Seller Financing Mobile Home Park

[Craig Sloan]

I am considering selling a mobile home park that I own.  There are 31 lots.  24 lots have homes on them.  19 of the homes are park owned and are being sold on contract.  I have a prospective buyer, but he wants seller financing with a 5 year balloon.  My concern is that the park will be mismanaged during that 5 year period, they will not complete the contract and we will get back a less profitable park than I currently have.  I'm looking for suggestions on ways that I could protect myself/my property and increase the chances this deal will be closed at the end of the 5 year seller financing period.  Thanks in advance for your advice/assistance.  

[John Jacobus]

If you are concerned with deteriorating operational performance during the life of the note, you could consider including covenants in the loan that require certain operational thresholds are met (NOI, DSCR, gross rents—pick your 1-3 favorite) to remain in good standing. If things go south, you can step in quickly by calling the loan and/or place the appropriate pressure on the operator to ensure the park performs to your definition of acceptable standards during the life of the loan.