Of course, we mean profiteering in the very best sense of the word. It’s completely legal. The key to a successful Lonnie deal hinges on the fact that many mobile home buyers and sellers do not have access to much cash or traditional bank financing. A Lonnie deal is basically flipping mobile homes in a park. The investor locates a mobile home for purchase in a park, buys it, rehabs it, then resells (with owner financing) to someone looking to own and live in it.
By financing, we mean the reseller (or investor) plays the role of bank/lender and allows the buyer to make monthly payments on the mobile home until it is paid in full. There are a few factors working in favor of the Lonnie deal investor. First is the fact that banks do not like to get involved in loaning money on mobile homes. Second, many people in the market for buying a mobile home have sub-prime credit. Bad for them. Great for you as a wheeler dealer.
Here’s exactly how it works. A seller lists his mobile home for sale for $5,000. Since not many people looking to buy a mobile home to live in it have bank financing or that much cash on hand, the seller is going to have trouble moving the property. In you swoop, a savvy investor who manages to get him to accept a price of $2,000 cash. Next you go in to make sure everything is in working order. Minor rehab of plumbing, electrical, and HVAC might add up to $500, so your total investment in the deal is $2,500.
Now turn around and list it for sale at $5,500 with terms as follows:
1. $500 cash down
2. 10% interest
3. Monthly payments of $250
22 payments later, the Lonnie deal is done and has earned you a 135% profit in less than two years. In our book, that’s a great return. What if the buyer defaults? Even better! You take back the mobile home, keep the down payment and any monthly payments they’ve made, and put it back up for sale at the same terms. Profiteering? We like the term aggressive investing instead.
The Mobile home Parks Listing Team
Flickr / srqpix