Why Selling a Mobile Home and Carrying a Note is a Losing Proposition

The Economics of Selling and Carrying a Note on a Mobile Home That is in a Mobile Home Park You Don’t Own Okay, you agree that renting a mobile home is a money losing proposition.  So what about selling the home and carrying a note on it?  Well, sorry to say that it’s a loser too. COST OF HOME:                             $12,000 LOTRENT IN PARK:                      $200 per month PRICE YOU SELL HOME:            $16,000 with $1,000 down and 12% Int TOTAL MONTHLY PAYMENTS:   $200LotRent + $250 Home Payment Sample Profit and Loss Statement Revenue                   $450 per month COST Lotrent                       $200 per month Net income                $250 per month Before you get too excited, we have to make one big adjustment – that $250 is not going to last forever, in this case only for under 8 years – or 92 months (that’s how long it takes to pay the house off).  You have not created a lifetime of income, only for 92 months.  And that’s assuming the buyer makes the payments. Have you heard about the sub prime credit mess?  Well, guess what kind of customer you will be selling to?  The lowest end of the credit spectrum – that’s who.  Based on national averages, even if you do all the credit screening in the world, they will stop paying you in the first two to four years.  So you may be getting that house back when they default and run off (in our experience you get about 5 out of 10 homes back).  What happens then?  Well, first, you will have to file for a legal foreclosure, a much more expensive step than a simple eviction.  And you will have to pay the lot rent during the entire process.  But the worst surprise is that you will have to make the home ready to sell again.  And wait until you see what condition it will be in!  It’s a pretty safe bet that the carpet will be stained and filled with pet urine.  The walls will have holes and scrapes all over the place. The closet doors will all be broken.  And the appliances (including A/C and heat) may be missing, being sold by the home owner to pay for their move. To get that home back into service again will cost maybe $5,000 – and there goes any profit you thought you made.  In addition, now the home is a few years older, and will not sell for as high a price as it did last time.  And if this cycle repeats itself just one more time, you will be lucky to get for the home what you just spent in re-doing it. Why do the other guys leave this important item out of their books?  I approached one of them at a convention and asked him and his response was “I’ve never had to spend a penny on repairs on my houses”.  Then he must not have ever owned one! By Frank Rolfe Frank Rolfe is a mobile home park investor and owns over 100 parks with his partner Dave Reynolds. Frank also leads regular Mobile Home Park Investing Bootcamps through the MobileHomeUniversity.com.