Confirm my thinking here

Reviewing a current deal that has 44 spaces with 42 filled. However out of 42 filled, 18 are on sales contract and 5 are pending sale. Lot rent for the 5 homes is guaranteed 1 year or until the home is sold.

Looks like a good park, street lights, speed bumps, and nice looking trailers and neat lots. However, I would not want to own all these contracts as it appears to be a ticking time bomb.


OK, let’s break this into the different issues to consider.The “5 pending sale” concerns me because of SAFE Act implications. Under the SAFE Act, you cannot sell and carry paper, only sell for cash or rent. If the seller does this, then I guess it’s his problem, but if you don’t want to become SAFE Act licensed, you cannot continue with what he’s doing on that front.It’s a given that, of the 18 sales contract, at least 25%+ are going to default in the near future. The normal metric on this would be sell 18, get 9 back, sell 9, get 4 back, sell 4, get 2 back, sell 2 get 1 back, sell 1. You are going to be in the home business for a long time. As a result, you have to be able to handle the financial needs of renovating and renting/selling the homes through multiple “churns”.On the good side, if you do a test ad and know the demand is there, getting the homes out the door will not be hard. Plus, they won’t be moved out, since you are the repo company.So the value of this deal is basically 42 x lot rent x 12 x .6 x 10 = ? plus the value of the homes, which must include an allowance for all of the “churn” activity ahead.I don’t know that I would consider this deal a “time bomb” but it will be a pain, no question about it.On the 5 vacant homes, no way you can do a 1 year lot rent guarantee. This is an old scam, in which the seller offers you one year but you pay him seven (based on a 10 cap). If those homes are vacant, then those lots are worth -0- or maybe 50% of value, since you can only pay for what is on the ground right then, not a future fantasy. You cannot let him “bond around” the present value.


You said a 25 per cent churn rate, and then appear to show a 50 per cent churn rate in your example of sell 18 get 9 back, etc. Am I looking at this wrong? Also, he wants 50k for the 5 homes, I do no know lot rent yet as I am waiting for an updated brochure. The park is in a rural area, not good. And the metro area is just 37000 people.

One last question, how are the home study courses sent out? I ordered a week ago.


I said “25%+” because some markets churn less than others, based on geography. If the park is in the north, it will churn 25% normally, and in the south 50% or even more (depends on the state). This is very macro, so just good for rough estimates. The geography will also dictate home values (the more north, the more valuable they are).On the rural issue, you can solve that riddle with a test ad. 37,000 can be an O.K. metro size, but it again depends on which metro you’re talking, and how strong the economy is there.Brandon sends the courses out same day. However, we were all at the MHI convention in Vegas and just got back this past Saturday. Email him at and he can give you the exact shipping info. That’s the one time of the year that we let him leave his desk, as he has to set up the power point, etc. for my speech.

When running a test ad, is it best to set up a local number through google voice or will a single 800 number suffice. The park is a northern state, historically a strong market.

Kristen updated me in the mailing …

We think that a local number is better, but an 800 is OK. But you can’t share one number with more than one test.

I read up on google voice but have not signed out yet. I was not able to determine how many numbers could be set up. I did see a 10 dollar charge for changing a number. Is there any other cost.

This 44 space park with the 18 on sale and 5 to be sold has a lot rent of 210. When I asked about safe compliance, I was td they were using a form approved by the state (ind). Are you aware of such form

He is also adding utility income with lot rent to determine total income. Probably not a good thing as the cost to read and bill utilities offsets the income. Am I thinking right here,


Dean,I am not aware of such a document approved by the state, I sure would like to see it though if you get your hands on it. As far as adding the utility income- it is offsetting the utility expenses, and any expense in collecting would show in lost income and management expenses. We call it- ‘other income’.Billing back for utilities has a huge payback and is worth much, much more than what it costs to read and bill back. I would guess it costs us 5-7% of the utility bill in administrative budgeting to bill back. So if the utility bill for a park was say- $3,000 per month, we might have $150 - $200 monthly in administrative costs… on most months a bit less, and on a bad month closer to the 7% mark. Good and bad might be transposed numbers, or meters that are not turning… 


I have reached out for an explanation, the broker stated she had not see the form. I just came across be bill back practice in my home study course. Is the percentage just added to each lots bill?

Dean,There are 2 ways to address this. One is allocation- which just divides a total into the number of tenants. We do this with trash for instance. The other way is to have meters, and bill back usage.These charges are added as line items on the bill. 


Under the SAFE act - can you sell a home, let the buyer pay it off and not charge any interest. Is that ok or is it a violation

No, that’s still a violation. You simply cannot create mortgage of any type – only rent or sell for cash – unless you become SAFE Act licensed and compliant with Dodd-Frank. Talk to your state MHA for the latest updates, as all states are slightly different in interpretation.

thanks, that what I thought,Anti-business - big government legislation.

This particular law ended up being anti-consumer more than anti-business – taking away the ability to obtain a home mortgage for millions of folks was not exactly a smart move.

Frank, why not become Safe-Act licensed? Is it very hard to do? Have you done it ?