All Forum Posts by: Erich Hauck

@Benjamin Schultz Overall they are typically not worth the time or additional cash flow due to the type of tenant typically occupying and abusing the home leaving you with the repair bill. However in saying that we have several customers who run very successful rental parks and operate more like apartments than MHC. My reccomendation is to outline a realistic business plan in converting the 16 POHs over 12-18 months. Depending upon the demand in your smaller market you may be able to unload them quicker. Just ensure you are finding relatively good buyers as you do not want to have to go through the eviction process every month for non-payments. Overall as Alex stated lenders typically don’t like POHs. However in our ever changing market we work with a few that have programs specifically catering to acquiring communities with any number of POHs. Terms are not as favorable but they are available.

I’ll be out there Monday to Wednesday night.

Hey Dirghayu, each states foreclosure process varies and how the lender can go after the borrower does as well. By signing a PG with a loan, the partnership is guaranteeing to pay off the debt. If you default on the loan, have a $4M outstanding principal balance, and the property sells afters foreclosure for $2M, then the partnership is liable for the remaining $2M (plus accrued interest, legal costs, and any other fees tacked on). But again how aggressive the lender can come after you is strictly dependent upon your state. Best bet is to contact your local real estate attorney, it’s well worth the couple thousand dollars for him to review the loan docs and explain exactly what your signing.

Nolan you will likely be unable to get a term sheet from a lender until the property is identified. Your best bet is to show the broker your current liquidity and the purchase price range you are targeting. Typically you’ll need 25% down (minimum) plus another ~10% for closing/reserves/deposits/unexpected capex upon closing. If your looking at deals under $1M (loan amount) you will find the national lenders do not typically have an interest and your best option is local banks and credit unions. If you find a park that has a lot of Park Owned Homes or Transient sights (RVs) then that can make financing even more difficult. If you find a deal and want a second look I’d be glad to review it for you. Good luck!

As Chase mentioned you’ll need to be in the $1M range (loan amount) to grab the attention of national lenders. There are exceptions to this but that typically is for high net worth borrowers that have good liquidity and the property is in a good market. Your best bet if the loan amount is under $1M is to look towards your local banks and credit unions. You’re likely looking at a 5 year deal (maybe 7) on a 20-25 year amortization schedule in the mid to high 5’s. You’ll want at least 35%-40% of the purchase price on hand, 25% down (typical minimum) and then closing costs, reserves, and some free cash in the event any unexpected immediate repairs pop up. Good luck with your acquisition!

Jeff, As most have mentioned the Fannie/Freddie program are your best term terms, the loan will have to be right around $1M. The biggest concern would be a first time commercial borrower on an acquisition. Certainty of obtaining a commitment and closing is not guaranteed. You could have $15k+ tied up in third parties and legal (not including GFDs) and end up getting shafted at the end (I’ve seen this happen). So then you run into two options, walk from the deal and potentially lose your deposit if the money has gone hard (hopefully your still within your financing contingency) or you go to hard money, pay the high costs associated with it and close. In today’s market your going to find it hard to get a bank to do any term longer than 5 years. But you have the certainty of execution and know your going to close. You’ll have flex prepay so you could turn around and refi in 2-3 years, you’ll be subject to interest rate risk but will not be in a position where you have to close on an acquisition. You could also try your local CU, they can go a little longer than the banks and typically are cheaper to close. Depending on the cap rate your paying and the condition/quality of the building there is one other option. Life insurance companies are more conservative lenders but may be an option in this scenario. Pricing right now is competitive with the Agencies or better and they offer fixed rates up to 30 years. Feel free to PM me to discuss any of these options further.

Sam you will find it very difficult to finance these small communities. Typical national lender will want $1M request or more to even look at it. Look for local credit unions, may be able to get a 20 or 25yr amort out of them, banks as you have found out are less flexible in this size range.

Brian, the Fannie/Freddie product are great if the deal works for their structure. CMBS will get a little more aggressive on dollars but pricing is going to be ~50bps higher. CMBS costs are typically higher as well. Your typical Loan with either is going to be $1M+, 10yr fixed rate, 30 year amortization, non recourse. The loans are assumable so even if you intend to sell the buyer could assume, much easier to modify the Agency loan versus a CMBS loan. The other players (outside of commercial banks) are life insurance companies. They are not as aggressive on dollars but pricing, flexibility, service, operating covenants, and certainty of execution are better than both Agency and CMBS.

If your doing any type of conventional financing the lender will order the PCR, Phase I, and Appraisal, you’ll have control over title and survey. Your broker should have a few options for you. We use EBI a lot with our borrowers, fair pricing and typically very quick.

As Henri already mentioned the location in FL is really the determining factor. In larger MF deals your looking sub 5% cap rates, 6-7% is a great price anywhere in FL for the bigger deals. Prices down here are crazy right now and doesn’t appear to be letting up with the yield curve flattening and cost to borrow long term holding steady (for now).