Newbie to MHP Ownership

First, I am thankful I found this website and forum and will have to keep an eye on a boot camp near me.

In the interim, reaching out to the community for advise. I have contracted to buy a 6 lot MHP and have one empty lot. The 5 rented are tenant owned. CAP rate on purchase 11% based on NOI of 5 lots, not 6th. I am believe the chances of having someone bring in a MH that they purchase is slim at best.

  1. Best to be on lookout for trailer to buy and sell to fill spot #6? This may be challenging in today’s market finding 10 year old or newer that meets cash flow requirements of lot value multiplier. Village has ordinance that requires this, however I can apply for a variance. I’m just concerned how long it may take for someone to do on their own and move in, obtain financing, etc.
  2. As owners move out and I in turn own, best I presume to invest enough money in to in turn sell. Stay away from renting.
  3. I also own storage and have ability to over-lock at 30 days. I do need to do better of on time payment expectations, but generally have been good. With the MHP, I will not have tolerance and will start legal process when legally able. I am considering discount for ACH/CC reoccurring payment. Has anyone had success with this?
  4. I will have work to better establish the pride in ownership concept, however, not horrible and could be much worse. Many of the homes are old and need some TLC.

Any help from the group greatly appreciated.


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In response to your points

  1. Filling one empty lot need not be a high priority and should only be viewed as a bonus. Instead of bringing in a home to sell try concentrating on locating a buyer you can assist to bring in their home. This will eliminate all investment and risk on your part.

  2. You have no need to own homes when residents leave. It is their responsibility to sell their own home and until they do they continue to pay rent. The only time you should end up with a home is if you get it for free or wish to upgrade the community through buying and renovating older homes.

  3. They owe rent they pay rent end of story. Discounts are a sign of a owner lacking the strict business practices to enforce payment. Or a owner looking to increase income by hoping they will pay late.

  4. You can encourage pride in ownership by investing time and money in upgrading your part of the community. Roads, grounds, entrance etc. then hope they get on board but pride is very difficult to create. You will likely have to force resident upgrades through changing and strictly enforcing community standards. As residents turn over be very selective as to who you allow into your community. New residents will be easier to get on board, you cant teach old dogs new tricks.

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Thank you for your input. On discount, get it and agree. So, push for auto draft/CC otherwise, probably not something I can dictate or worth losing a tenant. Yes on the owning part, I just expect at some point in the future I will get one for free and at that point goal is to sell. I don’t want to transition into owning these and if I do probably best to unload for even a very small amount to new owner. I feel like at least out of the shoot, it is setup good. I will work on marketing the lot rather than considering bringing one in.

Another thought, do you allow sub leasing? IE someone wants to purchase as a rental rather than living in it. ?



I do allow sub lease but only because our landlord tenant regulations force me to do so otherwise I would not allow. We have had owners sub lease, about 6 times, and every single one has been a failure. Absentee owners are impossible to control as they don’t care about the community and renters care even less. Lonnie dealers fall into the same category. If your goal is improving the community and instilling pride of ownership you will never achieve it if you have rentals, that goes for both POHs and sub leased homes.
If you do get a free home I would renovate and sell for the highest possible price. Pricing dictates quality of residents. If you want low quality residents provide low quality homes at rock bottom pricing with community owner financing. If you want to upgrade price high and only sell to buyers that qualify for bank financing. Two different business approaches with a wide range in between.

Greg great information, thank you.

Actually Greg, I may have misspoke on discount. This is to incentivize electronic payment, not an allowance to be late. Due on 1st is due on 1st. If all tenants setup auto-draft, it is a matter of convenience and assurance rather than acceptance of past due. For that, I am willing to give something up. Just wondering how others handled.


I have a slightly different opinion than Greg on this subject so I’ll share it just so you’ll have a difference of opinion. Greg operates a different business model than I do. Both models are successful and it’s your choice which one you decide to use.

  1. I would fill the lot with a used home. You can find these on Facebook, craigslist, buying from private owners in other local parks, etc. One caveat is that your 10 year restriction makes it almost as economical to do a new in your case. Choose a 4 bedroom if you get the option and you’ll likely have to rent to own this. Cash buyers at this level are very hard to find and bank financing is hard for most park people to get.

  2. Stay away from renting on your rougher homes. It’ll likely be years before you get a home back that is owned by a tenant. If you only have one, you should be patient and sell to a cash buyer. Determine an attractive price that is not a give away.

  3. Do not offer a discount for automatic payment. Set it up as an option if you wish, but it probably won’t get used. The best way to handle this is to set a late fee that hurts and follow through with no pay/no stay.

  4. Offer to come out of pocket for some of the exterior home repairs. You will want to bill back the residents over the course of 12-18 months for this, but it is a program that is generally well received. Especially if you are offering this while you are making improvements yourself. In addition, you will also need to enforce a fine for tenants who don’t fall in line with keeping their lot cleaned up. Ours is $40 and it ruffles the feathers enough to get most residents to comply. Next step is eviction/non-renewal if they don’t.

The parallels in Greg’s model are there too though. Being selective with your tenants is critical to making certain that everything else you do is not a waste. Our requirements are:

  1. Criminal - No felonies, no sex offenders, no violent misdemeanors

  2. Credit - No evictions, No judgements from previous landlords, no recent (3-4yrs) bad credit tendencies

  3. Income - Requirement is set at 3x what would normally be the rent amount for the home. For homes that would rent for $600, it would be an $1,800 income requirement per month. You will also want to take the extra step and call the employer.

On the sub-lease, we allow this and it’s not been a bad thing for us thus far. I think one thing that makes it successful is if your out-side investor lives within 25-50 miles of the park. You can probably scrap the idea though. No lonnie dealer is going to want to place a $25,000 home in your community. Most of our Lonnie Dealers are residents who live in the park and own 1-2 rentals. It’s a little bizarre, but in that park it seems to work.


Thank you for your response. But now this opens up more questions, sorry.

  1. Who are some of the better background agencies and typically what do you pay?

  2. How does a Lonnie deal differ than rent to own if I am the one financing? What have you seen for typical terms, contracts, liens, etc. Sounds like I need to find an attorney with experience on this if I go that route. I can see however that this could be a great opportunity to increase my return. It also seems to be different setup on selling older homes with very low value versus bringing in a $20-$30K home. If you have any general guidance on all of this, that would be appreciated.

I will browse the learning materials on the site. Probably best to start there for a lot of answers. If I decide to continue to pursue more parks, then boot camp looks like a good deal. Knowing myself, if I went to boot camp a monster could be in the making!

  1. We use Mr. Landlord for our background and credit. The cost is $24.95 per application. We bill this directly to the applicant and won’t run anything until the application fee is paid.

  2. Lonnie dealers pay cash for the home. You won’t rent to own to a Lonnie dealer. All of the homes we have sold to Lonnie Dealers have needed work and that seems to be more their style. We encourage them to work quickly with fines that kick in at certain dates. For example, we may give them 30 days to renovate the exterior before they are charged a $100 fine.

Not sure what you mean by the attorney, but in a rent-to-own you don’t give the resident title to the home. Getting them out of the home works the same as any other rental - with an eviction. It’s a rental agreement where they accumulate purchase credits towards the purchase of the home. This is not a mortgage.

I mention getting a 4BR home above. The reason I say this is that these can typically be sold on Rent-to-own for about 25% more than a 3BR and they are roughly the same price from the factory. When you can rent to own a home for $800-$900 per month, then you stand a good chance of getting out of the home in around 5-6 years. This is a heck of a lot better than the 7-10 years you would need to recapture the value on the 3BR. Of course, if you can have a bank or Clayton finance the home for the tenant, then that is much better.

Okay, let me reframe my question and present it in a rent to own versus seller finance setup. I wouldn’t reach out to a third party as I agree will be difficult and present more issues. I would prefer to sell the home, finance it and keep the ownership and related maintenance on the tenant. So if I sell say a home for $7,500, $500 down, 12% interest over 5 years, is that the right direction to be thinking? In a rent to own, I own, I maintain?

You need to be SAFE act licensed to sell the home to the tenant in your structure. Furthermore, an eviction is a lot cheaper and easier than a foreclosure. In our rent to own agreements, we take care of all big ticket maintenance items (roof leaks, HVAC repairs). In the agreement, anything that will cost less than $500 (or would not result in the home not being habitable) is the responsibility of the tenant. So, if a tenant has a leaky faucet or if their refrigerator goes out, I don’t fix it. It’s on them to fix it.

In a rent to own, you own and you can establish who maintains what. Originating a mortgage without being licensed is not only illegal, it is more expensive if you need to take the home back.

Lastly, if you are selling a home for $7,500 then you should wait it out for a cash buyer. This is possible in most markets and is a superior business model than rent-to-own or seller financing. We do rent to owns on these types of homes in some of our parks purely based on them having a large home portfolio. When you have 40 homes, you almost have to do rent-to-own here and there to keep the process of ridding yourself of homes moving forward.

Would you lay out a hypothetical setup on a $25K rent to own scenario? Relative to repairs, have you setup a rent to own whereby tenant is 100% responsible. Certainly a higher credit would be warranted in that event. Also, not sure where that line in the sand is when a rent to own has the appearance of a seller financed. Assuming negated by contract and no mention of fees/rates, but certainly would have to have term and price? Thanks again for all the information.

Here is an example of a rent to own for $11,700 on a 36 month term. If I were to do a $25,000 home, it would be 6-7 years. However, this is a 3 bed room. If this was a 4 bedroom, then it would easily rent to own for $850 in this market. ($525 of which would be applied to the home) This would then be about 4 years.

Next, I know what you are going to ask here, what about interest rate? Well, the actual lot rent in the park is $280 (not $325) for all of the lot renters. By setting these rent to owns at a higher lot rent, you effectively have your interest money. You are also playing a mini accounting trick to receive a more favorable appraisal.

We don’t get too carried away with trying to figure out interest rates, terms, and what not. We would rather charge a higher lot rent on these and set the home price based on 24, 30, 36, or 48 months with 100% of the rent being applied to the credits. A tenant only receives a month’s worth of credit for an on time payment. We don’t do too many new homes so this is what we do with what we have in our inventory.

Lastly, we are not the brain child of this. This is directly bastardized from F & D’s reference library which they got from Sun Communities. Sun is a public company who has some pretty decent attorneys. If they like it, then it’s probably good enough for you and me.

MH Rent to own Agreement lot17.pdf (1.3 MB)

Our agreement is a two document process, the other agreement was too large to upload. It basically states the rent amount. For this transaction, it’s $650. $325 for the lot and $325 for the home credits each month. If you want to look at it, I can send it through email.

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A “Rent to Own” agreement is considered in some states a “disguised mortgage” that is subject to the SAFE Act. The modern construction needs to be either a SAFE Act licensed mortgage or a straight rental. With a rental, you can offer a rent credit agreement, which is designed for customer retention. It works the same as Southwest’s Frequent Flyer program, and you can save up your credits same as cash to buy the home – or any home that is you have for sale in your park at that time – or not, at their option.

All of these structures are subject to doing your own diligence, as the SAFE Act is very new and there is no case law at this point regarding mobile home parks, that I am aware of. Talk to your state MHA, do on-line research, and make your own independent decision, acknowledging that nobody has a 100% handle on the SAFE Act and Dodd-Frank at this point.

Yes, if you don’t mind, send it to Thanks again for all of your suggestions.

Frank, yes, I will be sure to do due diligence and involve my legal counsel when needed. I’ve learned quite a bit in this forum in a very short period of time. Great group it seems.

When people refer to this forum as a “gold mine,” it is threads like these that are the “gold” in the mine. The essence of this business is summed up in this thread, which is that you have to get comfortable with what the law says and what risks you take when you seek your advice and advisors.

The state association is a great place to start in every state; and just about whatever might end up getting you in proverbial “hot water” will be based on STATE law which is different in every state. You’ll be tried in state court and I would say (have said) typically your company ought to be based in that state (the state of the real property). I would use an LLC for flexibility unless you have a reason to do something different. To the best of my knowledge, LLC’s are available in all 50 states (it started in Wyoming).

With that in mind, keep in mind also that specific advice in this forum can be very state-specific.

What is and is not allowed with respect to “renting” versus “selling” is, in the end, something that you will have to convince a judge, jury, insurance executive, or someone else (plaintiff’s lawyer, regulator) with respect to.

In practice, property law and contract law are both so-called “common law” and are based on state statutes interpreted by precedent and analogy. Was it a “sale?” or was it not a “sale?” and “When did the sale happen” and “what was transferred to whom at what time?”

The difference between a sale with a long-term lease and a rental and a rent-to-own is very subtle when the same parties control both the lease office and the sales office. In the end, the economics of the transaction include some rent and some property rights that are conveyed over time to the buyer, if they finish the “term.” What you call what only matters when you’re hauled before someone to explain.

My comfort zone extends to have (since 2012) only used a licensed creditor and my wife’s MLO license to originate Dodd-Frank compliant mortgages on “real” sales. Since we go to the trouble of trying to do it right, I am counting on the worst thing that could happen is that we are told to stop doing that and start doing it “wrong.” They look exactly the same from the customer’s point of view, but the transaction costs are higher for the “right” way.