Buying MH Notes

I just finished reading Frank’s post in MH Age Requirements where he said he prefers older homes because there is little risk that there is a note on them that result in a park visit by the repo man.I wonder if any of you have ever tried to purchase the bank’s lean on a newer home in your parks to eliminate the repo man risk. Back in the days when I was a hard money lender, I used to see deals in the secondary note market for MH notes that paid out 13% all the time, meaning the notes (like all notes on the secondary market) were being sold at a healthy discount. I would guess contacting the note holder when the rent payments stop coming in could result in a steeply discounted deal. You would not even need to disclose that you are the park’s owner – just send out a “We buy MH notes in the _______ area” letter with some good sounding DBA.

I’ve been proactive working with the bank on a few doublewides in one of my parks, but that was only when the tenant was being evicted.  My main concern was not losing the home out of the park.  But other than that, I really don’t want to own any more homes than I have to.  But if you are looking for good MH deals returning 13% or more, then your ideas might be a good way to go.

Randy,The flaw I see in your idea is that you would then be buying a non-performing note.  How would you get it performing again? By repossessing and reselling the home? That would be very risky, I think. Also, it wouldn’t be a passive investment at all.  Mobile home notes are generally considered high risk and few note buyers buy them these days, from what I have read and heard. I have bought them and love them, but I bought small notes at 40% to 50% discount off principal balance, with very quick payback times.  I also don’t pay more than I could sell the home for quick for cash. These were notes that were performing perfectly. 

The idea is to buy the notes on the homes in your park that are at risk of being repossessed in order to keep them in you park. You know there is a risk of foreclosure when the tenant fall behind on the rent. If the home is removed from the park, you will have to replace it with a home that you have to purchase on the open market. And you will also have to eat the moving and set up costs… But if you could pick up the note (which presumably is less then the FMP of the home) on the house already in the park and possibly get the note at a discount and not have to pay to move and set up the replacement home, well, that is clearly best outcome of a bad situation.  

We do not have repos in our parks since we deal with retires and seconds home owners that have a high income and when 2007 down turn happened our net went up. Buy quality parks and you will be spending you time collection money instead of chasing down repos. We have a repos dealer 30 miles away and it looks like the mortgage holder is getting book value since interest rated are so low and will not take a loss on 2005 and newer homes since it appears the loans are including decks, skirting, and even land.