Financing mobile home park

[Chris Gavre]

How do you guys finance mobile home parks?

Banks of course won’t, I’m trying local credit unions and they aren’t willing to either.

How do you set up a deal with a local investor? Do you give them a percentage of the cash return each year/month, a stake in the park itself? How does setting up deals like that work?

Thank you!

[Jack Martin]

Chris, banks are actually a great resource for financing a park. If the size of the park is too small, you may find it difficult to get a bank's attention, so keep that in mind as you consider your strategy with smaller parks. In general, larger parks are easier to finance, and the best banks to approach will be local or regional banks, particularly those who like MHPs. You can find out which banks have an appetite for parks by asking the MH/RV brokers in your area, networking through other owners of parks in your area, or simply obtain list of the smaller banks in your area and just calling them to see if they have lend on parks. If you plan to build a portfolio of MHPs, it would be good to do this legwork in advance of buying parks, so you can build a relationship with the banks that surface as the best option prior to making offers. That will also allow you to understand what the lender may require you to do prior to refinancing if you choose to purchase the park for cash and refinance once it' stabilized. And, your experience as a park operator will have significant impact on whether a loan is considered, as well as your ability to negotiate the terms of the loan.

[Chris Gavre]

Originally posted by @Jack Martin:

Chris, banks are actually a great resource for financing a park. If the size of the park is too small, you may find it difficult to get a bank's attention, so keep that in mind as you consider your strategy with smaller parks. In general, larger parks are easier to finance, and the best banks to approach will be local or regional banks, particularly those who like MHPs. You can find out which banks have an appetite for parks by asking the MH/RV brokers in your area, networking through other owners of parks in your area, or simply obtain list of the smaller banks in your area and just calling them to see if they have lend on parks. If you plan to build a portfolio of MHPs, it would be good to do this legwork in advance of buying parks, so you can build a relationship with the banks that surface as the best option prior to making offers. That will also allow you to understand what the lender may require you to do prior to refinancing if you choose to purchase the park for cash and refinance once it' stabilized. And, your experience as a park operator will have significant impact on whether a loan is considered, as well as your ability to negotiate the terms of the loan.

Jack, Thanks for the response. I was actually wondering whether or not you could get refinancing on a park.... Was looking at a park that would give me about a 1400/month Cash flow, however, I'm 21 years old and don't even own my own house yet. Was afraid of locking up all this debt, then being stuck renting where I live for the next 3 or so years until I'd be able to refinance, if that was even possible.

Not concerned about the debt itself, more concerned about not being able to get my own house and just throwing money down the drain by renting my apartment for $800/month. What are your thoughts on this? It's kind of the reverse order of how many people would say to invest. Most would probably say get your own place, house-hack, then invest in a rental/flip/etc.

Expenses were about $20k/year from this park, 67k in total rent revenue, could get the park for about 280k, 9 units with room to add 2-3 more mobiles in the future. Would have to leverage about 240k on a 10 year loan around 6.5% interest. Leaving me taking home around 16k profit for the first few years... assuming no surprises in terms of expenses.

Anyways, long response, but would love your feedback on this. 

Thanks

[Jack Martin]

Chris, keep in mind, it is the same amount of work for a bank to do a million dollar loan as it is to do a 150k loan, and to be candid they would rather service a larger loan.  With that said, I have seen local banks lend on smaller parks once they were fully stabilized. If you can clean up the park, fill the vacant spaces, renovate and sell any park owned homes, and have it running like a swiss watch, you should be able to get a loan from a local bank, assuming you qualify as the operator. If you do that, the park will be worth a lot more than you paid for it, so you'll have some equity there as well.  

It would be smart for you to find out which local banks have an appetite for parks ahead of time and start building relationships with the loan originators at those banks.  Be candid with them, tell them what you are doing, and they will tell you exactly what the deal needs to look like for them to lend on it.  

[Daniel Ryu]

@Chris Gavre

Typically the order of preference for financing mobile home parks:

• Agency Debt - Best rates and terms. However, typically $2m minimum size loans, 30% fewer POHs, and the parks would have to be higher quality: offstreet parking, signs, lights, etc. Ask a lender for their Fannie Mae Buyer's Guide (or you may be able to google it) and look up the mobile home park section.
• CMBS - Before COVID, CMBS was a good alternative to Agency. Rates weren't quite as good, longer periods before payoff was allowed (defeasance penalties could be very high), and the nerve-wracking nature of not knowing until you close whether the loan is going through - not sure if that's for all loans, but we didn't know for certain until the day before closing. Not fun... CMBS was more lenient on POH requirements - we received a CMBS loan despite having a high POH count, WWTP and wells.
• Local / Regional - Might be recourse, but can potentially do smaller loans.

I've heard of a few a MHP lenders that will do sub $750K loans - reach out to me if you're interested and I'll see if I can dig it up in my notes.

[Jack Martin]

@Daniel Ryu that's a great quick breakdown of debt options.  Agency Debt is clearly the winner, if the park and the operator qualify.  In addition to your notes, a few other items they like to see is pavement throughout the entire park, and usually if the park will need to be at least 50 spaces. 

In support of @Chris Gavre and his question about smaller parks, or operators without a long track record, local/regional bank relationships will net the best results. When we got started, we networked with MHP brokers and owners, and also cold called every local/regional bank and credit union we could find. Roughly 20% of them had an appetite for MHPs. Take a few days to make those calls and you should get a good idea of the local resources available. 

[Joshua Schoer]

@Daniel Ryu

Hi Daniel,

Will you please also message me any lenders you have come across willing to do smaller MHP loans?

Also, not to hijack this thread, but has anyone found a lender that is willing to finance a purchase and a line of credit in one loan that can be used for infill?

Thanks,

Josh

[Daniel Ryu]

@Joshua Schoer

Sent!

[Colby Wise]

Hi @Daniel Ryu or @Joshua Schoer - can you also send me a list of MHP lenders willing to do smaller loans! 

[Daniel Ryu]

@Colby Wise

I DM'd you

[Alanna M Small]

Hi @Daniel Ryu - can you also send me a list of MHP lenders willing to do smaller loans?

My husband and I have found a couple of MHP properties we are interested in but having trouble with financing.

Thank you in advance!

[Daniel Ryu]

@Alanna M Small

Sure thing!

[Shane Jeanfreau]

@Chris Gavre I just purchased a 37 pad park in the middle of this pandemic using a local bank. Terms are 20yr AM fixed for 5yrs @ 4.8% int. I only had to dish out 20% which was fine with me being they took the deal. I even had another local credit union literally call and email me saying they can beat the rate so the banks are willing to lend. You just need to get a list and call everyone in your area.

[Chris Gavre]

Originally posted by @Shane Jeanfreau:

@Chris Gavre I just purchased a 37 pad park in the middle of this pandemic using a local bank. Terms are 20yr AM fixed for 5yrs @ 4.8% int. I only had to dish out 20% which was fine with me being they took the deal. I even had another local credit union literally call and email me saying they can beat the rate so the banks are willing to lend. You just need to get a list and call everyone in your area.

 Are you renting out just the pads or park owned homes? I’m looking at one now that I’m thinking of just renting out the pads but felt like there’s less demand for that?

It seems like it’d be a whole lot easier to manage, but how can people who live in mobile homes afford to have them moved then set up in a new park? Or is this something, as the park owner, that you pay for? Thanks!

[Reginald Truss]

Chris, thanks for reaching out to me, although I might be your last resort, but to help me help you I need the following answers to the following questions: Hope to hear from you.  Also need email address.

How many deals or projects did you work on close in the last 36 months?

First Name

Last Name

Email

Phone Number

Business Entity

Estimated Credit Score

Full Project Address

Purchase Price

As-Is Value

ARV

Rehab Budget

Liquid Funds Available

Total Rentals Owned

Ever Had a Foreclosure? When?

Bankruptcy? When?

Ever Been Convicted of Felony or Fraud?

US Citizen?

Reggie Truss

[Gary Dezoysa]

Hello, @Daniel Ryu!

Can you send me a list of all lenders willing to do smaller loans for mobile home parks?

I am interested in but having trouble with financing.

Thank you in advance!

[Paul Sofia]

Originally posted by @Chris Gavre:

How do you guys finance mobile home parks?

Banks of course won’t, I’m trying local credit unions and they aren’t willing to either.

How do you set up a deal with a local investor? Do you give them a percentage of the cash return each year/month, a stake in the park itself? How does setting up deals like that work?

Thank you!

Banks do finance them.  Where is it located?

[Paul Moore]

Hi @Gary Dezoysa and others. Frank Rolfe was on the BP podcast ~ 2 years ago. He has a thorough training course and provides lender recommendations to his students. You may want to check there.  The MHP deals we invest in almost all use Freddie Mac and Fannie Mae financing.  

[Patrick Fanning]

@Daniel Ryu Hi Daniel, I came across this thread and am looking for the same lenders on small MHP’s. If you still have them, can you send those contacts over to me? Thanks.

[Ken Morris]

Quote from @Daniel Ryu:

@Colby Wise

I DM'd you

Would you be able to send me a list of lenders too?

[Myles Mannino]

I know that Legacy offers in-house wholesale financing for tiny homes, and mobile homes. They have a lot of homes too.