The Investment That Won’t Stop Paying

What if they stop paying?

When I explain how I create notes by buying, selling and financing used mobile homes, one of the most frequently asked questions is, “But suppose they stop paying?” My answer: “Rent a U-Haul and help them move.” That’s usually the best thing your buyer can do for you.

Take the case above. If my first buyer had paid his note off, how much money would that have cost me? Because he didn’t, I made much more by reselling the home. In almost every case like this, I’m in a better position the second time around than I would have been if the original buyer had paid the note off.

So instead of worrying about taking a home back, learn to recognize an opportunity when it’s handed to you. You might even consider sending those folks a thank-you card.

On my typical deals, I usually have all my money back after 12 to 14 payments. If a buyer makes that many payments and then walks away or gives the home back, don’t I have a “free” mobile home? When that happens, I sell the home again, structure a new note with a new buyer and keep collecting payments. When you can sell a free product, it’s hard not to make a profit.

Two more homes that came back

In one deal I sold a mobile home for $12,900, with a $1,000 down payment, and received 37 payments of $237. Then the owner got married, bought a house and couldn’t find anyone with cash to buy his mobile home. When it was time to move and there was still no cash buyer, he offered to give it back to me for $500 (enough to cover the new refrigerator he had just put in) plus satisfaction of the balance of his note.

I had the home sold again within two hours, because I already had a buyer lined up. The price was $13,900, $1,000 more than the first time, with $1,000 down and a note for $12,900 payable $250 a month for 75 months. We also received about $9,000 in lot rent during his stay.

As I wrote this, I was getting back another home I had first sold about three years earlier for $10,900. That buyer made a $7,000 down payment and paid the balance off in 22 months. He had also bought a house and tried for several months to find a cash buyer for his mobile home. When he couldn’t, he agreed to sell it to me for $4,000, the same home he had paid me $10,900 for. It’s in better shape now than when I first sold it, and he paid us about $8,500 in lot rent over those three years.

Why financed used homes sell

There is a big demand for affordable housing all over the country, and mobile homes help fill that need. Demand for used mobile homes with seller financing and affordable payments grew a great deal over the years before this was written, because prices for new mobile homes and stick-built homes kept rising. New mobile homes cost about half what a stick-built home costs, but they are still out of reach for many buyers.

Being affordable solves only part of the problem. The buyer’s biggest problem is finding someone who will finance the purchase. Many buyers can afford the monthly payment but can’t qualify for a bank loan.

If you can offer that buyer a good used mobile home with an affordable down payment and affordable monthly payments, you can create high-yield notes and steady monthly cash flow. Once the deal is done, all you have to do is wait for the mail carrier to deliver the checks.

A note holder, not a landlord

In all the time my buyers lived in these homes, I never had a call from any of them about frozen water pipes, stopped-up drains, refrigerators that died or any of the problem calls I used to get as a landlord. I’m sure they had problems, but they were homeowners, not my tenants, so they took care of them.

I was just the note holder, and note holders don’t fix things that go wrong with the home. There might be something better, but so far I haven’t found it. And to think, I used to work a “job” to put groceries on the table.