lending options for Mobile home Park

3 Replies

@Alan Tripp the type of lender depends on the deal and your qualifications as the buyer. Generally, outside of seller financing, the common types of debt available for MHPs are as follows. 

Local & Regional Banks - You can find out which banks have an appetite for mobile home 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/region and call them to see if they have lent on parks in the past. If they have not, don't waste your time. Also, is important to note that a $200k loan takes the same amount of work as a $20MM loan, so you may come across some banks who like MHP's yet they may not show serious interest in really small deals.

Life Companies - Life co debt will typically have better terms than banks, but will come with tougher qualification criteria. You can access life co debt through a commercial loan broker, but take the time to find the broker who specializes in MHP debt. If the broker doesn't have a deep level of experience placing debt on mobile home parks, you could be in for a lot of brain damage and promises that are not met. Network through MHP attorneys and MH/RV park brokers or owners to find the right commercial loan broker.

Agency (Freddie/Fannie) - If the park and the buyer qualify, this will be the best debt, but the qualifications are even more restrictive. Just like Life co's, you can access agency debt through a commercial loan broker, so take the time to find the most experienced MHP broker.

Conduit (CMBS) - Conduit went away for a bit during the COVID onset, but they are back lending again. They can be a little more flexible than agency or life co, particularly with respect to the park and terms. Again, you can access conduit loans through a commercial broker.

(In addition to those sources, there are a few others that are less common, such as HUD and SBA)

Your track record of experience with the asset class will have significant impact on whether a loan is considered, and whether you can negotiate the terms of the loan, so be prepared to demonstrate your experience, or the team you have built around you who has the experience.

Typically smaller deals under 50 spaces will be best suited for banks. Once you find the right banks, there will be more flexibility with respect to qualification of the deal and you as the buyer, particularly if you lack a track record.

Larger deals will open the door to agency, conduit, and life companies, all of which tend to come with better or more flexible terms, but with a higher degree of buyer experience and park requirements. For example, some lenders will require you already own and operate a similar asset in the same market wherein you are buying the subject property. Some will have a minimum number of spaces and pavement requirements in the park. Some will have restrictions as to total occupancy and percentage of POHs, while others are more flexible. Many of these loans can be non-recourse or limited recourse, but there will likely be liquidity and net worth requirements of the borrower. Some loans will come with defeasance or yield maintenance, while others will have step down prepayment penalties.

A good loan broker who specializes in MHP debt can guide you with respect to the right choice for you as the buyer, which type of lender will be best suited for the park, where the terms will be the most favorable, and where the hurdles will likely be. Having that relationship will help you get the best terms for the deal and avoid wasting time on a loan that is low probability.

All the best,

Jack

I've always found that the most difficult part of funding a mobile home park is finding comps for the evaluation. If there are other mobile home parks in the area that have sold recently it should make the funding process a bit easier.