What would be the best way to seller finance mobile homes to current renters in a mobile home park? Let's assume a $1,000 down payment will also be paid on top of the numbers below.
$10,000 @ 12% APR for 48 months
$12,640 paid over 48 months
$12,640 @ 0% APR for 48 months
Either one might sound better depending on the person. Option 2 guarantees the full $12,640 is paid. I suppose option 1 could have an early payoff penalty equal to the remaining interest due. Any thoughts or better options?
The park I'm looking at has 43 park owned homes. Personally, I'd want that number to be 0.
Option 2. I think "technically" you can't charge interest if you are not a bank. However you can charge a higher amount and divide that over how many months they will be paying you. Part of their rent is a credit that goes back to what they owe. It is also easier to keep up this way for you and the tenant because you don't have to keep up with amortization schedules or early payoffs.
That would probably be easier.
I would disagree on needing to be a bank to charge interest on a private loan. Hard money lenders and seller financed deals all charge interest.
@Shawn Rasmussen there are several factors to consider here.
You will want to become familiar with the State and Federal regulations related to selling homes. Even if you own the park and the homes, you will still be subject to those regulations. If you plan to carry the paper, there are regulations that govern that as well. Do yourself a favor and align yourself with a licensed MH dealer who sells used homes. They will be able to help you understand all the requirements and may even be able to assist you with that requirement.
You will want to keep the payment affordable so your prospective new resident can fit both the lot rent and the monthly payment for the home into their budget. It is WAY more important to create an affordable solution for the resident than it is to make money on the home. As a park owner, you want to focus on filling spaces with residents who want to be there, can afford to be there, and will pay the lot rent for many years to come. Don't let yourself become so focused on making money on the homes, where you could lose sight of the big picture.
The last item to consider is why are all the homes owned by the park? It could be the current owner thinks renting homes is a better business, but maybe the market cannot support the sale of homes? Make sure to do a market demand study to find out the truth there. You don't want to acquire what you think is a great deal and end up with a park where you cannot execute your strategy.
All the best,
All good points Jack. I will check into it some more. I'm waiting on the financials from the listing agent.
@Jack Martin are there any good resources that you know of that help you determine what state and local laws say about seller financing specifically? Thank you!
@Hunter McDonald the first place to check would be the manufactured housing community association in your state (MHCA). They should be able to point you in the right direction and will likely know the best resources for you as well.
@Jack Martin thank you! Much appreciated.