4-star mobile home park mortgage options, April 2024

Mobile Home Park Investing
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4-star mobile home park mortgage options, April 2024

Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

Good hunting!

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Mark Walker
Member since 2024 · 54 posts · 17 votes
2y
Quote from @Mark Walker:
Quote from @Chris Mason:

Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

Good hunting!


 Thank you for this, I'm looking at a MHP currently. 


I'm looking for Mobile Home Park lender. Do you have any suggestions?
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  • Logan M.
    Investor · Provo, UT · Member since 2016 · 759 posts · 626 votes
    2y
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Can you explain this to me like I am four years old?

    1Reply
  • Chris MasonPro Member
    Moderator
    OP
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    2y

    7/25, 10 years maturity:

    Fixed interest rate for 7 years.

    25 year amortization / payment schedule.

    Balloon payment in 10 years. 

    That part is normal for commercial mortgages; 5 year maturity is common, and 2019+5=2024 is why many are expecting offices to have a rough couple years.

    Net operating income (NOI) is net profit before the mortgage payment, and determines how big of a mortgage you can get.

    NOI / cap rate = sales price, and sales price x cap rate = NOI. If you can remember $1m <-> $60k <-> 6%, you can bounce between price, NOI, cap rate. NOI, and thus cap rate, feeds into how much of a down payment is required b/c it feeds into the "sizing" of the loan.

    Many asset classes, like apartments and offices, have less than ideal in place cap rates today, so you need 35% or 50% down to buy them (unlike a DTI-based home loan, your personal W2 income cannot be used to significantly offset). Not so with many mobile home parks. The guy was expecting something like 40% down based on talking to other folks buying commercial real estate (not of the mobile home park variety), so was super happy with 25% down, and then I had bigger pockets open in my other browser tab, and here we are.

    0Reply
  • Mark Walker
    Member since 2024 · 54 posts · 17 votes
    2y

    Are most MHP recourse? I'm currently looking at a combo MHP+SS property? Likely to finance both in one loan? Also a 4 year old here! Thanks

    0Reply
  • Mark Walker
    Member since 2024 · 54 posts · 17 votes
    2y
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Thank you for this, I'm looking at a MHP currently. 

    0Reply
  • Mark Walker
    Member since 2024 · 54 posts · 17 votes
    2y
    Quote from @Chris Mason:

    7/25, 10 years maturity:

    Fixed interest rate for 7 years.

    25 year amortization / payment schedule.

    Balloon payment in 10 years. 

    That part is normal for commercial mortgages; 5 year maturity is common, and 2019+5=2024 is why many are expecting offices to have a rough couple years.

    Net operating income (NOI) is net profit before the mortgage payment, and determines how big of a mortgage you can get.

    NOI / cap rate = sales price, and sales price x cap rate = NOI. If you can remember $1m <-> $60k <-> 6%, you can bounce between price, NOI, cap rate. NOI, and thus cap rate, feeds into how much of a down payment is required b/c it feeds into the "sizing" of the loan.

    Many asset classes, like apartments and offices, have less than ideal in place cap rates today, so you need 35% or 50% down to buy them (unlike a DTI-based home loan, your personal W2 income cannot be used to significantly offset). Not so with many mobile home parks. The guy was expecting something like 40% down based on talking to other folks buying commercial real estate (not of the mobile home park variety), so was super happy with 25% down, and then I had bigger pockets open in my other browser tab, and here we are.


    0Reply
  • Mark Walker
    Member since 2024 · 54 posts · 17 votes
    2y
    Quote from @Mark Walker:
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Thank you for this, I'm looking at a MHP currently. 


    I'm looking for Mobile Home Park lender. Do you have any suggestions?
    3Reply
  • Chris MasonPro Member
    Moderator
    OP
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    2y
    Quote from @Mark Walker:
    Quote from @Mark Walker:
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Thank you for this, I'm looking at a MHP currently. 


    I'm looking for Mobile Home Park lender. Do you have any suggestions?

    Of course, that's what I do for a living. Feel free to reach out. 

    0Reply
  • Roger D Jones
    Member since 2023 · 178 posts · 122 votes
    2y
    Quote from @Logan M.:
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Can you explain this to me like I am four years old?


     Chris,
    CAP rates can be so subjective and hard to pin down so how deep in the weeds do you get on your analysis? Are you taking the seller's stated CAP or are you digging deeper? Do you have a set list of expenses you work off? Just curious.
    Thanks
    Roger

    0Reply
  • Chris MasonPro Member
    Moderator
    OP
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    2y
    Quote from @Roger D Jones:
    Quote from @Logan M.:
    Quote from @Chris Mason:

    Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

    Good hunting!


     Can you explain this to me like I am four years old?


     Chris,
    CAP rates can be so subjective and hard to pin down so how deep in the weeds do you get on your analysis? Are you taking the seller's stated CAP or are you digging deeper? Do you have a set list of expenses you work off? Just curious.
    Thanks
    Roger

    It really depends on what I have to go off of.

    If the listing broker advertises a cap rate with no additional information, I go with that. That's all that I have. If it turns out to be some mythical pie in the sky projection about what the cap rate might be 5 years from now, and my buyer client [ideal outcome to follow] has to use that to negotiate price down, oh well, guess they shouldn't have misled in their marketing, sucks to be the seller who hired a broker that advertises falsely, guess they should do a better job next time. Less ideal outcome is buyer has to come in with a bigger downstroke, absolute worst case scenario is they can't, and we all just wasted our time. That happens too.

    If they advertise the cap rate and post an offer memorandum, then I'll look at that. Sometimes they advertise a 9 cap but then the OM reveals that it's a projection, and they also show the P&L, in which case I'll go off of the in-place P&L to arrive at cap rate, which might be 8%. 

    If it's in escrow, or about to be, and we have the T-12, perfect, that's now the best information we have, so we use that.

    As the commercial mortgage guy, it's no more my job to create a P&L, to derive NOI and cap rate from, than it is the job of a home loan guy to create fake paystubs.

    0Reply
  • Rene D.
    NV · Member since 2019 · 254 posts · 57 votes
    2y

    @Chris Mason What criteria do you use when evaluating small mom n pop parks without any financials? Those type of parks are my usual but finding a lender is not easy.

    1Reply
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