Mobile Home Notes – How to
find them.
Updated 3/16/06
The Industry
There are not very many
nation wide buyers for mobile home notes.
This approach is best done when looking to buy the notes yourself or work
with an investor who is local to the notes.
Go to www.google.com and search for
we buy mobile home notes and contact the potential buyers that you find that
way.
What we are talking about
here is a Mobile Home in a Mobile Home Park on a rented or leased space. It is important to note that we are NOT
talking about a Mobile Home that is on a lot or piece of land that is owned or
being purchased by the owner of the Mobile Home. This latter type of situation qualifies for
normal housing loan programs. Thus, it
can be purchased using traditional and even government guaranteed loan
programs.
The Mobile Home that is on a
rented or leased space does not qualify for a FHA or VA loan. To purchase a mobile home on a rented or
leased space will require that the purchaser obtain other, non-traditional,
types of loans.
A person purchasing a new
mobile home will find many options available for financing. Often the manufacturer will have loans
available to its customers. In some
cases, the mobile home dealer will have made arrangements with local sources of
financing. These high interest finance
companies or private investors will have less stringent requirements than those
of the local banks. A final alternative
for the purchaser of a new mobile home is to get a bank to loan them money for
part of the purchase and then come up with the difference in cash.
For the purchaser of a USED
mobile home, the options for financing are much more limited. First, as mentioned above, there is no
government loan guarantee program for mobile homes that do not include the land
with the purchase.
The mobile home manufacturers
have no interest in helping with financing the sale of a used mobile home. They reserve their funds for financing new
mobile homes that are in their current inventory. These are mobile homes that they need to get
sold to maintain their profit margins for on-going operations.
Finance companies will
sometimes make loans for mobile homes that are built within the last 5 years at
relatively reasonable rates (10% to 12%).
If the mobile home is older than that the interest rates increase significantly
(14% to 18% and higher). Finance
companies will NOT finance a mobile home that was built before 1976. Actually, most will not finance anything made
before 1985. This is the year when the
original HUD National Manufactured Home Construction and Safety Standards were
beefed up. Since 1985 mobile homes are
built to standards that are similar to the minimum local and county standards
of normal homes.
So, what does this mean to
the purchaser or seller of a mobile home that is on rented or leased land? It means that there is rarely financing of
more than 50% or 60% of the NADA rated price of the mobile home. This is not to say that a person can’t get
better financing on a used mobile home.
It just represents the case that those who buy mobile homes generally
have the type of credit score that would eliminate anything more than this 50%
or 60% financing being available to them. People who DON’T normally shop for
used mobile homes may well be able to get better financing terms.
If there is only 50%
financing available, then the buyer will have to come up with the other 50% in
cash. If you’re looking at a typical
purchase price of under $40,000 for many mobile homes (less than 15% of used
mobile homes sold for more than $40,000 in the 1990’s), then you’re asking the
buyer to come up with as much as $20,000 in cash to make the purchase. Again, this may not be an unusual amount for
a down payment for a normal home on its own lot. However, this is a virtually impossible
amount of cash to expect the typical buyer of a mobile home to pay.
And, this is where the market
develops. If the typical buyer of a used
mobile home has to come up with as much as $20,000 cash to buy the mobile home
and if this typical buyer is not likely to have that kind of cash, how does the
mobile home get sold? Obviously, this will require the owner to carry back the
financing. The seller will have to carry
back the amount that the buyer is short on the down payment.
You will find that, on a
percentage basis, there is far more carry-back financing in a typical
How to find Mobile Home Notes
There are three ways to find
these notes. The majority of the notes
can be found by going directly to the Mobile Home Parks. You can go directly to Mobile Home
Parks. Mobile Home Dealers are an
excellent source for ongoing leads to note holders. Finally, Mobile Home Manufacturers will
sometimes have a finance department. It
may be possible to purchase portfolios of notes from them on occasion. Here are specific strategies for each of
these markets:
Mobile Home Parks
1.) The owner and/or the Mobile Home Park manager will
often be carrying these notes. They will have read Lonnie Scruggs’ book “Deals
on Wheels”. In that book Lonnie teaches
you to watch for mobile homes that are for sale. The approach is to offer the owner a very low
cash offer. Then turn around and sell it
for a small down payment and carry back the financing, receiving monthly
payments. A Mobile Home Park owner/manager
may have a portfolio of these notes. You
approach him and ask if he would like to sell any of them. Like most note holders he will say that he
doesn’t want to sell them. However, just
like anyone else, there may be times when he could use cash more than monthly
payments and he may sell a note or two to get the cash. But, he will have one additional reason for
selling a note that other people will not have.
Sometimes he comes across a good buy on a mobile home that will take a
chunk of cash! You should leave your
card with him and suggest that he call you whenever that need comes up. The most important message to leave with him
is that there is a way for him to pull cash out of his notes without having to
sell them. (If he calls you later, this
will be the lead in for a specific type of partial.)
2.) You should then ask the Mobile Home Park owner/manager
if he knows of anyone else in the park that is carrying back a note. He may also know of someone that sold a
mobile home in the park and carried back financing. He may have the forwarding address of this
person. The Mobile Home Park
owner/manager may know of other “Lonnie” dealers.
3.) Ask the
4.) Ask for permission to have someone go through the park
and leave your flyer in the door of all of the homes in the park. Often, he will not want you to do that
because he fears that the flyers may end up all over the streets and make the
park look trashy. This is not a big
obstacle for you. Just ask for the
highest number space in the park and make your own data base of addresses. Print up a tri-fold flyer or create a short
letter that states that you are interested in buying notes and mail it to every
occupant in the park. Include in your
mailing piece a statement that you can teach people who are trying to get their
mobile home sold to “use your money to help potential buyers
buy their
home”. This is a set-up for showing them
how to do a simultaneous closing.
5.) Drive though the park and write down the phone numbers
of any homes that are for sale. Call
these people and tell them that you are an investor in mobile home notes. Ask them if they would like you to teach them
how to “use your money to help potential buyers buy their home”. This is a set-up for showing them how to do a
simultaneous closing.
Mobile Home Dealers
Visit the Mobile Home dealer
and speak to him as you did with the Mobile Home Park owner/manager. If he has notes, you will find him to be
generally much more interested in selling them than would a
1.) A dealer may have notes that he carried back when he
sold a used mobile home that he took in trade on a new mobile home.
2.) A dealer may have a short list of “wannabe”
buyers. Some of these buyers have told
him that they will purchase a new mobile home as soon as they sell their old
mobile home. They need to sell that used
home to get the cash for the down payment on the new mobile home. So, they cannot take a seller carry-back note
because the monthly payment will not get them the cash that they need for the
purchase. Explain to the dealer how a
simultaneous closing works and ask him to let you talk with those “wannabes”. If one of them uses the simultaneous closing
to get the money to buy a new mobile home, you will make a believer out of that
dealer. He will likely send you a deal 3
to 4 times each year.
3.) Ask the dealer if he can remember anyone that bought
one of his mobile homes and carried back a note on the old home that they sold.
Mobile Home Manufacturer
With the acquisition of
Greentree by Conseco and then Conseco’s subsequent bankruptcy, credit lines for
mobile homes have become quite tight.
Warren Buffet is making a bid to buy Conseco, so things may get a bit
easier over time. But, at this time it
is tougher than ever to get loans to buy a Mobile Home. Some manufacturers will have an in-house
financing department. They will
regularly need to sell off the older notes in their portfolio in order to
generate the capital to loan on the new mobile homes that are currently coming
off of the assembly line.
Contact the finance
department and go their personally to talk with the finance manager. Tell him that you are working with a group of
investors that are interested in buying portfolios of notes. Ask to be put on the mailing list for
companies that they will contact when they want to sell off some notes. This list is usually large institutions such
as insurance companies and finance companies that will buy notes in
quantity. When they need to generate
some cash they will sell off dozens of notes at a time.
When you receive a notice of
sale from them it will include a spreadsheet of all of the notes that they are
offering for sale. It will often require
an “all or nothing” offer. This means
that there are a few bad notes in the group.
That’s the only way that they can get rid of the bad notes.
The spreadsheet will give
information that will make the quality of the portfolio clear. It will have columns that include credit
scores for the mobile home owner and the payment history on the note as well as
the usual information. We have a
considerable advantage on the “all or nothing” type of portfolio. We can take out the good notes and offer that
portfolio to the investors that will bid high for a good note. Then we can offer the bad notes to the
slime-ball lawyers that buy note to repossess the property.