SUB2 on Mobile Homes? - Posted by Bill KY

Posted by Dr. Craig Whisler CA on March 18, 2002 at 11:40:12:

Hi Jerry. Why do you always ask such hard questions? I don’t know the answers. I guess for scenarion A I wouldn’t care if the seller moved back into the mobile after I bought it because I would be able to control the rent. I would raise it up to just a little above the top of market, with a 30 day notice as required by CA law. If he doesn’t pay, that’s fine with me. I would prefer that he doesn’t. If he isn’t paying me rent, then he probably isn’t paying the lender for the mobile either. Either way I win. If I own the lot, I WANT the mobile to go into default and to be repoed by the lender. This would open up another avenue for further profit.

Actually, Jerry, the same would apply to your scenario B.

One nice profit would occur upon buying the lot and the other would be possible only if the lender ends up repoing it. You should do all you can to encourage the lender to “protect his interest” (:

Regards, doc

SUB2 on Mobile Homes? - Posted by Bill KY

Posted by Bill KY on March 16, 2002 at 14:41:48:

Excuse me for my ignorance, but I have a potential Subject 2 deal on a 2000 Schultz mobile home on 4 acres in KY where the owner is agreeable to allow me to simply take over payments- his mortgage balance is 42K. He has a monthly payment of $203 on the land, and $526 on the home (including taxes and insurance)- leads me to believe his payoff estimate is wrong… In any event, I generally work standard [non-mobile] homes and need a quick primer or help from someone who could tell me if SUB2 works the same with mobiles as it does with non-wheeled residences… I’m feverishly reading all the prior posts in this forum, but anyone who could help me out would be appreciated. I don’t have time, on this one, to purchase and digest DOW- although I think that needs to be next on my reading list. Thanks in advance.
Bill, KY

Re: SUB2 on Mobile Homes? - Posted by CW

Posted by CW on March 22, 2002 at 12:07:22:

Where are you in Kentucky?

Is the seller living in the home? (nt) - Posted by Jerry Freemean

Posted by Jerry Freemean on March 18, 2002 at 06:19:39:


Close your eyes and think again… - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on March 17, 2002 at 19:31:16:

This is a potential KILLER deal, but you will need to reshape it just a little.

We are taught to look for (or make) great deals. What is a great deal? Well, its supposed to be a deal with either great terms or a great price (or both), right?
Well most of the time that is right but not always. Maybe I just think differently from most folks, but, I see another element in this case that could be of great value to you, Bill, if you structure it correctly. Don’t be afraid to think out of the box. Where is it written that you have to accept or reject this deal exactly as it has been offered to you by the seller?

Clearly everyone else is right in telling you that this is a bad deal AS OFFERED, but you don’t need to do it the way it was offered. You should make your OWN offer.

Half of this deal is horrible (the mobile home half). The other half of this deal looks VERY good to me from where I sit in CA. I admit that I have no idea of land values in your area, so you need to determine for yourself what the land part of the deal is worth. It seems to me that 4 acres with all of the utility improvements already installed would be a good deal for $203/mo with nothing down. Try to buy the land ONLY and rent it to whoever buys the mobile.

Here is how I would structure my offer, and how I would present it to the seller. I would approach the seller with an offer to buy the land only. Offer to just take over the land loan, with nothing down, to get it off his back. I would tell him that the total price for the land mobile combination is very high. I’d say that it will be nearly impossible for him to sell both at once in this market. Remind him that most mobile home buyers around the country buy mobiles in parks and just rent their spaces. It is easier for them to get into a mobile purchase that way. Tell him that they will have a much lower downpayment that way. Say that this is probably the easiest way for him to sell his land and mobile in this market. Say that you would be able to buy the land now and start making the land payments immediately to relieve him of this responsibility.

As the owner of the land you would have a much easier time managing your rental lot than if it were a lot and mobile combination. Tenants can’t do so much damage to land only (though I’ve have had a few who have tried).

You wouldn’t care what happens to the mobile. If the downstream buyer of the mobile chooses to rent your lot or to pull it off your lot, great. You win either way. If he pulls it out you could get another similar one for maybe about $15k.

If the buyer of the mobile home later defaults on his payments to the lender, so much the better. Let the bank repossess it. Remember it will still be on YOUR lot (collecting rent or accruing storage costs that could later be offset against the purchase price if you want to buy it from the lender).

After a repossession, the lender could pay you lot rent (maybe at about $350-$450/mo or what ever the market will bear). Raise the rent a little above market to the lender but not so much that he is FORCED to pull it off, though that is ok if he wants to pull it off. Either way you win. Remember it is VERY costly for the lender to move the mobile, resell it, and then move it somewhere else and set it up again. Chances are good that it will just sit on you lot for a couple years while the lender goes through his reality check of trying to sell it for more than it is worth. It should probably sell for about $15k. After the lender softens up as they usually do, in time, I would offer $15k or so for the mobile (with full credit for rent/storage). If and when they accept, ask them to finance it, with no due on sale clause in their note. You could then, if you wish, resell it Lonnie-style by wrapping the existing note with your new one, if this is permitted in your state. Check with your lawyer first though. If you resell the mobile Lonnie-style you could still rent the land. In deals like this you tend to have a captive tenant who stays and stays, and pays and pays, because it is so expensive to move big mobiles. Either way you win.

If the lender does not make any payments for a year or two (this is good)then just write to them and say you have a “storage bill” on their mobile for
$8-$10k or so and offer to take the mobile off their hands for the amouunt owing to you. Remember how much it will cost them to move it. You could always sweeten your offer a little but don’t do it if it isn’t necessary. If you go this route, I would not press the lender for the monthly payments for about 2 years if you want the mobile. Just let the payments accumulate to the point where the bank will have to write a BIG check to you. Banks don’t like to throw good money after bad. I suspect that this expenditure would have to come before the lenders board of directors for approval. The bank officer who made the loan originally might not want this to happen and draw attention to the fact that he has name a bad loan. He may prefer to just quietly send you the title to the mobile, free or very cheaply, hoping the board doesn’t even notice. Lenders are notorously tight (about losses like this) and they might decide to just give you the title free and clear for space rent or storage charges owning.
I have done a couple of deals like this in CA and they were VERY profitable.
Good Luck, doc.

Re: SUB2 on Mobile Homes? - Posted by terryr

Posted by terryr on March 17, 2002 at 17:49:01:


This comes up a lot … - Posted by Jerry Freeman

Posted by Jerry Freeman on March 16, 2002 at 19:48:47:

although usually, they’re talking about a MH without land, so your deal may a little different.

Nonetheless, it calls for a very cautious sniffing over before proceeding. People often post here saying that someone “just wants me to take over the payments…” For a sense of what that usually means, go to this post and read all the follow-up postings:

Sometimes, you can get a seller to give you some cash to help them get out of the payments. After you’ve studied the numbers in your deal, you might come back to the seller with something like, “I can’t do this with the terms you’re asking for. I think you probably know that the loan balance is really too high for the property. However, there’s still a way we could do it if you could come up with a transition payment (or payments) to help me take it over.” Then you work out with them how much you need to make the deal right-side-up and how they’ll pay you.

Best wishes,

Re: SUB2 on Mobile Homes? - Posted by Tony-VA

Posted by Tony-VA on March 16, 2002 at 19:35:38:

The retail value of that home would likely run you $25,000. You could likely pick one up for $15,000 as a trade in on a dealer lot. That being said, what you have is an upside down asset.

Owning the land on these deals is great if you can do so on terms that make it worth while. I prefer to have an exit strategy that allows me to keep the land, sell the home and rent the dirt back to the buyer.

I am not certain what your exit plan is for this one but easy money, better yields and less headaches may be found elsewhere.

But this by now means should suggest that money cannot be made on this kind of deal. Just a personal preference.

Best Wishes,


Re: SUB2 on Mobile Homes? - Posted by ScottS(NC)

Posted by ScottS(NC) on March 16, 2002 at 19:09:17:


Homes are diffrent then mobiles, New mobiles are more closely compared to new cars. A 2000 mobile is depreciating faster than it is being paid off. I dont pretend to know your market but the price you gave, here in Asheville NC would be retail. Bill buy Lonnies book Deals On Wheels if you dont already have it it will teach you the mobile biz and save you thousands in the process. HTH Take Care ScottS(NC)

correction: - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on March 18, 2002 at 11:58:41:

In the last paragraph the sentence should read “The bank officer who made the loan originally might not want this to happen and draw attention to the fact that he has MADE a bad loan”.

NOTE; Bill, if you buy this land and the lender repoes the mobile, contact me for further ways to save another $5k or so off your purchase price if you want to buy it.

Regards, doc

Question … - Posted by Jerry Freeman

Posted by Jerry Freeman on March 18, 2002 at 06:22:38:

Hi, Doc.

In this scenario, how do you set it up so the seller doesn’t move back into the home (assuming he’s not living there now) and take advantage of the now affordable payments? Or if he’s living there now, how do you get him out of the home as part of the deal?

Best wishes,

Re: Close your eyes and think again… - Posted by terryr

Posted by terryr on March 17, 2002 at 23:23:52:

great idea doc