 plus the down payment of $500... a taxable event of $4,000. When payments come in you have income taxes owed on the interest, you have a part of the principle that passes tax free (the percent of each principal payment you paid your upfront taxes on) and then you have principal that is taxable. So your real return would have to figure in the taxes owed for the sale, and the taxes owed on interest, and the taxes owed on the remaining principal paid out of each payment.

The point of this post, is if we are going to really talk about the real return, things are going to get a bit complicated...
I am not sure how this will post, but it is a section of a program I use to calculate return. This is a $10,000 note, 48 payments at 12%. It shows the first 5 months of payments, and the return of the 4 years...

Cash Method Estimated After-Tax Return = 51.64%

Tax Bracket: 31.00% active Status
Down Payment: $500.00 note Type of Sale
Principal: $10,000.00
Interest Rate: 12.00% 65.00% FMV as a % of Face Value
Term in Months: 48 $3,000.00 Total Capitalized Expenses
Total Interest: $2,640.24 12 Months to Payback
Total Payments: $12,640.24

1 2 3 4 5
Regular Payment $263.34 $263.34 $263.34 $263.34 $263.34
Interest $100.00 $98.37 $96.72 $95.05 $93.37
Principal $163.34 $164.97 $166.62 $168.29 $169.97
"Discounted" Principal $73.50 $74.24 $74.98 $75.73 $76.49
Income from Principal $89.84 $90.73 $91.64 $92.56 $93.48
Net Income $7,189.84 $189.10 $188.36 $187.61 $186.85
Tax on Gain $2,228.85 $58.62 $58.39 $58.16 $57.92
Investment $3,000.00 $0.00 $0.00 $0.00 $0.00
Net Cash Flow ($1,465.51) $204.72 $204.95 $205.18 $205.41
1 2 3 4
Annualized NCF ($3,000.00) $799.42 $2,506.07 $2,778.29 $3,099.25
ATIRR Note 51.64%
Cash Return 0.00%

2 Votes

Originally posted by J Scott:

Jim -

First, thank you for all the great information you've provided in this forum...it's truly appreciated!

Hope you don't mind if I ask a couple questions...

Originally posted by Jim Johnson:

My payment of $350 consists of what? $30 of it is insurance and the rest is payment.

What specifically is the insurance cost for? Are you maintaining insurance on the property, even though you don't hold title?

Or is this just escrow of the insurance for the buyer, to ensure that it gets paid?

Assuming this is escrow for the buyer, is there a reason you don't do the same thing with taxes?

ANSWER- I escrow to pay the insurance on behalf of the buyer. This way I know the home stays insured. Where I hold most of my notes, the tax bills are mailed to the registered owners, not the lein holders. So I require in the security agreement the owners pay the taxes and send me a receipt. If they do not pay, the county will contact me if the taxes are past due. If I have to pay them, a service charge is added.

I have my owners pay their own taxes.

I assume you're talking about property taxes? What happens if the owners don't pay their taxes? Does the county come after them? After you? Are you generally forced to pay the back taxes to retain control of the property?

ANSWER- mobile homes are taxed as personal property. The property taxes your thinking of are paid by the park. A mobile home tax is like the use tax you might pay on a car.

Do you hold any liability for paying taxes (or for anything else) by holding the note? Or is the worst thing that could happen is that the local taxing authority could take the home?

ANSWER- if the taxes are not paid, they can be bought at a sale and the home can be 'taken' through the tax sale. So I get the taxes paid.

In other words, can it come back and hit your credit, or put any of your other assets at risk, if for some reason the taxes never got paid?

ANSWER- not a credit issue for me, it can show as a tax sale for the registered owner of the home.

So I am working with $320. Lets say this is an older home- so top $ is $3840. That is total money out- after every fee, tax and park manager is paid. It must also include fix up costs and space rent for however long it will sit. So our home needs taxes paid of $200, Title fees of $25, space rent for 45 days- say $600, and lets say the park manager found and sold the home for me, so add another $500. I pay the managers $250 per side, buy and sell on my deals. So I am at $3115 before cleaning a carpet or replacing a light bulb.

I'm confused how you got to $3115 here?

You started with an investment of $3840 (12 x $320). From that you subtract your upfront costs of:

- Taxes: $200
- Title Fees: $25
- Rent: $600
- Fee to Manager: $500

Total: $1325

So, you should be able to pay $2515 for the asset, right? Where are you getting $3115?

ANSWER- Without getting too deep into the numbers, and I have to admit I pulled this post from another web site I had posted it at quite a few years back... I take my net x a number of months, subtract out the hard costs to come up with a purchase price. 12 months, 18 months, it really depends on the home, the park and the reason I am buying the home. Remember I am a cash on cash investor with mobile homes, not a yield investor. So how I do thins will be different than others...

Lets say I sell it as a fix-up home. Say as is I would sell it for $7,000, no money down and payments of $200 per month. On a fix up I would escrow $25 for insurance leaving $175 of payments- or $2100 per year. After 56 payments i would have collected $9,800. I also charge $15 per month to service the note, so add $840. Grand total- $10,640. People love fix up homes, and my return looks good!

How do you decide how many payments the buyer will make?

ANSWER- I use a program called Loan Expert Plus on my desktop, and PowerOne on my blackberry.
Do you have an ROI target and work backwards?

ANSWER- Yes, I want a 100% ROI in no more than 18 months, ideally a year. My average is about 10 months.

Do you set a sales price and a payment amount, and figure out the number of payments from that?

ANSWER- Yes- My payments are all whole numbers, like $350, and I then tweek the interest rate to come out with a whole month, like 63 payments.

Do you get a feel for how long the buyer is willing to pay?

ANSWER- well, I just wing it I guess. The buyer can adjust the payment amount so long as my ROI is in that 18 month window.

I imagine a typical buyer wouldn't care if they paid 56 monthly payment vs 100 monthly payments, assuming the payment was reasonable to them. So, how do you determine the right number?

ANSWER- really, it is all about the monthly payment not the number of payments made.

I guess the question is, do you market the property based on the sale price, or based on the monthly payments?

ANSWER- I always market a monthly payment. I ahve never posted a purchase price or the number of payments.

Thanks again for all the great info...I have plenty more questions, but I'll stop there for now... :)

I hope the answers help...

3 Votes

I am looking for mobile homes in the Indi area to move to Lafayette and maybe Muncie. I could be looking for as many as 65. I pay small bird dogging fees for homes I purchase, like $1000 per home. I am looking for 3 bed single wides, 1980s through 1990s. If you run across something let me know...

0 Votes

All Forum Posts by: Jim Johnson

Jim Johnson has started 18 posts and replied 320 times.

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Post: How much to pay for the Mobile Home your buying...

Post: Hello From Indianapolis

Jim Johnson has started 18 posts and replied 320 times.

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Post: Hello Bigger Pockets!

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Post: How much to pay for the Mobile Home your buying...

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