Will The MH Park Require You To Pay Back Lot Rent?

After foreclosing on a note and taking possession of the MH will the MH Park require you to pay any owed back lot rent?
or
Will you have problems with the MHP, in that, they place a lien or try to take possession of the MH for the lot rent owed?

Hi,

 Yes, Yes, and Yes! You will owe all back space rent, utilities and late fee's, you may also be required to defend an action against title for abandoned trailer, have to pay parks legal fee's and cost's, and may still lose title and ownership depending on where the park is in the process?

If you have deep pockets and negotiate something to keep the mobile home, you may be asked to remove it from the park! This of course ends up costing you thousands of dollars!

          GR

So if this is the case, where is the money in MH rehabbing and selling using a promissary note (owner financing)?

ROI is fairly low. From what I hear many buyers end up walking away before the note is paid in full. So most of the time you’ll be raked over the coals.

Now I know in some states only the occupant is liable for unpaid utilities. I haven’t check to see if that is the case here in Missouri.

I am trying desparately see how investing in MH rehabbing and selling the MH under a promissry note will work.

My project proforma’s are 98% complete. It has finally indicated returns are just ok (not great). ROI’s are a little tight having to handle the financing. Those who walk out before the note has been paid actually you to clean up the MH and resell with another down. This helps the return because you receive another down.

What can be done to lessen the [owe all back space rent, utilities and late fee’s, you may also be required to defend an action against title for abandoned trailer, have to pay parks legal fee’s and cost’s, and may still lose title and ownership depending on where the park is in the process?]

If this business were simple (as all the house flipping shows made it out to be a few years ago), everyone would be doing it. Finding good deals, financing, rehabbing within a budget, etc can all be difficult. Lonnie Scruggs was picking up MH’s dirt cheap and then selling them for around 8-10k on owner financing at rates close to 12-15%. You can’t pay 10-15k for an old trailer needing a good amount of work and expect to make much from it.
If the utilities are in the tenant’s name with the city/county, they should remain responsible for those unpaid bills. The city/county should not be able to hold that against you as an owner, but that can also depend on the laws in your area. If you don’t own the MH park, but your MH was sitting there I don’t see you getting out of that obligation if the buyer defaults.
These are all costs of doing business just like when I have losses due to unpaid rent and evictions out of my SFH’s. Your cash flow from your other units has to be good enough to help cover these contingencies. Retail stores account for shrinkage due to theft. All businesses have the potential for loss.
MO should be fairly LL friendly. That should help you.

Thanks Justin:

Do you think it is possible to get the Park to agree in a written agreement to hold the lien holder harmless for bills (park provided water/electric etc.) not paid by previous owners to include lot rents?


It sound like the interest rate Lonnie charges is pretty high. I know must of the buyers are high risk buyers. Is the interest rate offset by the length of the loan? Like a 3 year financing is 12% and a 15% financing is 6 or 7 years.

But, the first home I bought had an interest rate of 12.25%. And, I wasn’t a high risk borrower.

Eliminate the problem of paying back lot rent by purchasing your own mobile home park and then finance the mobile homes there…if you have a default, take it back and resell and you won’t have a problem with the park management anymore.

I did several hundred mobile homes in other parks and the back lot rent became a problem. Also, many of the parks changed their rules about vintage and size of homes and if you repo the house with the changed rules, you will not only have to pay back lot rent but you will be forced to move your home to another park.

Eliminate all this stuff by purchasing your own park…start small and build.

Let me know if you need help.

Rob

Thanks Rob:

Over the past month I’ve been putting together a proforma using Lonnie’s data from his 2004 version of Deals on Wheels. Before I completed it (last week) I could see where owning the park where you owner finance is the better way to go.

Lonnie’s theroy of buy 12 homes/year for 3 years rolling the profits back into the process for 3 years and you’ll have $60K doesn’t take into account a lot of the expenses you’ll be faced with. The numbers are slightly off but not by much. But since most of the financing runs for 30 months you will have to keep rolling the profits back into the following years purchases. In year 4, I guess, is when you can take some income but the income would have to be around $20K/yr. Still not enough to live on. Even in future years at the same rate of 12 homes/yr it will be difficult to draw a steady income largest enough to be self systaining rolling money back into the future years purchases. With 30 months loans you can not build a big enough portfolio. To increase the number homes per year requires even more profits rolled back into future purchases eating up profits in reinvesting.

This is also taking into consideration you won’t have to spend money on court costs to repo a few homes during the first 3 or 4 years.

After realizing that apartments are out of my reach financially I turned to MH parks. I have known for years MHP’s can make you a millionaire quickly. I’ve had my eye on MHP’s for a few years. I have made employers millions of dollars just to end up laid off. I seem to be able to make millions for my employers but not for myself. But cash poor as I am I haven’t been able to buy a park.

I can utilize my marketing and strategic planning skills and abilities for a MHP as easy as I can for an apartment community. But, I’m broke after being laid off at least 6 times in the past 14 years. Even my retirement money has all but disappeared with several bad market periods over the past 14 years as well as being unemployed and not able to contribute.

If I could come up with the down, someone to finance the rest as well as find a park in Arizona (Phoenix area) I’d have no problems building a great investment and a real nice community for park members. I would then like to duplicate what I’ve done to build another great park. If I need to resell right away to generate cash flow to do it again I’s have no problem in doing it. The secondary purpose of this is I need to get away from standard employment preferrably on the first MHP purcahse. Regular employment is killing me.

Thanks for your input Rob.

Frank