Which comes first financing or securing property?

11 Replies

HI Everyone!

I am a real newbie here and with investing. I have a lot read a lot in mobile home parks and will be investing in one or more within the next year. My question is at this point is-- should I secure financing first or should I be narrowing down the parks I am interested in? I spoke with a residential broker who suggested  I get a loan first and go park shopping after. Any thoughts or comments would be greatly appreciated.

Regards 

Jena

It's really something you want to be doing together. Start looking for deals and make it known that you are looking for financing. If the deal is good enough, the money will come. If you found an amazing deal tomorrow then I can assure you that you wouldn't have too much trouble finding financing. You could very likely find it right here in the forums! Just securing financing won't get you anywhere if there is no deal though, so for me finding the financing too prematurely isn't a good use of my time. This is another newbie's opinion though, so take it for what it's worth. ;-)

Have a great day!

Standard MHP Due Diligence periods are 30 to 60 days, more than enough time to secure financing.  Also depending on the geography you're targeting and the materiality of the loan you need the source of your financing may not be known today.  Most Parks needing < $500K loans will need to be sourced through a local bank or private money, whereas larger ones can be obtained through MHP speciality type lending brokers nationally.

Would suggest that you read the MHU Due Diligence Manual if you have not already - it covers a lot of these items and will give you much better guidance than a residential broker.

Promotion
Vacasa
Vacation Rental Property Management
We do the work. You get the ROI.
We do it all for your vacation rental. All—marketing, pricing, guest requests, housekeeping & more.
Free income estimate

You might not even have to go with bank financing. Both MHPs I own were bought with owner finance. You'll find the mom and pop parks are more willing especially when you ask for financials and they don't have the proper documentation. I prefer owner financing and use this as an excuse as to why a bank will not finance the deal.  Both my deals were rather small. The first one was $200k with 30k down for a 10 pad and the other was a 27 pad for $450k with 100k down. However, unlike most of the MHP investors they don't like or estimate MHP owned rentals. I personally like them and love the cashflow so if you read other investor posts based on the the basic  MHP formula that is used I overpaid, but I bought it on the formula you would use for an apartment complex. I wouldn't do it if the park was over 30 minute drive from my house because there is  a lot to manage. If it was over 30 minutes then definitely don't do the mobile home park rentals and just rent the pad.

Thank you for your post  Rich, I live in California for now so that's not doable. However I like the small park idea too. Do you think you make more cash flow out of those two parks one park?

Regards, Jena

If it's a single home transaction most RE agent/brokers will want you to be pre-qualified for a loan based on your credit, employment and skin in the game. Once you get that nailed down the next step would be to get a very experienced in MH's in the area you're interested in investing in.

Or, if you partnered with someone who had the experience and the multitude of skill sets needed to profitably facilitate a comfortable transaction and ongoing rental investment. I've worked this way with folks since I got into the biz. It's a win win for both. 

Most importantly though no matter who or how you choose to acquire MH's make sure you're dealing with a local, licensed, bonded, insured professional during every faction the project. The Devils in the Details. If it can happen it will. Good luck.

I like both the small and big parks. Both cash flow really well. I do cash flow more on the bigger park simply because it's more units. I didn't take any courses just read the BP posts and listened to the free podcasts on mhu and a few other ones out there. One of the reasons it's cash flowing amazingly is by partner has a full time repair crew so we get wholesale prices on parts and pay labor on a daily rate ($15/hr)

Thank you Rich for your reply.  I'm kinda stuck on the little park vs large park thing. I can buy a small park or finance a big one and it seems the numbers run about the same when you factor in debt service. The first park is the scary one.

I'd say get as much park as you can afford. In general, I guess you need to decide what you want but for long term, profitable, low maintenance cash flowing deals I can't say enough good about Mobilehomeuniversity.com / Frank Rolfe. Tons of great resources with that group. As someone told me before I attended the boot camp, "you'll learn answers to questions you didn't know you should have." I did! Great market, Good luck!