Dirk, Tony, Lonnie and other mobile home specialists - Posted by Debra G.

Posted by Bill K. - FL on February 18, 2000 at 16:13:02:

Hi Debra,
I would stay between the two. Lower than apts but higher than rental mhs. You sell the higher payments by explaining after a certain time the home is paid off and just lot rent will be due. With respect to the new ones; to buy they must come in with several thousand down and qualify for a new third party loan. Don’t consider them your competition. 50% of those deals fall apart.(Had a new home dealer tell me that) Your market is the folks who can’t buy a new one.

Dirk, Tony, Lonnie and other mobile home specialists - Posted by Debra G.

Posted by Debra G. on February 18, 2000 at 15:25:45:

You all have provided an abundance of great information on dealing in mobile homes. I have a question about comparing mobile home payments with local apartment rental costs. I have found in my area, rent for similar apartments and mobile homes are priced very differently. Three bedroom/two bath apartments rent for $500-525, and 3/2 mobile homes rent for just $395-425. There’s at least a $50 a month difference in two bedroom homes. Should I be setting up my mobile home /lot fee payments to match mobile home rental costs, or the higher apartment rates? It seems that parks would be charging the higher rates if the market would bear it. What has been any of your folk’s experience? And, by the way, you could buy a brand-new 3/2 mobile home here, set it up in a park, and pay $500-525 a month, the same as renting an apartment. Thanks for any feedback!

Re: Dirk, Tony, Lonnie and other mobile home specialists - Posted by Tony-VA

Posted by Tony-VA on February 18, 2000 at 17:11:07:

Wow, I actually got my name in the same sentance with Dirk and Lonnie. That is an honor. Hope I can live up to that.

To be honest Debra, I go by what my target market will bear. I have found that sometimes I can get the total payment (lot rent plus note payment) to be less than renting a comperable apartment, and still be higher than renting a mobile home. I have also had the opposite be true.

Each buyer seems to have a similar, but unique perspective of market value. Some of them are coming to me because they cannot afford an apartment, other come because they can but want to own instead of renting. I work within their parameters, letting them name the terms until I get them in the ball park that I am looking for.

Here is an example.

Buyer says he can afford between $225-$250 per month comfortably (over and beyond lot rent). I say Hmmmm, I might be able to work with that but how much can you afford to put down. They again name a number. I flinch and remain quiet. They will break the silence and name a slighlty higher number. If they are in my ballpark, I say well, I can get you those payments with that amount down, but I will have to extend the note to 48 payments instead of 36.

Most of my buyers, after speaking to MH dealers, expect the notes to run 10 years or more. When I mention 3 or 4 years, they jump on it. Most of them have been quoted the same or slightly higher monthly payment on new MH’s, but for many many years, a higher % rate and then only to find out that can’t qualify.

Some of them are so excited to have payments less than they were paying in rent, or close to it. They get excited when they find out they will actually own their own home in 4 years or less.

I sort of back into my deals in negotiation. I stick very firmly to lonnie’s advice of never naming numbers first. I flex the terms to fit the deal and get a yield that I am happy with. I take into account holding costs and often sell in 3 weeks or less, while dealers and brokers seem to keep these older homes on the market for several months.

I hate to admit this but I don’t get top dollar for my homes. I know that I can get more, but my wife and I have had great success with our technique, usually exceed 100% yield, but almost always get the payments in the lower end of the buyers spectrum. Usually $230 range. We are more than comfortable with our success in the deal. And we enjoy the benefits of the rapport we establish with our buyers and their friends. As Lonnie says, it’s okay to leave something on the table for the other guy.

This has helped us when we have had homes returned to us. The homes so far have all better greatly improved from when we sold them, and the buyer’s came to us and asked us to take the home back and waive the note. Each swept, mopped, and vaccuumed the homes. Each stated, “You have been really good to us, thank you.” I wish I could bottle and sell the feeling one get’s when they hear that, and walk away with better collateral then what they started with.

So long story short, my suggestions is to work with each individual, as an individual. Work the deal in a Win/Win scenario until the terms fit into the comfort level of both buyer and seller. Using apartments and rental units as a guide is good for starters, but can limit you in my opinion.

A side note:
The reason our yields are high is because we have stuck fast to the rule #1. You make you money going into the deal.

Best Wishes,