Manufactured Home Park financing

3 Replies

Any suggestions if I am looking at purchasing a park as to 1) Key things to look for and questions to ask the seller 2) bank financing options 3) typical bank turn arounds on these

Hey @Jason Ray Richardson ,

I was looking into MHPs at one point a few months ago.  I found Jefferson Lilly's podcast super informative and helpful.

None of the local regional banks I work with would do financing on MHPs though so I set the project to the side for now.  Maybe you will have better luck with your local banks?

@Bill F. Think you should chime in here.  

@Jason Ray Richardson Due diligence questions are somewhat, with some peculiarities, similar especially around financial due diligence. Operational is a different matter. 

Bank financing options exist especially in the Midwest and the South where financial institutions are more comfortable with this asset class. It also depends on your relationship with the lender, operational track record and type of MHP that is being acquired.

Thanks for the tag @Omar Khan

@Jason Ray Richardson

-Its hard to give a complete answer because literally books are written on the topic. Omar alluded to it, but DD comes in two flavors, financial and operational. 

Financial DD is making sure the numbers match the story the seller is telling. For example, if you are told the park had 50 occupied pads at $200/month and no vacancy. It should bring in $10k/month. If it only shows $8k/month, then you know that something is up. Some lots could be paying less than other, economic vacancy could be high, ect. 

Operational DD is highly dependent on the class of park you want to target. Urban or rural, public or private utilities, primarily TOHs or majority POHs. 

-Banks: If they will lend on them at all, they will only lend on the cash flow generated by the MHP and not the extra cash from POHs. Local and regional banks are your best bet for parks in the $250K-1.25M range. The key is to call call call. Its not unusual to be told no 10-20 times, Once your loan goes over $1m, is when agency debt generally starts to make sense, but lower ranges can work. 

The banks work at their speed, but will work with you if they like the deal. It wise involve them early and get them whatever they need when the ask for it. That means you should have three years of tax returns, all the info you'll need for a personal financial statement, LLC docs+ operating agreement done before you talk to a bank.

Hope this helps.