Starting MH note buying business - (long) - Posted by srb (Tx)

Posted by Anne_ND on July 10, 2006 at 18:23:59:

The classic Lonnie notes are going to exceed 60% of the retail value of the home.

Rather than actually sell a partial, I usually get a loan from an investor secured by the cashflow on the mobile home (not the title) and I continue to service the note. I guarantee the cashflow regardless of whether the payor on the note continues to pay- if your investor is out of state they sure don’t want the hassle of repoing and then selling a MH from far away.

good luck,


Starting MH note buying business - (long) - Posted by srb (Tx)

Posted by srb (Tx) on July 10, 2006 at 17:11:06:

Based on my (limited) experience in doing Lonnie deals and attempts to find note buyers, I am thinking of starting a mobile home note buying business. Let me know what you think about this plan:

I will offer 80 cents on the dollar for partials that meet the following simple criteria:

I will buy the next 24 payments
The note should have at least 36 payments remaining
At least 3 month seasoning required (preferably no late payments in that period)
Remaining face value of note should not exceed 60% of “as-is” retail value of home
Home should be less than 15 years old


Assume $300 monthly payments for the next 36 months (present value of the next 24 payments is $6373.02 at 12% interest).
I will buy 24 payments for $5126.57 (giving me a 35% yield).
Therefore, I would be paying him 80.44% ($5126.57 divided by $6373.02) of the face value.

I will borrow $5894.40 from an investor (at 20% interest) that will provide him 24 payments of $300 per month. This is an investor that has already lent me money at 20% interest to invest in mobile homes. So, he understands this kind of risk.

I will make $767.82 ($5894.40 - $5126.57) as my spread.

Benefits and risks for all 3 parties (myself, note seller, investor):

Note seller:
Benefits - quick cash to do more deals, ability to sell income stream for 80% of value
Risks - must add investor or myself as lienholder to mobile home title till 24 payments are made

Benefits - makes 20% yield on investment, protected by lien on mobile home at less than 60% of value (good LTV)
Risks - credit history of MH buyer (note payor), possibility of repo if payment stream stops, note payor has to pay taxes, lot rent and maintain insurance

Benefits - quick, upfront cash ($767.82) for my efforts to match two interested parties; provide MH expertise in valuation and repossession to investor
Risks - I assure a steady income stream to my investor. So, I am responsible for repossession if the payment stream is jeopardized.

Miscellaneous issues to consider:

  1. Fees to add lienholder to title and release of lien once payments are made.
  2. An amount equivalent to 2-3 monthly payments would be held in a separate account (escrow?) to guard against default. They will provide a 60-90 day cushion to complete any legal action if payments stop or are late.
  3. Note payor to provide proof of insurance coverage & property taxes paid

What do you all think about this plan?
Survey question - would anyone here be interested in selling their notes if I offered a service like this?



Let’s modify it then !! - Posted by srb (Tx)

Posted by srb (Tx) on July 11, 2006 at 11:03:45:

The biggest risk I see that affects the payment stream is the note payor. If the note seller (Lonnie dealer) does his due diligence while selecting the home buyers, that is a big plus. Also, it would be interesting to know how many of his previous buyers have defaulted on their payments. If the Lonnie dealer has a license, it would show that he was serious about his business.

The reason for buying partials was to have the Lonnie dealer involved in the note till it was paid off; any repossession that might need to be done would be done by the note seller since he would want to collect on the payments remaining anyway, right?!

In any case, what if I lowered my offer to 75 cents on the dollar? Would that better compensate me for my risk?



Re: Starting MH note buying business - (long) - Posted by JeffB (MI)

Posted by JeffB (MI) on July 11, 2006 at 10:50:04:

My opinion, the way you have proposed this, the deal is way to thin for you.

Having said that, I’d be happy to sell you some of my notes! :slight_smile:


Re: Starting MH note buying business - (long) - Posted by Scott

Posted by Scott on July 10, 2006 at 19:53:30:

Just a couple of things, I buy these kinds of notes all of the time and I can tell you this, your margin is too thin. If you have to take the home back it will cost you greatly.

Additionally, most people will be hesistate to allow you to hold 60-90 days worth of payments and I typically get the title to the property and it is my expense to add myself as the lienholder.

As for me, I purchase homes older than 15 years.

Have you read Tin Can Alley by David Butler or Terry Vaughn book Cash-in? They might be of further assistance to you!

Re: Starting MH note buying business - (long) - Posted by Craig McCracken (AL)

Posted by Craig McCracken (AL) on July 10, 2006 at 19:39:14:

I’m sorry but I’m missing something here. If you buy at 5126.57 and borrow 5894.40 with 20% interest and the underlying note is at 12% how do you not become upside down ?