Refinance mobile home parks

[Abdul Lateef]

I wanted to know if anyone had ever refinanced a paid off or cash bought mobile home park. Thank you

[Frank Rolfe]

Yes, we have been doing "cash-out" refi's for over 25 years. Here are some things you need to know:

1) you can only get a cash-out refi with a CMBS "conduit" loan or a Fannie Mae/Freddie Mac "agency" loan. Regular banks will not do it 99% of the time as they want you to have some skin in the game.

2) the typical construction on these is seller debt with a 5 to 10 year term, during which you aggressively raise rents to market levels, push water/sewer usage cost back on the customers, fill vacant lots, and cut costs. You will have to increase the value of the property by at least 50% to pull it off [for example, you buy a park for $1 million, push the value to $1.5 million and refi at 70% LTV = around $1 million]. The point is that you need to buy mobile home parks with large upside to hit that threshold within only 5 years or so.

3) CMBS "conduit" debt has periods where it evaporates (like right now) so you have to time it right. If the property is going into "agency" debt then you are safer as that does not shut down. However, the quality and size of agency debt properties is significantly higher (typically $2 million loan size or greater).

It's a great business model, as your return on a mobile home park is infinite if you refi out all the equity. We are big fans of this concept.