Introduction to Deals on Wheels
Deals on Wheels, authored by Lonnie Scruggs, will teach you what you need to know to purchase, rent, offer owner financing, and sell individual mobile homes successfully. Unfortunately, Lonnie passed away in 2013. However, his wife has taken over this business, so this book is still offered for sale on Amazon for $469.97. I also noticed his materials are sold on eBay for $99.00 to $449.00. Lonnie also authored two other books called Making Money with Mobile Homes, and Taking the Mystery Out of Money.
I will review all 21 chapters of Deals on Wheels, so you’ll have enough information to make an informed decision.
The key to becoming successful is to decide what you want to do. Once you choose, focus, and get good at the skill you decide to embark on, you will succeed. This also holds true for investing, law, accounting, and engineering. Always take your instruction from the best in the business. Never learn from someone who just pitches theory. Make sure they are doing what you want to do. If you don’t have a direct connection with them, buy their courses, purchase their books, get on their mailing list, then read and listen to all their free stuff. You want to get inside their head as much as you can.
Your barber or bearded philosopher uncle aren’t going to make you successful. You can only learn the correct way from action-takers. When you take advice from people who aren’t qualified to give it, you can’t blame anyone but yourself when you are in the same spot one year from now as you are today. If the person giving you advice hasn’t done anything significant, why would you want to listen to them in the first place? There’s tons of free advice, but you must learn to separate the wheat from the chaff. Lonnie Scruggs is one of the best in buying, managing, financing, and selling individual mobile home parks. This is how he worked his way to financial freedom, and he can teach you to do the same.
Remember everyone has an opinion and almost all of them are worthless, but good advice and instruction is priceless.
Invest in Yourself
You have to put yourself before anyone else. If you can’t help yourself and can’t become financially independent, how can you help anyone else? Some of the most successful people are the most giving. But before they started giving, they had to learn and earn financial independence. One of the best ways to invest in yourself is by educating yourself. Your net worth will be the average of the top 10 people you associate with. Start attending webinars, listening to audio and video, reading articles, taking courses, and doing everything possible to learn from the most successful people. Anything you do for 21 days becomes a habit. So, delegate at least two hours per day to educate and better yourself.
For example, this means after work you can watch one video, read one article, and listen to one podcast. Any effort you make to improve yourself will be well worth it. People that don’t educate themselves end up with a J.O.B., meaning just over broke. Millions of people in the United States are one paycheck away from homelessness. Many are “running naked” with maxed-out credit cards. If they lose their job, they will likely file for bankruptcy. If this isn’t you, that’s great, make some effort to stay ahead of the eight ball, and you will be fine.
After a seminar, Lonnie explained how he got into the used mobile home business to some students. He also explained how he bought, sold, and financed these. The older mobile homes are the ones he likes purchasing. Some of this group was excited and had a lot of interest in what Lonnie was saying. He wasn’t sure why they were getting so excited because this was his everyday business. Some of his students asked him to write a book, so they could learn how he was doing all this. At first, he gave them a two-minute explanation of how he does this. Then, he sat back and realized people need much more information if it’s their first time doing this. This is why Deals on Wheels was written.
Foreward
Lonnie and his wife Joanne have been involved with real estate for nearly three decades. Before they got involved in mobile homes, they used to manage homes and apartments full-time. This was their “job.” They never followed the traditional path and got their real estate license. He felt a real estate license would hold him back. He does have a permit to sell mobile homes in his state since they require a license. However, he prefers to work with private parties. He calls dealers and attorneys “deal killers.” His wife Joanne and himself never took on any other employees during the 30 years they worked together. This is because they wanted complete control of their business and their lives.
They don’t have to worry about clocking in at a particular time or an employee skipping work. They are also both proud of the fact that government involvement was minimal. He admits that he could have made more money if he had some employees and automated certain aspects of their business. However, by doing this, he would sacrifice some of his freedom, which he wasn’t willing to do. If his wife or himself weren’t feeling well or just wanted to take the day off, they would. This business has provided his wife Joanne and himself with not only financial security, but financial freedom as well. They have even enjoyed some world travel.
One day he realized he was facing burnout because of tenant and management issues, and decided to sell most of their properties. They were willing to carry paper on these deals. They were making recurring income from these properties from each note. Then he started learning how to buy discounted notes and mortgages. This provided him with recurring income without any hassles of managing property or dealing with tenants. After doing this, he wanted to learn how to create his own notes. He realized that used and inexpensive mobile homes were the way to go. This is the skill you will learn in Deals on Wheels. This is done by creating “paper” or promissory notes. Each deal you make will give you a little more monthly cash flow.
Chapter #1 – Why Used Mobile Homes?
It took Lonnie a while for the light bulb to go off in his head and for him to decide this was what he wanted to do. When he started researching mobile homes, he discovered only a few sellers were willing to do owner financing. The only way to get the funding was if a dealer was involved. This meant that he would have to qualify for a bank loan. The first deal he was involved with was a lady selling her home for $6,000.00. She had a buyer, but he only had $1,000.00 to put down. He was looking to finance the other $5,000.00 and couldn’t get it. He had a decent credit history and a good job, but the bank wan’t willing to work with him. When it comes to red tape and large financial institutions, this is typical.
He got the home from her after she agreed to reduce the sales price by $250.00. Eventually, this deal worked out for everybody. He was surprised at how easily he could make this deal work. He knew he could keep doing these deals to earn more positive cash flow. Over the next couple of months, they did more deals and kept improving their methods. Now he had an even better idea. Why not find homes below market value, place an ad, sell the same home at market value, and offer to finance the sale? This worked much better than the deal he made before.
The mobile homes he purchased ranged from $4,000 to $6,000. First, he would ask for a cash discount. Then, he would buy homes outright at this price, then turn around and sell them using owner financing, making a grand or two net profit. Buyers were very easy to find since Lonnie was carrying paper. He would get a small monthly check for each one he sold using this technique.
In some cases, he would purchase private lots for up to 20k. These are 50 x 100 small lots. They own some of these, and they provide him with good rental income, take up almost no time and have no management problems.
Chapter #2 – Which Homes Offer the Best Profits
The target homes he is looking for are undervalued in the $2,000.00 to $3,000.00 range. You won’t find anything like this in California, but I’ve heard some deals exist in the Midwest and South. He likes to sell them at a profit for $4,000.00 to $6,000.00. These types of homes have the best potential, not to mention there is almost no barrier to entry and minimal risk. The mobile homes he likes buying are 10-20 years old. He prefers single wides over double wides, probably because of the lower costs. He doesn’t choose to look at homes over two decades old.
Sometimes owners take better care of older mobile homes. For example, a family with a few kids can almost destroy a newer one, so every situation is different. If you are trying to assemble a deal and the numbers make sense, go for it. He also recommends staying away from any mobile home less than 12 feet wide. Homes less than 12 feet wide, even the ones in good condition, can be tough to sell. Owners won’t like them because they can’t fit their furniture inside and encounter other space-related issues.
He doesn’t like double wides because they cost a lot more, and the numbers don’t work in his favor. Sometimes, you can buy up to three single-wide mobile homes for the cost of one double-wide. Whenever possible, they try to avoid moving the homes they purchase. Moving a home is very costly, and it would only make economic sense to have one moved if they got an outstanding deal on the front end.
Their target goal is to sell the home for at least double what they paid, and you have a much better chance of doing this with a cheap home. An example would be to sell a home for $5,000.00, with $500.00 down. Then take a $4,500.00 note for the rest. He charges 12.75% interest and structures the payments to last about 30 months. Before you buy a home, you need to have a good idea if it will sell and what it will sell for. If you know this, all you have to do is worry about getting the property for a price you are willing to pay. The only way you will know what a home will sell for is by studying your market.
Chapter #3
He first speaks about how much you should pay for your home. Understanding the market is the best way to learn what prices you should buy and sell for. There’s also a book called the NADA book. He feels they are too expensive and isn’t suited for the types of properties he recommends you deal with. If you use this book, you will end up paying too much for the home, then try to sell it for too much and won’t get any buyers. He feels this book might work better if you were going to get into newer homes. The NADA book is also valuable if you work with a bank. A dealer might give you an older book for a few bucks if you want one.
He also talks about quick “flips” and how you can still come out ahead in certain situations, even if you pay more and sell for less. For example, if someone approaches him and wants to purchase a home within specific parameters, he will go out and find a home that meets these specs, buy it, and set up a deal with the buyer. This way, he can flip the property and make a grand, then float the rest on notes and get another $200.00 monthly for 30 months. Knowing the market, he realized this would have been a good buy, even if the seller asked for $1,000.00 more. It’s common to make 44% on a deal.
When you buy you make an immediate profit, and you get paid after you sell. You will sometimes profit from a deal even if it doesn’t meet Lonnie’s buying and selling guidelines. The only way to know this is to be aware of market prices in the area you are operating in. He says you should also test your market. You can get fantastic results by doing this; your only costs are for an ad. You can test the demand for seller-financed homes by placing one in your area. In this ad, set the price slightly higher than you will be selling it for. Understanding your local market takes time and effort, but it’s simple. You can also visit parks and speak with the owners or managers.
Park residents with their homes for sale will often be happy to speak with you. Many of them are in the know and keep track of which homes in the park sold, when, and for how much. Many of these residents are elderly and like the fact that someone was excited about having a conversation with them. Most also know everything that is going on with the park. If you get this opportunity, ask plenty of questions, and listen closely to their answers. You can learn a lot from doing this.
Chapter #4
In this chapter, he discusses locating your first mobile home. You will find over 9 million mobile homes in the United States, with about 350,000 new ones being built annually. There is no shortage of these, so finding one won’t be a big deal if you know how to get started. There are many excellent buying opportunities, and it takes a lot of work to relay this information to many investors. Many say they are motivated but have yet to take action and secure their first deal. If you have a positive attitude, this could account for 85% of your success. There’s an old saying, if you think you can do it, you’re right. If you feel you can’t do it, you’re right. Always be optimistic when it comes to a good opportunity.
Suppose you’ve never been involved in purchasing mobile homes before. In that case, you will realize this is a very profitable business, and most people in the industry, including sellers, are enjoyable people. This business can make significant returns if you pay attention and do your homework. The only sellers you want to work with are motivated sellers. You want to avoid sellers just “testing the market,” who don’t need the money quickly or have no sense of urgency. Sellers with a sense of urgency are leaving the area, just got divorced, have health issues, are buying a new home, got evicted from the park, and so on.
Before you sign any purchase contract with the buyer, always speak to the park manager first. Many parks must approve you as a “resident”, even though you might not personally live there. You also need to make sure the mobile home can stay on the lot before you leave. If the home needs to be moved off the lot after you take ownership, you will likely want to walk from this deal. If Lonnie speaks to a park owner or manager he’s never met, he tells them he’s trying to help a young couple find a place to stay, and he wanted to find them a home in this park. He also says he will be loaning the couple the money to buy the home and will get paid back in monthly payments. Saying this fits into his investment agenda.
After this conversation, he will likely have to fill out some paperwork the park gives him and be subject to a background check. Background checks are more common because of all the deadbeats and creepos. He will also be responsible for understanding all the park rules and pay a security deposit. Building good relationships and maintaining a good reputation are vital in the mobile home business.
Building solid relationships can be responsible for giving you more business in the future. Referral business in real. If people like you, they will take an extra step to push you in the right direction. Always invest time and even a little money to protect your reputation. He discusses nine different sources you can use to find the mobile homes you want that fit the Deals on Wheels parameters. This chapter is accurate, and with a little initiative, you can make the wheels start to spin in your direction.
Chapter #5
Deals on Wheels Chapter five discusses the types of homes you should seek. He recommends that for your purchase, while you are learning his system, you stay with homes in the $2,500.00 price range. This home doesn’t have to be in top condition, but it should be livable and not need much work, especially if the required repairs cost you extra. There are certain things he covers that you should inspect before you make a buy. For example, many of the older homes will have floor damage. This is because most of the older homes have particle board underneath. Particle board can last a long time but gets damaged when wet. It soaks up water, then disintegrates, leaving you with a hole in the floor.
He also recommends inspecting the plumbing and toilets. Sometimes the toilet will have leaking around the base. If the property is vacant, turn on the water and check the plumbing. See if there are any leaky drain lines. Ensure there are no water drips in the bathroom and kitchen faucets or showers. Also, make sure there are no leaks in the roof. This is a bad sign if you see water stains on the wall or ceiling. Sometimes they did repair the roof but never repainted the inside wall or ceiling, so the stain is still showing. This is okay, but you must verify that the roof was repaired.
Older homes use crank-out type windows, and they tend to get brittle and break over the years. If you notice this, you can always fix it, and it won’t cost much. Likewise, you can always replace a window if you have to. You can buy a new window for about $60.00 and, in many cases, put it in yourself. These days, tons of YouTube videos will guide you through this process.
Remember to look at all the appliances and ensure they work, as well as the AC and furnace. You might have to arrange with the homeowner or manager to turn the power on before inspecting the property. You can also enter in the purchase agreement that all these items must be in good working order. If the seller doesn’t want to make any repairs, you could negotiate a lower sales price and do these yourself.
Some mobile homes still have wheels and axles. You can move a home without these, but it will cost more. If you don’t plan on moving it, it’s no big deal not to have them. If the hitch is bolted on, the mover can slide it under the home. This makes the home look better and allows you to install new skirting. This book also discusses electrical service, aluminum wiring, and negotiating the best purchase price.
Chapter #6
The first thing Chapter six of the Deals on Wheels PDF book discusses is how to negotiate the best purchase price. After doing lots of work, placing ads, and speaking with different sellers, you’ve finally narrowed down a home you want to buy. Next, he recommends that if you have a spouse, take them with you. This is one credibility builder that will help the seller trust you more. Finally, if you don’t have a spouse, have a trusted friend show up with you.
You can offer them lunch and gas money. Also, when you make a deal with the seller, pull up in blue jeans, a pickup truck, or an older vehicle. Look down to earth; they might not trust you if you pull up in a BMW and a fancy suit trying to look sophisticated. If you only have an expensive car, park it so the seller can’t see it when they open the door.
With some practice, you will eventually “smell” a good deal. He ran into sellers who he felt literally didn’t shower for months. He felt like he was in a trash dump, but the smell came directly from the seller. Also, the home looked like a garbage dump. The moral of the story is if you take the high road and look beyond all this, there could be a sweet deal on a property like this. Sometimes these people want quick cash and are willing to offer a discount.
There’s another technique they use to get a discount on the home. The spouse or friend shows up at the home. One finds a flaw in the home, like a hole in the floor. Then they call the other half to check it out. First, they make sure the seller is there so they can see it. Then one of them approaches the seller and asks if they will fix it. In almost all cases, they know the seller won’t fix it. The hole could have been there for decades, and they probably ignored it. But this sets a renegotiation point for a lower price.
This always works because the seller figures any other potential buyer would have the same complaint. After all this, you let the seller name the price. Usually, they lower the price after being confronted with problems with their mobile home.
Chapter #7
In Chapter seven, Lonnie Scruggs goes into more detail on repairing the issues you found earlier. You don’t have to learn to do all the repairs yourself, but you should at least educate yourself on the most common types of repairs, mainly how they apply to a mobile home. Plenty of qualified people out there fix broken stuff for a living. When Lonnie sells a mobile home, he does little to no repairs and sells it “as is.” If the new owner has enough pride of ownership, they will fix what parts they want to restore. You can always incentivize the buyer to repair the property by lowering the price slightly.
When you had to do these repairs in the past, you were on your own when figuring things out. Now YouTube has instructional videos on just about everything you can think of. Home repair and DIY videos are abundant and viral on YouTube. Just search for Mobile Home faucet repairs or shower stalls, for example.
He starts talking about damaged floors. If you have a terrible floor, repairing it might be as easy as cutting out the affected area and replacing it with brand-new 3/4-inch plywood. Make sure the plywood is over a floor support before you secure it. In most cases, the floor will be stronger in this area than the rest of the floor that still uses pressboard.
Next, he explains how to disconnect the commode if the bathroom floor needs repairs. This job is small, even if the damaged area is around the commode. He goes into some detail on the three steps you need to accomplish to fix the bathroom. Next, he goes over shower stalls. You can get a new shower wall kit to install if the shower walls are bad. The pieces within this vinyl kit can be glued over the old wall. If the wall is in bad condition, you might have to replace the old sections with plywood. Make sure you use the right adhesive when installing the new vinyl sections.
Lonnie also covers ceilings. He says not to panic if you find a water stain on the ceiling. The roof damage that caused this might have already been fixed earlier. Many small leaks can be sealed pretty quickly; there’s no need to go out and spend thousands on roof repairs like you would for a regular home. The best time to find out if there’s a leak in the home is right after it rains. If you can’t find any dampness, chances are there are no leaks. Lonnie also talks about carpets in good detail.
Chapter #8
Chapter eight discusses what you need to do to locate a buyer. Many sellers try to sell within the month to avoid paying another month of lot rent. Lonnie teaches you to structure a deal so well that a line of people will make you offers. When you purchase a property, you should take your spouse with you. On the other hand, when you sell your property, you should not take your spouse or anyone else. It should only be you and the prospective buyer. If you can sell this property within a month, it will only cost about $200.00 for space rent, $200.00 in advertising, and $100.00 for repairs needed for the new owner. Every situation is different, but this scenario is typical.
The local paper will have a Mobile Homes For Sale section in most areas. Always put “Will Finance” in the top line of your ad. Anyone with a full-time steady job, working just about anywhere, can come up with a typical $200.00 to $500.00 down payment. Most owners would happily float a note for the rest, at a high-interest rate. Most buyers would rather pay more interest than deal with all the red tape and hassles the bank would put them through.
This scenario would be typical for a semi-responsible young couple to take advantage of. If the home costs $4,500.00, they could put $200.00 down and make three years of payments at $236.74 each. This is a win/win because, as the seller, they are making a significant profit, and you’re providing a young couple getting started in life with a solid place to live. Another thing you can do is offer the buyer a discount if they pay the entire note off in 30 days. Lonnie will teach you by running all the numbers and how you can profit in a situation like this. Chapter eight is the meat and potatoes of this book. Make sure you learn this because the rest is easy. Chapter eight explains how his deals are structured.
Some people he sells to have been living in apartments for a while and are tired of making these large monthly payments. Typically, you pay at least $800.00 per month more for an apartment than you do for a mobile home. Another thing to consider is that the demand for mobile homes lately is off the hook because they are regarded as affordable housing. A little later in this chapter, he details how to structure your ad, how much a buyer should put down, and how much they should pay each month. Once again, Lonnie breaks down the numbers well here. After this chapter, anyone with even a small level of business acumen could negotiate a deal with a buyer or seller.
He even explains how you can sell at zero percent and make things work in your favor. This chapter also covers maintaining a list of potential buyers, and how to get the seller to work for you. He has two prices for every deal he’s involved with, a cash price and a credit price. Of course, the buyer will pay less if they use cash, but he structures the agreement so that he comes out ahead no matter what. It’s a slick but straightforward little method he’s used many times. He also makes the payments affordable, so it will be easy for the buyer to pay off their note and still have plenty left over for their other expenses.
Chapter 10
In the PDF version of Deals on Wheels I’m reviewing, there is no Chapter 9. For some reason, it was not added to the Table of Contents. However, I didn’t forget to review this chapter. Chapter 10 starts discussing the sales contract. One thing he does in all his deals is getting the most he can as an initial deposit. In the appendix section of this book, they will have a sample sales contract you can use. This contract is easy to fill out and only requires a little explanation.
They like to sell their homes in “as is” condition. If you use another contract, make sure that “as is” is spelled out and say the mobile home is being sold without guarantee or warranty. If you don’t do this and let’s say their heater goes back in three weeks, they might take you to small claims court and try to put you on the hook for a $2,300.00 repair. Also, in this contract, say that you are under no obligation to make any repairs to this home. If all the correct contract terms are in black and white up front, you can’t get bitten on the back end. A Truth in Lending Statement is a legal requirement in all states.
It would be best to let the buyer know the annual interest rate charges, finance charges, and the total amount of interest they will pay over the life of the note. It also must specify the monthly payment amount and how many payments they will be responsible for. When a buyer signs the contract, this means they agree that they have received a copy of this statement. This way, buyer’s remorse later won’t be an issue for the seller, if the buyer tries to back out of the deal. Once the contract is signed, the buyer is responsible and must adhere to what is mentioned in the agreement. It is legal and binding in any court.
Chapter 11
Next Lonnie discusses the promissory note. This document says the buyers owe you a certain amount of money. The note says how you will be paid and other factors that could cause the note to fall into default. The appendix section includes a copy of the note he uses. He’s used the same one for years and never had any problems with it. Different areas have different laws and regulations, so the wording of this note might not work in your state. However, the note form you use could be easily obtained by speaking with a local attorney in your area or purchasing this form from Staples or some other office supply store. He goes into detail on what the note should include. You can even purchase these forms online, sorted by state.
A court will only rule in your favor if each and every term is in this note. Defendants tend to disagree with you when you are both in court, and although a verbal agreement is legally binding, good luck getting them to admit to what they told you months earlier. First, the word Promissory Note should be in all caps at the top center of the document, so anyone who views this knows what it is. Then under this, the word Original should be written in all caps. If more than one person is responsible for paying on the note, it should be worded “jointly and severally” after the word “undersigned”. This means you can take all parties to court if they default on the note.
He also discussed late charges, being firm with your buyer, and insurance and property taxes. Sometimes buyers pay late and don’t include the late charge. If the note is worded correctly, you can deduct the delinquent amount and apply the rest of the payment to interest and principal. There is more record-keeping involved, but it’s not too bad. They also charge note holders $2.00 every day they are late after the fifth of the month. Some people pay on their notes a few weeks late every month, they have no financial discipline, and it’s just more money in his pocket. It doesn’t bother them at all to do this. They also charge an additional $25.00 if their check bounces.
He also goes into “sob stories” note holders will tell Lonnie about all their phony hard-luck tales. He was gullible when he started this business until he learned they were playing him. Sometimes you might deal with a professional con artist looking for sympathy. The good news is the mobile home is secured by the promissory note. Always include the make, year, ID number, and location of the home and park within the note. The seller will remain in possession of the title until the final payment on the note is received and processed.
All things that will cause a note to default should be in the note’s wording. This way, a court would likely rule in your favor if a specific violation occurred. In the note agreements Lonnie uses, the note is in default if the payment is received 10 days late. Legally, all the remaining principal and accrued interest are due and payable in full. There doesn’t have to be any more grace period before the note goes into default. He gives them a little longer than this because he doesn’t want to leave any wiggle room for a Judge to say he was overzealous. The note holder is also responsible for all collection and legal costs and attorney fees.
Chapter #12
In chapter twelve, Lonnie Scrubbs goes into Insurance and Personal Property Taxes. He first mentions that you can’t trust the buyer to purchase insurance for the mobile home. As the owner, if you issue a promissory note to the buyer, you must take responsibility for getting insurance. Once the note is paid off, the title gets transferred to the buyer; then, it is their responsibility to get insurance. Lonnie always carries a copy of the insurance policy for each home he owns. He ensures this policy is in his hand before giving the buyer the keys.
Lonnie is open regarding the buyer’s insurance company, but he insists on a copy of the policy for every property he floats a note for. He also makes sure he is labeled as the first beneficiary. If the buyer doesn’t do this, he will get insurance for the property himself. Plenty of independent agencies out there will set you up with an insurance policy. Since he’s been responsible for obtaining insurance rates on several mobile homes, he can usually estimate the cost and let the buyer know how much within a few dollars. Even though he might purchase the policy himself, he will transfer this cost onto the buyer.
The policy payments need to be paid; if they aren’t, Lonnie will ask them what the problem is. In the promissory note, one of the terms is that all mobile home insurance payments must be made. If the mobile home insurance isn’t paid, technically, the note is in default. He always stresses that you should have a mobile home insurance policy that covers the entire home value plus an extra $2,000.00 above that. If you don’t, and the home burns down, good luck getting compensated. He also details what it takes to have the right insurance on your home.
Any insurance you purchase should not only cover the cost of the home but should be enough to compensate you if something terrible happens, like a fire or flood. Sometimes if the insurance you purchase on a home is located in a mobile home park, you also need to consider lot cleanup costs and the price to have the mobile home hauled away if a fire occurs. Lonnie has only been involved in one fire incident in his investing career. Lonnie goes over all the other contingencies that could happen and advises you to purchase more insurance to cover these contingencies if they occur.
Finally, he explains a little bit about how mobile homes are taxed. A mobile home is usually considered personal property, except for a couple of particular circumstances, which he outlines.
Chapter #13
Lonnie is a mobile home dealer licensed in the state of Virginia. Because of his status as a dealer, he must collect title transfer costs, do the paperwork, and transfer the title to the buyer. Your local DMV office can explain these procedures for your area. These procedures can be different depending on which state you live in. Some states use a bill of sale or a UCC-1 versus a title to secure the loan.
You must pay a 3% sales tax plus a $20.00 title transfer fee in Virginia. The buyer is responsible for paying these fees. Lonnie collects these fees from the buyer when he sells the property. Once the DMV receives all this paperwork, they will forward the appropriate information to the city tax collectors so the buyer will be on the hook for future tax payments. Mobile Homes, in almost all cases, are considered personal property, so this is how they would be taxed. One thing he suggests is to get familiar with how the laws regarding repossessions and judgments are worded. Even the Clerk of Court will tell you what you need to do to repossess a mobile home on which you hold a lien.
Next, he talks about non-dealer regulations and the best way to proceed if you sell the mobile home as a private party. In this case, the buyer is responsible for paying the title and transfer fees. His name will be on the title as the registered owner. The buyer will assume these fees if he decides to sell this home. He feels it will make life a lot easier if you get a dealer’s license if you buy and sell mobile homes at scale. Also, you will need a local city business license. When dealing with mobile homes, the city and state governments will want their fair share of tax money.
Sometimes buyers will purchase a property, then resell it to someone else without putting the property in their name. This is called “skipping title” and is illegal. If the DMV finds out you do this, you can get fined. Why risk it? Do things right the first time and avoid this drama. Title fees are relatively inexpensive, pay the government what you owe and stay legitimate. The rules and regulations will vary by state when you buy and sell mobile homes.
Some will require you to have a license, and some won’t. Some states will allow you to do a few deals, then require a permit. Some states are soft on enforcing the rules, while others are ridiculously harsh. Your local DMV and business license department at City Hall will know the requirements in your area.
Chapter #14
Chapter 14 of Deals on Wheels talks about Dealer Tax Ramifications. In other words, what to be aware of and how to plan for them. You can’t use the installment sales method on dealer-type properties. When you make a profit, you must pay taxes on these profits in the year of the sale. For example, if you purchased a home for $3,000.00 and invested another $500.00 for advertising, repairs, etc., you are now at $3,500.00 invested. Let’s say you sold this home at $5,500.00 for a $2,000.00 net gain.
You will be taxed on this $2,000.00 gain the year the sale was made, regardless of how much down payment you received. Also, all the interest payments you collected on the note floated to the buyer will also be taxed. This is a great business, but the one minor downside is paying taxes on the profit you received after making a sale if you received a small down payment. You might have to come up with a little out of your pocket. This is a one-time event with this property; after this, you only have to worry about paying taxes on the interest payments you receive.
In retrospect, doing this is still much better than having a J.O.B. (Just Over Broke) and spending your life slaving away for someone so they can live out their dreams. Next, he goes into a three-paragraph explanation of how to stay in a zero-tax bracket. He said the only way to stay in the zero tax bracket is to remain in the zero income bracket.
Remember, a good entrepreneur with any reputable business will be paying taxes. Smart people pay taxes. Cool people pay taxes. Even if you have a regular J.O.B., you will be paying taxes. I worked for the federal government for ten years, and they took the money out of my paycheck. No one wants to pay taxes, and a percentage of us disagree with how the government spends our tax dollars, but we all have a responsibility to pay them, whether we like it or not.
When I was a kid, an adult told me there are two absolute certainties in life. You will pay taxes, and you will die. I responded by saying how can you pay taxes if you are broke? He said yeah, you’re right. However, there is one benefit to paying lots of taxes. When you get older and collect Social Security, when you need and depend on recurring income, your check should be larger than the next person who failed to contribute. Finally, Lonnie talks about choices. You can keep working a regular J.O.B. and get taxed according to what you make, or buy and sell mobile homes and make your job cashing checks at the bank. Lonnie was initially hung up on taxes, but then he finally saw the light and doesn’t mind paying his fair share.
Chapter #15
Deals on Wheels in Chapter 15 covers lease options and rent-to-own agreements. He says both methods are suitable to implement, and both parties can benefit from these methods. However, before you use any of these, consult with your accountant or attorney and make sure you understand how these methods work. Lonnie has yet to use any of these methods himself with mobile homes. Once he sells a mobile home, he transfers the title into the buyer’s name. He would rather do this than be in the landlord business. However, people doing a rent to own and lease options with mobile homes are having good results.
Whichever of these methods you use, the buyer would have a right to purchase the mobile home at a future date as long as the contract terms have been fulfilled. He reviews numbers and examples of how this could work in real life. The option consideration fee won’t be taxed unless the option is exercised or expires. Any monthly payments you receive under this agreement are considered rent, so taxes would be due for the rent you receive each year. If the tenant decides to exercise their option and move, no rebate is required for the payments they already made.
If this is done right, these two marketing tools significantly benefit both the buyer and the seller. It’s imperative to follow all the IRS regulations when you engage in one of these methods. One of the requirements is that the final buy-out payment at the end of the option must be at least ten percent of the home’s fair market value. Let’s say the home has a fair market value of $3,000.00. In this case, a final payment of $300.00 will meet this requirement.
He also goes over following the rules when you do this. Don’t let the buyer engage in any shady tactics. Some deceptive tactics buyers have used in the past were to make a certain number of payments correctly. When they made their last payment, they paid some ridiculous amount like $1.00 and still attempted to retain ownership of the home. The IRS can say this was a sale, not a lease option. Not to mention this is fraud.
A tax advisor is familiar with all the regulations regarding lease options and rent-to-own deals. You can always try a few deals to see if you like this method better than selling the property. Finally, in Chapter 15, he writes a couple of paragraphs about minimizing trouble calls. This prose has to do with the wording of the lease option agreement form.
Chapter #16
Chapter 16 discusses what steps you will take if they don’t pay you as the seller. While a new mobile home investor might freak out and wonder what’s happening, not getting paid is a blessing in disguise. For example, if a payment isn’t received within five days of the due date, there is a $25.00 late charge. Each day after the fifth day, they will be on the hook for $2.00 more per day until they pay. From what he has experienced, the buyer usually will take time to make the payment once they realize they will be paying a late fee. What prompts them to send in the payment is the $2.00 per day that starts after the 5th.
Once they know they are paying $2.00 each day, this creates a sense of urgency, and they try to get the payment in as fast as possible. Make these daily late fees as large as the buyer will agree to, but don’t make them so large to where a Judge might think you are trying to take advantage of them. Even good, well-intentioned customers need help paying on time occasionally.
If they have a sense of responsibility and let you know they will be late in advance, then you can work with them. However, if they tell you they will pay by a specific date and don’t blow you off when you try to contact them, you can work with them. If they blow you offer and not take you seriously, you should rigorously enforce all your late fee charges. He usually works with people until he finds out they are trying to be dishonest with him or blow him off. There’s always a way they can catch up on their payments if they are serious. They can do some overtime, get a second job, and budget wiser; everyone has options. And remember, the amount for these monthly notes are minimal since these are the types of affordable deals Lonnie likes to structure.
Buyers should know that if they don’t fulfill their end of the deal and make their promissory note payments on time, they can expect legal action and the chance of having their mobile home repossessed. Some bad tenants try to take advantage of people and will give you every sob story under the sun. Others want to push you to see how tolerant the owner is. People stay broke because they live above their means. Then they prioritize things like a new car instead of paying for a roof over their head. Lonnie goes over why people stay broke, small claims court, and keeping copies of all your documents.
Regarding keeping records, make a file on a particular property. Put every legal form and anything relevant to this property in a folder. Then, someday when you sell the property, after they’ve made all their payments, and the title is transferred to them, you can turn over this folder to the buyer. He also discusses that they can get a free mobile home if they don’t make their payments through the repossession process.
Chapter #17
Chapter 17 is about how to get started. Lonnie used to believe the phrase; it takes money to make money. People still say this all the time. Yes, you need a little money to start any business, but this money can easily be saved by doing any regular job. If you have a little ambition and set some goals, you can save enough money to start this business. What it takes to succeed in business in education, and Deals on Wheels provides the knowledge to get started. Having a good attitude is up to you. There’s a saying that your attitude determines your altitude. It is much more important than how much money you have.
Even if you have no money, to begin with, Lonnie will show you one way to pull this off. He also teaches you how to start this business for about $3,500.00, a typical start-up price. Let’s bump this number up to $5,000.00 to be safe. It’s been quite a few years since he authored this course, so the price of mobile homes has gone up. However, you can still find many great deals and all his methods still work. Just take about a decade of inflation into consideration. He runs all the numbers Lonnie style and breaks things down in an easy-to-understand format. Then he teaches you how to recover your investment costs.
Finally, he talks about setting goals and how much watching TV can hurt you when you should be hustling and making mobile home deals. Then, he goes over the math and how much your financial future will change for the good if you do one deal per month.
He explains a lot of good math in this chapter, so you want to take advantage of this chapter. He shows you how you can sell the front end of a note. He also talks about the power of compounding in detail, which works nicely with mobile home investing. Over time, these figures can make you a six and seven-figure profit. Finally, he breaks this all down.
Chapter 17 is another chapter where he runs some numbers you need to understand. Keep going over this chapter until you genuinely understand how to do this. This will be 80% or more of the educational benefit you will receive from this book.
Chapter #18
Chapter #18 of Deals on Wheels covers Ideas For Mobile Home Park Owners. If you own a mobile home park or are considering purchasing or developing one, he recommends finding some nice, used mobile homes and putting these on some of the vacant lots. Then use the Lonnie method and carry the note. This way, you will receive payment without any management headaches. You want to be in a position where you will receive a rent payment for the dirt. When you sell the home, you should make a profit from this. You will also receive extra income from the finance charges. If you carry paper, the money will go into your pocket instead of the bank. He feels this is the best way to operate a mobile home park.
Next, he runs the numbers and compares renting versus selling the mobile home. You can analyze these numbers and determine the best method for you. His methods focus on renting, but he also shows you how to sell when needed. Sometimes renting can be more profitable than selling if you don’t mind being a landlord. One benefit of renting a home instead of carrying paper is you can rent it out indefinitely, as long as you don’t mind being a landlord. The other benefit is you could pay less taxes. The tax difference is only a small amount, but it’s worth considering.
He covers the lease with the option to buy again in this chapter. This is the way to go if you don’t want to pay all the taxes in the year of the sale and don’t want to deal with potential issues that may arise when you rent out the property. Many buyers would like this arrangement because their lease option payments go towards purchasing the home. Once they make their final payment, they only need to cover a small balance, and the home now belongs to them. These amounts can vary, but for illustration purposes, it could be $500.00 if this is what they put up as an option consideration.
Next, he goes over how to make a bulk purchase and lease several lots in the same park. He gives a great explanation of this and then closes out this chapter. If these lots are empty, you will have to place mobile homes on these lots before doing this. The buyer would pay the space rent fees to park management and pay the owner separately. If you are leasing these lots, you can increase the rent yearly to make a little more money. You would want to do this to keep up with inflation and you would need to explain this to the tenant. If you raise the rent too much, they might get angry and want to live somewhere else.
Chapter #19
Lonnie explains how he got his wife a mobile home lot as a Christmas present. The tenants that live there paid the entire note off and still live there. His wife Joanne still gets monthly rent checks for this lot and will probably keep receiving these monthly checks for the rest of her life. Let me explain for readers who might get confused: if you purchase a mobile home lot, you own that lot. There could still be some mobile home park management fees, but you own the lot.
This means you can rent out the lot separately from the home. So an owner of a mobile home lot and the home that resides on it can collect two monthly checks. The first check is for the mobile home lot rental, and the second check is for the owner financing for the actual mobile home they made available to the buyer.
A little later in Chapter 19, he details how to keep a file of the seller’s ads. He’s referring to people who had mobile home lots for sale. He saved the ads even if he disagreed with some of the prices. Some of these he would tape to a file card. When he spoke to the lady who owned the lot, he asked her if he could also purchase the note from her. She wasn’t aware the note could be sold and transferred. Lonnie told her the note could be sold, but for him to buy it, she would have to offer him a discount. One thing he recommends is to keep old ads and watch for them to pop up in the future.
In this chapter’s next section, he discusses how written offers get results. First, he makes a verbal agreement with the seller and offers something they would both be happy with. Then once he feels the deal is about as good as it can get, he makes a written contract and submits it to the owner with a deposit they both agreed to. He was able to get the note in addition to the lot because he took the time to get to know the seller a little bit and negotiate a good offer. Unfortunately, the other party that wanted this property wasn’t willing to do this. So he got the property for $1,000.00 less than the other party offered, and she accepted because she didn’t want to take a chance that the other party might back out of the deal.
The moral of this chapter is if you want something, don’t be afraid to make a verbal offer and start negotiating. Later in this chapter, he runs some numbers and explains how he came out on this deal. One good deal like this can get you a small monthly check for the rest of your life. He feels some of the best mobile home deals are available from the Christmas season to tax time. Another idea I thought of is you can strictly get into the business of purchasing mobile home lots and renting them out.
Chapter #20
In Chapter 20 of Deals on Wheels, Lonnie discusses how the lack of knowledge can be expensive. There are many people out there who refuse to take responsibility for their lives. They are in a bad financial situation but will do nothing to improve it. Many of us have family members and friends in this same situation. You can give them pep talks about how to invest correctly and how much investment seminars can benefit them, and it’s like in one ear and out the other. Their biggest excuses are they are too busy or can’t afford it. People with money in the stock market average about 6.8% per year.
One of his friends has money investing in the world’s largest gambling casino, the stock market earning about 6% annually. He was offered to invest in a better opportunity that paid 16%. He refused because he said he would have to pay early withdrawal penalties. So is the actual harm in leaving it in stocks yielding 6% or taking the money out and paying 16%? Common sense says 16% is 10% more than 6%, but he is still in stocks. Someone is happy, and that is his stockbroker. Another friend complains he is too broke to start this business. However, he’s paying the credit card company 19% interest. If he budgeted better and paid off his credit card, he could start saving some money to invest.
The next thing Chapter 20 covers is education. He’s not referring to a college education. Let’s face it; many current college grads work at Burger King or Wendy’s, especially those with degrees that can’t be applied well in the real world. Underwater basket weaving is a useless degree most of us have heard about discussed in jokes. These days a master’s degree is the new high school diploma of 40 years ago. My dad worked for Boeing and retired after 30 years. He was a navy vet and only had a high school diploma. He worked in defense electronics. These days, you would need at least a master’s degree to hold his position. Even college graduates with years in the workforce have nothing to show for their efforts.
Lonnie explains in this chapter that a degree means little of anything when obtaining true financial freedom. To achieve success, you must learn from someone better than you. You need to acquire a duplicatable, solid skill and then know how to go out and apply this skill. This will require you to pull out of your comfort zone. However, it will feel good as you get better at this, especially after you acquire your first mobile home. It will be an adventure, and you will learn so much along the way. If you operate in a particular area, you will make local contacts you can depend on for advice and guidance as you go along.
He feels the worst thing you can do is procrastinate. So instead, dive right in and get into the mix. This book will get you started, but it is ultimately up to you to take action. Remember, this book is a starting point. Your real education will come from experience and dealing with all the players involved in the Mobile Home industry.
Chapter #21
In Chapter 21, Lonnie says the school system of today doesn’t help you achieve success in the real world. They only teach theory, and students come out of school needing clarification. He also mentions how TV is a waste of time. These days, blindly surfing the internet or playing with your smartphone for hours are equivalent time wasters. Instead, you can spend this wasted time learning this business and planning to close your first deal. Your average student spends 15,000 hours going to school before they graduate. Unfortunately, they also spend 19,000 hours watching television during this same period.
He feels the other problem with society is that people have their priorities screwed up. Lonnie had someone inquiring about a mobile home he was selling. He asked him how much he had for a down payment. He responded that he didn’t have anything, had just purchased a new car, and his payments were $400.00 per month. Unfortunately, you can only help people like this if they truly want to change. How can you help someone who pays double the monthly payments for a car than they would on a promissory note to provide a roof over his head? He had a wife and a small child, which worsened his situation. The school system failed him. Those 15,000 hours he spent in school didn’t give him any skills to survive in the real world.
He speaks about the story and this man throughout the entire chapter:
- He talks about what he could have done with those $400.00 payments he essentially gives to the bank that financed his new car. Even if he had purchased a $10,000 car, he would have come out far ahead.
- He speaks about compounding power and how it would tilt things in his favor if he made a wiser decision.
- He explains how his lousy decision cost him over 1.1 million dollars by the time he reached 65 years old.
It’s a fascinating breakdown; you want to read Chapter 21.
He asks why the schools don’t teach their students about financing, making money, compound interest, investing, and preparing for a secure financial future. I have an answer to this question. Some of the elites in society influence what the schools teach because their big money contributes to the nations educational budget. They would have less business if they taught everyone how to be savvy with their money like the elites are. These are the same “professionals” that will be happy to finance your vehicle and issue you a credit cards with exorbitant interest rates. Hey I’ve been there myself, but luckily I learned my lesson.
People like this individual that buy what they want at the time will more than likely be broke for the rest of their life. But the banks and creditors are happy, so the world will keep turning, right?
Chapter #22
Chapter 22 wasn’t identified in the Table of Contents but exists within this PDF book, so I will review it. The first thing he spoke about was a half-page ad he saw in the local paper, put in there by a regional bank. The ad meant you could get a 5.35% return on a 22-month CD, so get a good night’s sleep. However, if you try to withdraw this money early, you will receive a penalty. He felt shocked in a disappointed way. First, the bank insults you by offering you a low rate of return, then dares to say get a good night’s sleep. He would have reworded it as the perfect nightmare – how to stay awake at night.
Annuities are one of the worst financial vehicles ever, and even to this day, they haven’t changed. They pay almost nothing, and the bank nails you when you need some of these funds early. The penalty is typically ten percent, just like withdrawing from your TSP or another employer-sponsored account before 59 1/2. He even discusses how the 5-6% the banks pay you is ridiculous.
If Lonnie was still alive, I had a news flash for him. The banks pay a lot lower than this now, under 1%. This is because the rate of return banks give you currently needs to keep up with inflation. The estimated inflation rate in 2022 was 6.5%.
Next, in this Chapter, he covers the 10-10-10 rule in detail and how to create a note paying at least 21%.
This is how it works:
- First, buy something for 10% below market value.
- Sell this same thing for fair market value, making the buyer put at least 10% down.
- Financing this same thing to a buyer for at least 10% interest by floating a note or using other means.
Of course, after this, he runs some numbers Lonnie style, breaking this all down with examples. He has another section of this Chapter called Learn The Concept, where he explains how to do this with a mobile home, which is appropriate since he teaches this. Finally, he gives a little pep talk on how to Invest in Yourself. The key to making this work is to get specialized knowledge to make this happen for yourself. Wash, rinse, and repeat.
And the cool thing is, you won’t have to spend another 15,000 hours in school to learn this. After reading this book, reread it to drive home the main concepts; it might take you 50 hours or even less. Then you should be ready to take some action and make things happen. Your choices after reading this book will make or break you.
Chapter #23
In the Deals on Wheels PDF book authored by Lonnie Scruggs, Chapter 23 is also not found in the main Table of Contents. This is another chapter covering the value of money and the value of your time. One story he tells is about a man who sold hot dogs. He sold good hot dogs, but he had health issues. People would stop and buy one whenever he yelled, “Buy a Hot Dog, Mister!”. He had to purchase a larger stove to handle all these incoming orders. Sorry, I can’t tell you the whole story, but his “college” son tried to put him up on the game. He listened to him and lost his business overnight. I’ll leave it at that.
Next, Lonnie talks about the value of time. Each day has 86,400 seconds. What people do with their own time is their business. But after the end of each day, this time is deleted. Use it or lose it. You can never get it back, no matter what. So the moral of this is to take as much of this time as possible and learn a skill that will give you the money and time freedom to start enjoying the remainder of your life and these future 86,400 second days you are currently blessed to have.
Then he makes a small plug on realizing the value of your time on earth. Then he places a significant value on genuine friendship. A friend is someone who makes you smile and encourages you to be successful. When you run this business, you will meet many acquaintances and pick up a few friends along the way. This is the very last Chapter; in the final part, he mentions that you should Make a Commitment.
You can read this book 10 times, but you need to take action to have a chance to become successful. Be loyal to yourself and take the plunge. The slight discomfort you feel by stepping out of your comfort zone will be temporary. The specialized skill you develop, the friends you meet, the lifetime of residual income you make, and the profits will last a lifetime. You will also have a sense of accomplishment. He wants you to commit to purchasing a mobile home within 30 days, and we want the same commitment from you.
The Safe Act
In this final part of the book, Lonnie is on the phone with Cash Flow Depot, discussing the safe act. The Safe Act discusses in interview style what a Lonnie Safe Deal is. This interview starts on page 157 and ends on page 181. These are transcripts from a small conference call.
Bonus Chapter – Create Your Own Economy
Lonnie Scrubbs finally finishes Deals on Wheels with a bonus chapter. This is a meaty chapter with a lot of wording. You can’t depend on the government to give you what you need to be comfortable. If you don’t believe me, look at all the homeless people on the streets. They depend on the government and are nowhere in life. The state of the national economy and your personal economy are two different things. With a little initiative, you can learn how to outpace inflation.
When he speaks about the economy, he does this from a local perspective. But with the internet, and all these new alternative investment opportunities you can participate in, changing your economy is doable, especially if you have a good internet connection and a little ambition. This Chapter starts on page 182 and finishes on page 201.
Appendix
You will have access to these forms toward the end of this PDF book.
- Mobile Home Purchase Agreement
- Mobile Home Sales Agreement
- Credit Application
- Promissory Note
- Lot Rental Agreement – Mobile Home Buy and Sell Information Sheet with Smoke Detector Verification
- Power of Attorney
Lucky Investor’s Final Opinion of Deals on Wheels
Lonnie has been doing business in one way or another almost his entire adult life. He poured his whole life of experience into Deals on Wheels, which makes this book so special. Jeff West read this entire book. He kept calling me, bragging about how awesome it was and that this would be one of our income streams once BrianGarvin.com takes off. That’s the cool thing about writing for a blog specializing in alternative investing, you learn so much about these programs and how they work. This meets all the criteria for a program we both want to participate in. It’s another way we can add diversity to our investment portfolios.
I rate this program a 10 out of 10, with a few words of caution. Lonnie passed away in 2003 (bless his soul), so this book hasn’t been updated for many years. The good news is, it doesn’t have to be. The nuggets are still intact, but a couple of things are different than what he explained. First off, the price of mobile homes is higher now than they were 15 years ago. Also, dealings with some of the professionals he’s worked with, like the city, can be done over the internet. Finally, many professionals in this industry are finally starting to add automation to their businesses.
I also wanted to mention that this book is out of print. You can pick up a used copy on places like Amazon and eBay. However, getting a copy is north of $400.00 in most cases. So is this price worth it even though it has some outdated information? My answer is it absolutely is. The reason why are the principles this book was written on and the concepts will always apply. These days though, $10,000.00 is a good starting amount you should have to get into this game. His figures were lower because things were less expensive when he authored this book. You have to love inflation right?
Overall, if investing in mobile homes is something that you are interested in, I recommend spending the money and getting a copy of Deals on Wheels. It will teach you how to invest in mobile homes and offers outstanding financial advice. It opened my eyes when it came to money, compounding interest, and the right mindset to have. So yes, Lonnie’s prose resonated with Jeff and I.
Other Mobile Home Investing Courses
If you are serious about Mobile Home Investing and are looking for an updated resource, we recommend Mobile Home University, authored by Frank Rolfe and Dave Reynolds. These two own over $500,000,000 in mobile home parks. This is an extensive course for investors who have big dreams and want to own a Mobile Home Park to add to their investment portfolio. We provided a lot of information on our review page you can look at. Frank and Dave offer quite a few different services and some free stuff.
The other course Frank and Dave offer is called RV Park University. It will teach you everything you need to know to invest in RV Parks. Both systems offer a 90-day, 100% no questions asked guarantee. Over 10,000 baby boomers retire daily, and many like to travel in their RVs. They also need a place to park, and these RV parks are easy to obtain seller financing for. So if you are ready to up your game, these two courses are where it’s at.
If you are somewhat cash strapped at this point, and are looking for a way to start stacking before you get involved investing a larger amount of money with mobile homes, we recommend you look at Arrived Homes. You can get started for $100.00. Making small moves is much better than not making any moves.
P.S. Rest in Peace Lonnie. You are a big inspiration to myself (Brian Garvin) and Jeff West. You have been responsible for changing the financial thought patterns of thousands of other investors, getting them on the right track, and encouraging them to make their first mobile home purchase.
Lonnie style, of course!
