WHY YOU CAN EFFECTIVELY MANAGE A MOBILE HOME PARK INVESTMENT FROM 2,000 MILES AWAY

Some things require the owner to be there 16 hours a day to succeed, such as a restaurant. Others mandate that the owner be there 8 hours per day, such as a law firm. But in the world of real estate, no sector requires less time on the part of the owner than the mobile home park. Why is that? There are several reasons.

The owner offers no value-add, except for the vision

When you own a mobile home park, you don’t personally offer any value-add except for the overall vision of where you want to take the property. If you are there 16 hours a day, like the owner of a restaurant, your revenues will not increase, nor will your costs decrease – in fact, your costs will increase because you have to pay for your own travel and lodging. Renting land is a low impact endeavor, and the owner is simply getting paid for owning the property, not because their association with it is worth any more money to the resident.

High customer retention and low revenue elasticity

It costs $5,000 to move a mobile home from point A to point B. This cost is too high for any resident to even begin to think about moving their home. On top of that, any home built before 1976 does not have the HUD seal required to be moved into most any city in the U.S. When you add these two together, what you get is an industry in which an estimated 98% of all homes have never left the spot in which they were first delivered. You might then say “why is the word mobile even in the name?” That’s because they do come out of the factory on wheels – but nobody said they could travel twice.

You only rent the land

Unlike apartments – in which you have to repair toilets and replace roofs – mobile home parks just rent land. And land needs little management or capital expense. The average mobile home park owner simply fixes potholes annually and mows the common areas throughout the summer. And that’s about it unless there’s a water or sewer line stoppage. What the residents do on their rented land is their problem, as long as they meet the park’s rules guidelines, which are easily enforced by the manager without any help from you.

A simple business model with established management systems

Owning a mobile home park is not like owning a factory that produces smart phones. Nothing new ever happens and there is no technology shift to worry about or consumer taste changes. Renting land is a very simple business model, and one that does not require much thought on the part of the owner. In addition, there are established management systems that the owner can use to gauge performance and make sure that their investment is on-track and that the on-site manager is doing their job.

Technology helps a lot

Modern technology has also made it easier to manage a mobile home park from afar. You can “virtually drive” your property monthly using an HD Polaroid or GoPro cube camera shot by your manager. You are always available by cell phone or email in the event of emergency. You can even install video cameras in your park and see that everything is functioning smoothly from your laptop.

Conclusion

The mobile home park business model works well for the distant owner who is looking to invest in a different state or region of the U.S. – or even another country. Renting land coupled with the affordable housing crisis makes it a unique sector of U.S. real estate. And we practice what we preach – nearly our entire portfolio of parks is in over 25 states that we do not live in.

 

Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with over 250 communities spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate. To learn more about Frank’s views on the manufactured home community industry visit www.MobileHomeUniversity.com.

Press Release: The Madison Group facilitates a $1.3M loan for a manufactured home community in Ontario, OR.

Transaction Description: The Madison Group (TMG), a commercial loan broker, facilitated the financing to purchase this manufactured home community in Ontario OR. The park is located in a small market, 60 miles northwest of Boise, ID. The buyers currently own another park in the area, and the purchase of this park offered them another solid opportunity in the marketplace.

Challenges: The experienced borrowers prefer the long term amortization and fixed rate options along with non-recourse features. The location of the park and the small market size presented problems for most institutional lenders.

Solutions: TMG assisted the borrower to close this transaction with a non-recourse lender that could accommodate the buyer’s needs. TMG successfully closed the transaction at a low interest rate of 4.95% fixed for 10 years with a 30 year amortization.

The financing was arranged by Angela Kesselman at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Angela Kesselman can be reached at 435-659-2200 or by emailing Angela at angela@madisongroupfunding.com.

Press Release: The Madison Group facilitates a $1.7M loan for Mobile Home Park in Tulsa, OK

Transaction Description: The Madison Group (TMG), a commercial loan broker, has facilitated the financing of a Mobile Home Park. The park was purchased less than a year ago and has 219 pads of which 106 are occupied and has great potential upside for our experienced investor.

The borrower purchased the property from a seller that was unable to produce historical income and expense data on the park. It was a quick close and the investor purchased with an all cash transaction. She was comfortable with the market and low occupancy, as she had previously turned around another park in the area and understood the market.

Challenges: The out of state owner requested an all cash out refinance transaction on a park that had no historical data available, along with a less than 50% occupancy and needed some repairs and updating. She requested interest only for a period of time in order to make the needed repairs and still cash flow the property during stabilization.

Solutions: TMG successfully closed the transaction at a low interest rate of 4.5% fixed for 3 years on a 7 year note with a 25 year amortization and one year of interest only payments. All of the cash was disbursed to the borrower to use without holdbacks or escrows allowing her to use the cash to complete improvements on the property and purchase other properties for her portfolio.

The financing was arranged by Angela Kesselman at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Angela Kesselman can be reached at 435-659-2200 or by emailing Angela at angela@madisongroupfunding.com.

Press Release: The Madison Group Facilitates a $2.475M Nonrecourse Loan for Senior Mobile Home Park

Transaction Description: The Madison Group (TMG), a commercial loan broker, has facilitated the financing of a Senior Mobile Home Park. The park has102 pads with 96 occupied and was being underutilized with excessive expenses. The park had a somewhat storied history, but was an excellent purchase – with great potential upside for our experienced group of investors

The borrowers took the property under contract with a down payment and a short-term seller carryback note. To finalize this purchase the group looked to enhance their position by creating a larger loan than would be possible at the time of getting the park under contract. TMG was able to provide a funding source that gave them a larger loan amount, based on the increased value from the time of contract to the time of closing the long term financing. The buyers were able to pay back their investors and have a holdback for additional monies upon hitting certain milestones.

Challenges: The borrowing group required a non-recourse loan to provide a vehicle for the investment team. When the park was purchased, it had below current market rents and higher than normal expenses. The borrower needed to get a loan that would allow for trailing 3-4 month in-place income while they raised the income and lowered the expenses.

Solutions:
TMG successfully closed the transaction, locking in a great rate of 4.90% with a10 year fixed term, 30 year amortization, and LTV of 78.5%. The final loan amount exceeded normal underwriting standards based on the lenders ability to set aside additional funds that will be dispersed upon the continued reduction of expenses and increased revenues. Once the borrower hits the milestones funding the final tranche will be dispersed. This allowed the borrowers to maximize their loan amount and to capture the aggressive rates available in the market and to avoid refinancing at a future date to recapture equity. It also allows buyers to have monies available for the purchase of other properties.

The financing was arranged by Jeff Meierhofer at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff Meierhofer can be reached at 435-785-8350 or by emailing Jeff at jeff.m@madisongroupfunding.com.

Press Release: The Madison Group closes a $1.15M loan for purchase of MHP in Texas

The Madison Group (TMG), a commercial broker and loan consultant, has facilitated the financing for a 129 pad MHP in a rural location between Houston and San Antonio Texas. The borrower’s goals for the transaction were to bring in a group of investors to the transaction and enjoy the potential upside and increased income over time. The complication that made most lenders shy away from the transaction was that the property’s location and high vacancy rate. The borrower desired a loan with a 25 year amortization to be able to achieve the cash flow necessary for the investors. Making this an even more difficult transaction, the property had transient oil workers which made the income fluctuate.

“The special needs of this transaction meant digging in deep by our staff, but we were able to facilitate the most favorable terms to meet the clients goals, said Jeff Meierhofer of The Madison Group, who originated the financing. “The borrowing group needs the ability to take the time necessary to fill the park to a higher occupancy create cash flow. We were able to find the right loan program for this rural park and get the borrower’s a loan that closed.

TMG was able to source the transaction to meet the borrower financial goals and provided him with a 75% LTV loan with a five year term and 25 year amortization fixed at 5.5%. The loan has a declining prepay and has adjustments in years five through 25 but does not require a payment.

The financing was arranged by Jeff Meierhofer at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff can be reached at 435-785-8350 or by emailing Jeff at Jeff.M@madisongroupfunding.com.

Press Release: The Madison Group closes a $2.3M loan for Mobile Home Community

Transaction Description: Cash out refinance of a 120 pad Mobile Home Community in the suburbs of Oklahoma City. The finalized terms were 5.26% interest rate on a 30 year amortization and 10 year fixed term with the first 2 years payments interest only.

Challenges: The mostly single wide pad park was built in the 70s and purchased in 2012. Even though the owner had never made any major improvements to the park, the value increased significantly since it’s purchase. The borrower was requesting a large amount of cash out to potentially invest in an additional park. This loan was complicated because the property has private water and sewer systems. Any problems to those systems would be a huge liability for the owner.

Solutions: We were able to find the right are financing to provide $1M cash out while offering the owner 2 years of interest only payments. The cash out allows the borrower to invest in an additional park to increase her cash flows.

The financing was arranged by Angela Kesselman at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group can be reached at 435-659-2200 or by emailing Angela at angela@madisongroupfunding.com.

The Madison Group closes a $3,300,000 Cash-Out Refinance on a Mobile Home Community in Utah

The Madison Group (TMG), a leading source of mobile home park financing nationwide, recently closed a $3,300,000 cash-out refinance on a Mobile Home Community in Utah. The borrowers have owned this property for 2 years and initially purchased it with a personal line of credit and small loan. The park’s value increased dramatically over the past two years and borrowers wanted cash-out to pay off existing debt associated with the property and invest in another project.

The challenge on the loan was that most lenders would only make a loan to 75% of the cost basis of the loan. The borrower’s desire was to recapitalize and get cash out based on the current value of the property. The borrower’s had taken great care to rectify collection issues and increase rents to market conditions. The borrowers were able to get a loan based on the in place income and appraisal and get cash out well beyond their basis. The loan will allow the borrowers to purchase other properties.

The borrower’s goals were met and the loan has a short pre pay of two years. The finalized terms of this loan were 4.6%, 10 year term, fixed with 5 year and a onetime adjustment in year 6. It is a 30 year amortization and 75% LTV. The loan is assumable which provides additional comfort for the borrowers.

The financing was arranged by Jeff Meierhofer at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff can be reached at 435-785-8350 or by emailing Jeff at Jeff.M@madisongroupfunding.com.

The Madison Group closes a $3,000,000 Purchase Loan for a Mobile Home Community in Tennessee

The Madison Group (TMG), a leading source of mobile home community financing nationwide, recently closed a $3,000,000 purchase loan for a 260 pad Mobile Home Community in Tennessee. This was a first time client of TMG referred to us by the buyer’s real estate agent. The borrower is an experienced investor who owns several other mobile home communities and commercial properties. The most important loan feature for the borrower was a 25 year amortization and an adjustable rate to maximize cash flow.

TMG facilitated a loan with the finalized terms as follows: 78% LTV, 5.99% interest, 20 year term, and a 25 year amortization.

The buyer of this property came to us requesting a purchase loan. He is an experienced MHC and commercial real estate owner and saw the upside in this property with under market rents. He also needed to execute a 1031 exchange. The biggest challenge of this loan was lack of documentation from the seller. The seller was unable to provide traditional profit and loss statements or any quality information on the park’s expenses. We were provided only six months of bank statements and several months of rent rolls. Another challenge with this loan was that eighty pads were master leased, which is an issue for many lenders.

The park’s income potential and the borrower’s extensive experience were positives in this transaction. TMG worked with the buyer to put together proforma data from the rent rolls and bank statements. We worked with our preferred lender who understood the merits of this transaction. The lender was able to fund the loan at a leverage of 78% with a timely closing to complete a 1031 exchange.

“This was a tough transaction for most lenders. We recognized immediately that the loan would need to be placed with one of our preferred funding sources. The final rate was higher than the buyer was used to having on his parks, but he understood the potential of the park and was willing to take a higher rate to capture the upside moving forward.” Said Angela Kesselman, TMG’s Associate Director of Finance

The financing was arranged by Angela Kesselman at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group can be reached at 435-785-8350 or by emailing Angela Kesselman at angela@madisongroupfunding.com.

The Madison Group closes a $4,076,000 Cash-Out Refinance for Two Mobile Home Parks in Oregon

The Madison Group (TMG), a leading source of mobile home park financing nationwide, recently closed a $4,076,000 cash-out refinance for two mobile home parks in Oregon. The parks have 53 and 63 spaces respectively. They are located in a tertiary market. The finalized terms of this loan were 3.94% interest, 10 year term, and a 25 year amortization with approximately $560K in cash proceeds to the borrower. This was a nonrecourse loan, and provided the borrower an extra level of protection in his portfolio.

The borrower desired a cash-out nonrecourse loan to create a liquidity event to use for other real estate purposes. The borrower wanted to utilize both parks on the same loan even though they were substantially different quality assets. He also wanted to have an aggressive interest rate under 4% to make the loan work for his cash flow purposes. Seventeen home pads are located in a flood zone so there needed to be workaround for that issue with income and insurance. The rental income from those properties could not currently be considered in the net operating income. The lender agreed to allow for future cash out if a new FEMA map was provided by the borrower.

The Madison Group did not stop with the first lender to provide terms that would maximize the borrowers long-term investment needs. Some lenders were scared off by the flood plain issue. By working intensely with the underwriters and insurance provider, TMG was able to secure a mobile home park loan that satisfied the lender’s needs and provided a long-term solution for the borrower’s investment strategy.

The financing was arranged by Jeff Meierhofer at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff can be reached at 435-785-8350 or by emailing Jeff at Jeff.M@madisongroupfunding.com.

The borrower wanted to refinance two parks which are both located in a tertiary market. He desired a cash-out, nonrecourse loan to create a liquidity event to use for other real estate investments. The borrower also wanted to utilize both parks on the same loan even though they were substantially different quality assets. He requested an aggressive interest rate under 4% to make the loan work for his cash flow purposes. By working intensely with the underwriters and insurance provider, TMG was able to secure a loan that satisfied the lender’s needs and provided a long-term solution for the borrower’s investment strategy. The finalized terms of this loan were 3.94% interest, 10 year term, and a 25 year amortization with approximately $560K in cash proceeds.

The Madison Group closes a $1,160,000 Cash-Out Refinance on a Mobile Home Park in Idaho

The Madison Group (TMG), a leading source of mobile home park financing nationwide, arranged the $1,160,000 cash-out refinance of a 100 pad mobile home park in Kimberly Idaho. The borrower’s goals were to get maximum proceeds and a longer fixed rate term while rates are still low. TMG secured the nonrecourse financing with a 10 year fixed rate of 4.45% and a 30 year amortization at 75% LTV.

The park was built in several phases starting in the mid 1970’s, with the latest addition finished in the 1990’s. It is located in a rural market on 18 acres and has 100 pads. The borrowers purchased the property in 2012 when the park had only 70% occupancy. The owners have since brought the occupancy up to 90%. They own two other parks in the same market and are able to capture some operational savings due to their proximity.

The transaction was complicated by the lack of sales in the market in the past year and the rural location. In addition, few lenders could provide both nonrecourse and cash out terms for this MHP. TMG sourced a lender that was able to offer the borrowers all of the terms they requested.

“The owners were able to refinance at a lower rate, lower their monthly payments and get a significant amount of cash-out of the property. They are now well capitalized and plan to finish filling the park. With the cash-out from the refinance, the owners will buy mobile homes and sell them to tenants. This will increase their cash flow and the park’s value moving forward” said Angela Kesselman, TMG’s Associate Director of Finance.

The financing was arranged by Angela Kesselman at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group can be reached at 435-785-8350 or by emailing Angela at angela@madisongroupfunding.com.