Does it Seem Impossible to Buy and Sell Mobile Homes?!

Many sellers and ‘would be’ buyers are finding it more and more difficult to obtain financing for mobile homes. This leaves many sellers stuck with their mobile home, many buyers out in the cold, and volumes of realtors/brokers just plain frustrated!

In this article, we will share the story of one of our clients, David G.’s 1st self-directed Roth IRA mobile home loans. David G., by the way, grew his retirement account from $6,800 to $293,000 in 5 short years.

The Opportunity

David G. became aware of this loan opportunity from a landscaper that mentioned the need to get a loan on a used mobile home that the banks were unwilling to lend on. (As we know, lenders generally do not like to finance older mobile homes.) David decided to partner his Roth IRA and his wife’s Roth IRA to fund this loan.

Wait a minute…isn’t his wife a disqualified person?!

At the TIME OF ACQUISITION, his IRA CAN partner with himself and/or any other person(s) and/or any other person(s) IRA.

Why Partner?

Since both his account and his wife’s account had small balances, partnering is a good strategy to help build both accounts. This same strategy is often employed with other accounts that have low contribution limits and thus smaller balances (for example, Coverdell Education Accounts and Health Savings Accounts).

The Terms

• The loan amount was $4,000 secured by a 1985 Oakwood mobile home located in a mobile home park.
• The Interest was 18% payable at $101.57 monthly for 60 months. Total profit based on 50% ownership-$1,047.10.
  • The loan terms were set by David G. and the borrower-NOT American IRA. American IRA’s role is a third party administrator not an advisor.
  • As part of the terms, the borrower paid all closing costs (i.e. Legal, title recording, certified mail fees, and American IRA fees).
    • This is not a requirement but it is good business practice. Think about it…when you get a loan from a bank do they pay all the fees? Not usually, so why should your IRA? Your IRA is the bank in this situation.

Some Quick Notes

• The Landscaper is not a prohibited person as defined by IRC Section 4975. If the landscaper was a prohibited person, David G. would not have been able to allow his Roth IRA to make the loan.
• The Loan was secured by the title to the home with the correct vesting and registered with the state to put a notice of a lien on the title.
  • This prevents the borrower from placing loans on the mobile home that are superior to the lien David G. made with his Roth IRA.
• The collection of payments will need to comply with federal law and require an approved third party servicing company.
  • For more information on these requirements, please refer to the SAFE Mortgage Act.
• If you are planning on adding loans to your investment portfolio, make sure you are familiar with the SAFE Mortgage Act as it relates to the number of loan transactions you can make per year
  • This number differs depending upon whether the loans you are making are for owner occupied homes or rental homes

Isn’t it harder to invest with an IRA?

The one thing you should remember is that the process is the same whether it is inside or outside an IRA.

The only difference is that American IRA signs all documents on behalf of your IRA and that all loan payments flow back into your IRA.

Turning Frustration into Profit

As you can see, investing in mobile home loans can be profitable. In this case, David G. made $1047.10 in interest income and he helped out both the landscaper and the seller of the mobile home. Whether you are a realtor, broker, investor, or seller…seeking out alternative solutions for funding sales is a win-win for all involved as long as all parties due their ‘due diligence’ to ensure the investment is sound and as long as all parties involved are careful to solicit the help of professionals (attorneys, CPAs, etc.).

If you think about the tremendous amount of mobile homes on the market, you will quickly realize how much profit is out there to be realized for those that are willing to be a little creative in closing those deals.

Note: This technique can be applied to all sizes and types of property depending on the size of the IRA. For more information visit our website, www.americanira.com.