Lonnie Deals

September 10, 2009 · 21 comments

While this site is primarily geared towards flipping houses, I like to use the blog to highlight all the real estate activities of our business, even those that don’t necessarily have to do with rehabbing or flipping. And we’re planning to start branching out just a bit…

For those not familiar with the concept, there’s a form of real estate investing often referred to as “Lonnie Deals.” A Lonnie Deal involves purchasing a mobile home (MH) in a mobile home park, doing some minor rehab to get it into move-in condition, and then reselling it to an owner occupant looking to buy a MH to move into. The key to Lonnie Deals is that the reseller also finances the purchase of the MH. When I say “finance the property,” I mean that the reseller will actually play the role of the bank/lender, and allow the buyer to make monthly payments until the home is paid off (generally less than 5 years).

Because it can be very difficult to get bank financing on a MH, and because a lot of people who live in MHs have sub-prime credit, there is a huge demand for MH sellers who will finance the properties for their buyers. For example, while it may be difficult to sell a particular MH for $6000 in cash, it may be relatively easy to sell that exact same MH for $10,000 if it is financed. This is because very few sellers are willing to finance the sale of their MH (they want/need the cash as soon as they sell), so buyers who can’t pay cash for the MHs don’t have very many options.

A typical Lonnie Deal involves buying a MH for anywhere from $1,000-6,000, doing minor rehab (or no rehab, if it’s not needed) and then reselling for at least double the total cost, with owner financing and interest rates around 10-13%. If you run the numbers, you’ll find that Lonnie Deals provide a tremendous return on investment, with yields often over 100%!

Here’s a good example:

Let’s say you find a MH listed for sale by owner for $5000. Because the seller is unlikely to find a buyer who can get bank financing, and is even more unlikely to find a buyer who has $5K to put down on a home, you are able to negotiate him down to $2000; this is actually a very common scenario. Now, you go in and make sure the plumbing, electrical and HVAC works, you make sure there are no roof leaks or floor damage, etc. All of this minor repair may cost $500 on a typical MH. You now have an investment of $2500 into this home.

Then you list it for sale for $5500, and offer to owner finance it for $500 down, and $250 per month. At 10% interest, this works out to exactly 22 payments before the MH is paid-off. If it’s a decent home in a decent mobile home park, you will likely get a lot of interest at these prices.

So, what’s our return if we can sell this MH for $500 down, $250 per month for 22 months? According to my calculator, the yield is over 135%! I don’t know about you, but compared to the 2% I’m making off my savings account, that’s pretty darn good…

Digging a little further and you’ll notice that the original $2500 investment is paid back in 8 months ($500 down-payment and the first 8 payments of $250), and then the next 14 payments of $250 are all pure profit (minus taxes, of course).

So, what happens if the buyers stop paying on their loan or decide to just move out? Well, that’s actually a great scenario for the seller. Let’s say the buyers default on the loan or move out after one year — the seller will have collected the $500 down-payment, plus $3000 in loan payments. He’s already made a $1000 profit, and can then turn around and resell the same home to another buyer! Best case scenario is that the buyers keep defaulting on their loans, the seller can keep reselling the property…over and over and over again…

And nicest thing about Lonnie Deals is that you don’t have the headaches you have with a lot of types of real estate investing. Because you are turning around and selling the home (sometimes just hours or days after you buy it), you don’t have to deal with all the hassles of doing expensive renovations, being a landlord, etc. You are essentially playing the role of the bank, and as you can imagine, that’s a pretty easy job.

As you might have guessed, given the theory behind Lonnie Deals, I’m very interested in seeing how well it works in practice. Starting this week, my wife and I have teamed up with my brother and another investor-friend of ours, and are looking for mobile homes. I have no idea if it will be a profitable venture or not, but as I’ve always done, I’ll keep you updated on my progress, whether successful or not…

21 responses to “Lonnie Deals”

  1. Dave says:

    I think that you are right that this can be one of those niche areas where you can make a lot of money. And your right, good luck trying to get a MH financed. It was almost impossible even back in the good years of the early 2000’s.

    The only downside, really, will be if the buyers default, and they’ve trashed the MH. But then, it’s only a few thousand, and the loss amortized over a half-dozen deals will still give you a great ROI.

  2. Shae says:

    J Scott, sounds like a great plan! I’m sure it will work as well (or better) as your rehab flipping business!

  3. Mike Z says:

    Great idea. The more streams of income you can create the better off you will be

  4. Adam Nash says:

    Wouldn’t the worst case scenario be that they move in, pay the rent for a while, and then stop and refuse to move out? Then you have to go through eviction, and maybe they trash the place in the process?

    Just curious, since rentals always have this issue, and lower income, bad credit rentals would seem to be higher risk in this regard.


  5. J Scott says:

    Adam –

    Because mobile homes (on rented land) are not considered residential properties (there is no deed), the process to remove a “tenant” is not an eviction. It’s actually a repossession.

    And in Georgia, repossession is very easy. You give the borrower notice of 5 days to bring the payments current, you make a filing at the county courthouse, and then you have the sheriff remove them and their stuff with a simple phone call.

    I’ve actually heard that it’s very rare to have to do a repossession. Generally, the buyers either leave in the middle of the night without warning or hand you back the keys and ask nicely for you to let them out of the contract.

  6. Brad says:

    I’ve heard of this before, sounds very doable with low risk & investment capital.
    You would have to watch out for the lot rents though, I haven’t been able to find a park with a monthly lot payment of below $375.00. So in your scenario above if the owners keeps defaulting there most likely not paying the lot rent either. I would hate to get stuck with paying all the back payments. Other then this small risk, I don’t think you can go wrong if you know your numbers. Let me know how it goes.

  7. Luis says:

    J, my only question is, if the person who sold it to you sold it low because they couldn’t find a buyer, how then are you going to be able to find a buyer at a higher price?

    Is it because you are selling it on terms instead of lump sum?

    Also, how do you even begin to assess the value of these things, i.e. what is their market value?

  8. J Scott says:

    Luis –

    Yes, the reason we are able to sell it is that we’re willing to owner finance it. Very few buyers for these things can come up with $4-8K to plop down to buy a MH. But, they’re happy to pay $250/month for however long.

    As far as assessing the value, it’s basically whatever someone will pay. Generally, people don’t care how much it costs, they just want affordable terms. So, we’ll advertise it as $500 down, $250 per month, and they don’t even ask how many months they need to pay…and they don’t really care…they just want a place to live that they’ll eventually own…

  9. Jason B says:


    Are these bank owned homes listed somewhere? They are not a part of the NOD or lis penden notices, right? I would think not as they are reposessed.

  10. J Scott says:

    Hey Jason –

    Generally, bank owned mobile homes are only listed on the bank’s website (or directly from the bank’s asset manager). As far as I know, there is no central repository for listing mobile home foreclosures.

  11. JeffB (MI) says:

    I’ve been doing Lonnie deals for over 5 years, and have made an awful lot of money doing them (over 100 deals) and have great monthly cash flow. It definitely works. The key to the business is a golden relationship with a park manager who funnels buyers and sellers to you. For that, you pay them referral fees. If you can find an arrangement like this you can make a killing… I have!

  12. joymc says:

    A couple of years ago , I read Lonnie’s book. In the distant past I have done a few house flip deals. I am skilled in carpentry and sheet rock. Not a big problem to fix up mobiles. And here in the Houston area there are lots of skilled laborers to assist with fix up as well. My problem is finding deals. I tried Craigs list. I am driving around in parks some looking for FOR SALE signs. Any suggestions as to locating deals.

  13. joymc says:

    I am one of those people who appreciates the fact that the shortest distance between 2 points is a straight line. Since the end game of the Lonnie deal seems to be to hold a note that yealds a high return; Why not just make equity loans on older mobile homes? Is anyone doing this? How is it working? Alternatively what about financing deals where someone with not so hot credit wants to buy a used mobile? I can see that the loan amount would have to be pretty low to avoid having too much money tied up in the deal. I can do a little rehab but I like not breaking a sweat also.

  14. Sparlin says:

    Hey Fastlaner! I thought I recognized this site. Hope you guys are doing good.

  15. kirk says:

    I’m basically doing lonnie deals in my own mobile home park. You are right, people are way more concerned about payments than the amount of the purchase. The trick is that when you add your payment which in my case is comprised of principal, interest, and insurance on the dwelling to the lot rent in the park the buyer has to be able to afford a monthly payment of $450+ which gets tough since most people are sub prime/low income.

  16. Bryce says:

    I did lonnie deals for a while but found it to be consuming since it became a hastle tracking down payments. However, it is good money and quite easy if you have the time.

  17. Chris says:

    So, did you ever find any profitable lonnie deals?

  18. J Scott says:

    Hey Chris,

    See this post (and lots of other posts about each of the deals): http://www.123flip.com/mobile-homes-final-analysis/

  19. Woody says:

    What state are all you guys doing these deals in?

  20. J Scott says:

    Hey Woody –

    The Lonnie deals were all done in Georgia (suburbs of Atlanta)…

  21. John says:


    I actually went to a Mr. Landlord dot com investing seminar in Indianapolis in 2002 with an ex girlfriend. [Check out his website as there is a ton of freeeeee, (my favorite price), information from real world landlords.] Alot of people got up to sell systems, programs, etc., costing hundreds to thousands of dollars.
    Then a man went to stand up and he looked old and he was wearing a suit with a tie. He started talking with the most wonderful southern accent and he gave a 2 hour financial seminar. The man’s name was Lonnie Scruggs and his book was called, “Deals on Wheels.” He sold his tape set for $99 and i purchased and I did a few deals. (5) They are quite hard to do here in New Jersey as the cost of living in through the ROOF. Here is the website http://www.lonniescruggs.net/ and I just learned these types of deals are now illegal. The toughest issue I found is having control. So what I did is “Rent to Own” or lease option which is not a new term. Also, part of the deal with the mobile home park owners is that I guaranteed the rent so they knew they would always get paid. The reason why I am on this website is I am thinking about wholesaling here in NJ. I have an OK – Joe job which I very much do not like but I would like the extra cash that wholesaling would bring.
    The reason I like this website is 123flip breaks everything down AND I feel they paint a very accurate picture. There are 2 very hard parts of being a RE investor. 1. Pulling the trigger as most people do not have the stones/courage and 2. Getting out when the deal goes south. GOOOOOD LUCK!!!

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