In this edition of my blog, I want to focus on seller financing mobile homes in mobile home parks. There are some people who shun mobile homes and/or look down upon people who live in mobile homes. I am not one of those people. I have had family who lived in mobile homes and I have owned mobile homes myself. In these days of the increasing cost for a place to live, mobile homes can be affordable housing. If mobile home living or seller financing mobile homes is not “your cup of tea”, that is fine because it means less competition for people like myself.
I first bought a mobile home and seller financed it for the first time back in the early 2000’s. So far, I have bought and seller financed 4 mobile homes in mobile home parks. Here are a few things that I have learned along the way:
1. BUILD A GOOD WORKING RELATIONSHIP WITH THE MOBILE HOME PARK OWNER OR MANAGER- If you buy a mobile home that is in a mobile home park, it is critical that you build a good relationship with the mobile home park manager and/or owner. When I have found a mobile home in a mobile home park that I might be interested in buying, the first thing I do is get in touch with the park management or the ark owner. Build a good repoire with them. Explain to them what is your plan: to purchase the mobile home, fix it up, and then seller finance it to a deserving buyer with a good down payment. Make sure that you tell them that you will not seller finance any mobile home unless they (the park owner or management) approves of the party. I have passed on purchasing some mobile homes because they would not allow me to seller finance the mobile home. Most of the park owners and park management that I have been encountered has been good to work with.\
2. IF YOU SELLER FINANCE A MOBILE HOME TO A PARTY, FIX UP THE HOME BEFORE YOU SELLER FINANCE IT- When I have bought a mobile home that I seller financed, I fixed up the home before I marketed it for sale with owner financing with new paint, new flooring, and new appliances. Sometimes, I did some of the work myself. Other times, I have gotten others to do the work for me. I have never sold a mobile home letting the new owners fix it up as I have always looked for borrowers who was going to live in the mobile home and I wanted it to make sure that it looked good.
3. MAKE SURE THAT THE BUYER OF THE MOBILE HOME PUTS DOWN A GOOD DOWN PAYMENT- I am not a fan of seller financing any property (whether mobile home or not) with no down payment. I want to make sure that the borrower has a “stake in the deal” and is going to think carefully about walking away from the property. I have sold mobile homes for 20 percent to 45 percent of the sales price.
4. HAVE THE BUYER OF THE MOBILE HOME TO SEND THE TOTAL MONTHLY PAYMENT TO YOU OR YOUR AGENT- I try to make sure that the total monthly mobile home of the borrower is equal to or less than rent would be for a comparable property (including principal, interest, property tax, property insurance, and lot rent). Since I am officially the owner of the mobile home until the final payment is paid, I want to make sure that the taxes, insurance, and lot rent is paid in a timely manner. I have in the paperwork it noted that while the monthly principal and interest will always be the same, the monthly amount of the property insurance, property taxes, or lot rent (and other mobile home park fees) can increase or decrease. I want the client to understand that if the mobile home park lot rent, taxes, or insurance increases, so does the monthly payment they will make to me.
5. MAKE SURE YOU HAVE SOMETHING IN THE PAPERWORK THAT DEALS WITH THEIR DEFAULT ON THE MOBILE HOME PURCHASE- I have had parties who decide after a while they did not want to live in the mobile home in the park anymore. In each case, they simply left the mobile home forfeiting their down payment. At that point, I fixed up the vacant mobile home and seller financed it to another party. If they had decided to not vacate the premises, I have a provision in the paperwork they signed that stated if they missed a payment for 30 days, the mobile home would then become a rental and their downpayment would be the security deposit.
These are a few things I have learned through the years of seller financing mobile homes in mobile home parks. I have found it by and large to be profitable and work out well. Let me say finally that I have found it especially rewarding when I have done this with monies from my self directed IRA. Best wishes to each of you in your real estate and real estate note investing.- R.L. Wall
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