100 ways to find buyers for mobile home notes....

I'm looking for what has worked for others in selling off mobile home notes. I've brought some used homes to my park and want to sell the notes.
About a year ago I answered an ad in a local paper from a note buyer and have sold several notes to him. ( I've since contacted several note buyer advertisements without luck. Most of these folks want a conventional note with land involved.) Advertising on Craigslist has been pretty
dismal. I talk to family and friends but so far no takers. I'm willing to discount notes to provide an 18-24% return. Any creative marketing ideas out there for selling mobile home paper??

Darrell, I have found that talk of Self-directed IRA's is the door opener when approaching a newbie investor. Keep in mind that usually they invest before they set up the SD IRA, it is a real good opener, also give them a book and a financial calculator and be ready answer their questions. Keep in mind that when your investor starts getting the checks, they will tell someone else, who then becomes a prospect.

Hi Darrell,
We also sold some of the notes for the homes in our first park. We leveraged those funds to acquire/fix up the remaining POHs. The largest purchaser of the notes were in fact my daughter. She loves it. We had more interested investors than actual notes available.

With that said, the biggest objection for most people is what happens if the resident defaults on the loan and also trashes the home? Most of these investors know nothing about Mobile Homes.
If I were a potential investor my questions would be:
1. How do I fix the home and how much does it cost?
2. How do I market, sell and take care of the home
3. How do I manage the residents if they get behind
4. Mobile homes do not appreciate like a nice stick built (generally speaking); what is the value of having my note secured by the title of a MH?
5. Do I have to pay lot rent while trying to fix and sell the home again?

These were the questions that we asked of me. In our case, we informed our investors that we would be responsible to taking care of all the fixes and resale if this event happened and would not charge the investor. Also, the lot rent was waived during this period. Lastly, we did personally guarantee the note in the event of total loss (ie fire). Ultimately, this was a question of risk/reward for these investors.

Would you be willing to share an example of the terms for one of these notes?

Howard

I bought several used homes last year and brought them into my park and rented or rented with an option. This Spring I wanted to bring a couple of more in and finance them through private notes. I would personally guarantee the notes with virtually no risk of default.

Do these terms sound reasonable:

$15,000 note
9% interest
5 year term

Thanks

Jayray,
If I were the note buyer I would need more information. You wrote:
- $15,000 note
- 9% interest
- 5 year term

Is that what you are selling the home to the mobile home buyer? Or are you saying that you want someone to invest $15k and get paid 9% on it?
Here are some pieces of info I would want to see:

Economics:
=========
- What is the total value of the note to the Home buyer (if note is satisfied): For example: $300/mo for 60 mo = $18k
- What is the actual seasoning on that note? Buyer has been note for 10 mos and never been late. The balance of the note would be $300/mo for 50 mos = $15K => therefore I know that there is only 15k left

- As a note buyer I only buy notes at a discount. I need to factor the time factor as well as take into the account the asset type I am investing in. So what is the amount of money you will sell that $15k note for? Would $7.5k cash now be ok? (PS - there is no right wrong answer - only what is negotiated)

- What type of documents will I receive as part of this transaction? promissory note with personal guarantee?, listed as loss payee on insurance of home?, listed as lien holder on title?

- If the home is abandoned for 6 months will I still get my payment? If my payments stop or freeze during this time then I would need to factor this in as my ROI could potentially change a lot

Investor Perspective
================
As an investor I want to know if this is the best use of my money (given the risk level). If my annualized ROI be 20-30% then I would look at it. If I could only make 9% then this is not so interesting.


PS: I am not a note buyer, just listing thoughts based on other note buyers I have met.

Notes and note buyers are great, but it can get a bit complicated. Here's what we do and it works like a charm.

Financial Friends with Self Directed IRAs (of course, I don't care where it comes from, but I love sharing SD Roth strategies with people - and they love me for it)

I pay 10-15%, but 12 is typical.

borrow 10k which is usually enough to buy a decent home for 5-8k, 3k for set up and I usually pay for the porch - 10-12k all in for a nice, used home - borrow 10k

My payment to them is $260 for 4 yrs or $330 for 3 yrs - have your buyer's payment match theirs.

You get a home in with little to nothing out of your pocket. You get lot rent - and you are in the black from day 1. They get a killer return. And 3 yrs goes by pretty fast, then you have a free and clear $330/mo asset paying for many, many more years.

Keep It Super Simple.

Now for FFs I really like, I will give them the whole payment. This is usually around a 30% return. But then they sometimes squeal when they have to reimburse us for repairs or when it goes non performing. Funny how that happens, isn't it? :-) Seriously though, I think you'll find many people who will help you build your business this way.

Brad Simmons
Bluegrass Region of our State
Danville, KY
[www.StarHomeUSA.com]

Hey Brad,

At the end of your post, what did you mean by "give them the whole payment"?

Jay,

just that - they get all the payments. I just get lot rent. But I really have to like the FF. :-) It is a wonderful way to pay someone back a favor. $250/mo for ?? yrs.

Brad Simmons
Bluegrass Region of our State
Danville, KY
[www.StarHomeUSA.com]

Honestly, I think the whole issue is that the note carries such a high risk. Unless you can find ways to mitigate that fear, it is hard to find a buyer. I like the idea " we informed our investors that we would be responsible to taking care of all the fixes and resale if this event happened and would not charge the investor. Also, the lot rent was waived during this period. Lastly, we did personally guarantee the note in the event of total loss (ie fire). " But the lot rent should never be in the consideration. No one want to end up with a home unless you only focus on local buyer.

Having bought a bunch of MH notes through my SDIRA, I echo Howards sentiments - spell out the terms and contingencies, and look for people who understand the risks/rewards. If an investor wants a completely hands off no risk investment, double or triple what he/she gets in a CD. Others are more comfortable with risk, not afraid of losing a month or 2 income, etc, and will demand a rate more reflective of this.
Ron