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Mobile Home Park Investing

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Brian Lubeck
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Selling homes to tenants

Brian Lubeck
Pro Member
Posted Jan 30 2024, 05:42

Good morning.  I have a question about selling homes to tenants.  We have a loan on the property as a whole, but recently I have sold a few homes to tenants and only charging them lot rent.  How will my bank view that?  Will they care because those homes were collateral?  Wanted to ask the community first before asking my banker.  Thank you in advance for any guidance.  

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Replied Jan 30 2024, 08:41

Depends on how you structured the loan but I think you're gonna get 'clipped' by your bank.  How could you be selling a home only for lot rent?  Did you do it to just get out from under the maintenance?  

Homes are like cars with titles and they can be moved.  If the titles are still in your name... It may be ok.  If you start titles with those homes listed as collateral in your yet to be paid in full note I think you may have a problem.

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Will Stewart
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  • MA
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Will Stewart
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Replied Jan 31 2024, 04:41

Were the homes collateral on your loan and/or used in the appraisal to justify the purchase price? If you got the loan based on lot rent value only then I wouldn’t worry about it. If the loan lists the homes as collateral technically you should be getting a release for them (and paying down a portion of the loan from proceeds).

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Dave Rav
  • Summerville, SC
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Dave Rav
  • Summerville, SC
Replied Feb 2 2024, 19:18

Yes, it's all about if the bank held the homes as collateral.  Does the BANK hold the titles?  If so, they have a mortgage against them.  Your sale is likely null and the bank may have recourse against you.

If the bank does not hold the titles and does not have the MHs as collateral, then you may be ok.

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Henry Clark
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Henry Clark
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Replied Feb 2 2024, 19:22

Proceeds should go to the bank.  If you made a profit ask them to release a portion to you to cover your income taxes.  

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Rachel H.#2 Mobile Home Park Investing Contributor
  • San Antonio, TX
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Rachel H.#2 Mobile Home Park Investing Contributor
  • San Antonio, TX
Replied Feb 4 2024, 10:11

@Brian Lubeck If you're selling the homes to tenants and only charging lot rent, it should be separated from the sale of the homes themselves. I would not bundle them together as a payment for the home which can be confusing. 

Yes, this may raise a red flag with your bank since the homes were collateral for the loan. Just something to be aware of. 

Hope that helps! 

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Replied Feb 4 2024, 15:30
Quote from @Rachel H.:

@Brian Lubeck If you're selling the homes to tenants and only charging lot rent, it should be separated from the sale of the homes themselves. I would not bundle them together as a payment for the home which can be confusing. 

Yes, this may raise a red flag with your bank since the homes were collateral for the loan. Just something to be aware of. 

Hope that helps! 

@Rachel H.  Wow... bundling the pad and house payment got completely under my radar.  Did not even think of that.  Thank you for the quick tutorial.