Land/Home Lonnie Dealing?

For some time now I have been writing about the similarity in market factors that created the Lonnie deal and now affect the land/home deals.

For example in the Lonnie deal where the mobile home sits on a lot in a park owned by someone else, the sellers of the mobile home struggle to sell because there were no lenders willing to finance their buyers to purchase a mobile home. The sellers had to drop their price but still needed some money to move. We as Lonnie dealers were able to buy these homes for very little because we could offer some cash.

The money made in Lonnie deals was made in the spread from the low cash price we paid and the higher, financed price we created because we were willing to accept payments over time.

This model of buy low for cash, sell higher and take the payments through owner financing is a great model so why not apply it to the land/home properties?

I have talked with a number of investors and a few real estate agents who are seeing the mobile home properties selling for next to nothing in some areas. Why not create a Land/Home Lonnie deal with these properties?

The singlewide on land would seem to be something one could buy for next to nothing in this environment and Lonnie deal the land and home just as Lonnie did the mobile homes in parks.

I am looking into the legalities regarding lease/options and contact for deeds (land contracts) both to see which might best protect our interest in the deals and how these techniques may be affected by SAFE Act and other legislation. I am only scratching the surface just yet but will be looking into this more now.

I post this to get your ideas and thoughts on this niche. Post your concerns and experiences and I believe together we can hammer out a model that others can replicate in their areas.

Tony

owner financing is a great way to make more but sometimes you have to abide by the Truth in Lending Act

also you have to watch your interest rates are not to high.

that being said check out some articles about owner financing here

I have a couple of deals that match your description. I agree that they are ripe for picking now.Judging from ad response, When advertised they didn’t really show much more desirability than homes in the park do. Payment price points seem about the same as the MHP $525 single, $650 double, it does seem that the length of stay is longer.

In my eyes, these are really good deals for the buyers, as pet issues, room for lots of cars and other junk are a non-issue.

Lease options for me have just been glorified rentals. The difference being the maintenence is deferred with a lease option vs. being done regularly as a rental. For that reason I had a couple of years ago stopped doing lease options (except for 1 recently).

My attorney has cautioned against contract for deeds because… i actually forget the reason why!

That brings us to owner financing whereby the deed changes hands and a note/deed of trust is created.
This strategy has appeal to me at present.
Cost of foreclosure would have to be factored in(i have been quoted $3500). So the down would need to be far greater than $3500.

I just did an owner financed sale on an “undeveloped” 4.5 acre parcel. Actually there was a well and a couple of barns on it. It was structured at 7.5% with a 5yr balloon. I found that some of the ones who made offers were ok with the price but wanted a lower rate(like 6%). What made me comfortable to do thisdeal is that i don’t see the buyer being able to damage the property much if at all if i do have to foreclose.

So what is the upside in owner financing vs. renting? Is it mainly fewer headaches without tenants to deal with?

Land/Home Lonnie Dealing?

Hello Tony,

I think this is an excellent strategy and one I’d like to put into place in the future. My primary concerns now are creating cash to pay off debt and replace my income from the 9 to 5. Once I get to the stage of having excess cash to invest in income producing assets, owner financing free and clear doublewides on land seems to be the ticket.

The demand for lease options and owner financing on these properties is very high in my area due to most buyers not being able to qualify for financing. You can buy these properties relatively cheap (especially now) and the rent/payment is fairly high giving you a nice cash flow cow.

One issue I see is coming up with the cash to buy these free and clear. The other issue is the SAFE Act and possibly having to become a licensed mortgage originator to owner finance them. That might sway me to using a lease option model instead. I know some investors that use a contract for deed, so they do not have to foreclose (they get deed in lieu of) and they get 10% down. It seems you can get more down with the contract for deed model versus a lease option model.

I would be interested to hear if others are using a Lonnie Deal type model now with land/homes and what kind of success you are having?

Thanks,

ShawnNC