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MISCONCEPTIONS
OF MOBILE HOME PARK FINANCING
The greatest
misconception about financing Mobile Home Parks is that
the lender who finances the park will also finance the
homes. The fact is that nothing could further from the
truth since the value of the homes are of no value to
the lending institutions. The reason is that the homes
depreciate in value, people tend to trash them when they
leave, and even if the tongues are cut off, they can
always be welded back on and the home can be towed off.
Rent from the homes is not applied to the income of the
park, but depending on the financials of the borrower
and the park, in some instances the income from the
homes may be considered as personal income.
The ideal
scenario for an investor is to seek a park that has no
park owned homes because there are no problems getting
it financed and there is no maintenance to contend with
for the homes. However, there is still hope for parks
with park owned homes since there are ways to get the
job done providing a little creativity is shown by the
seller, buyer and mortgage broker. Some lenders will
allow seller seconds, with restrictions, and some will
allow for the seller to finance the homes on a separate
deal from the real estate since there are lenders who
will finance the homes only
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which offers an
option. Many lenders have a 25% limit on park
owned homes, and there are lenders who are more liberal
and have no limit.
The following
is a guideline for buyers to keep in mind when looking
for a Mobile Home Park. Very basically the types of
loans available can be divided in to 2 groups
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Small Balance Loans
and Conventional Loans.
Small Balance
Loans
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$100,000 to $1.5
million range, no limit on park owned homes, allow
gravel streets and driveways, must be permanently
attached, 85% max loan to value and a 640 minimum mid
credit score,
1.0 minimum debt service ratio,
minimal paper work, seller seconds negotiable, only
partial environmental required, interest rates are a
little higher than with conventional loans but up front
costs are much lower. These are the easiest loans to get
and usually close in 30-40 days.
Conventional
Loans
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$500,000 to $10 million
range, 25% max park owned homes, hard top streets
and possible gravel driveways, must be permanently
attached, 80% max loan to value, 1.2 debt service ratio,
650 minimum mid score, full documentation, seller
seconds negotiable, partial to full environmental
required, and generally close in 4-6 weeks.
When buying
any commercial property with a business, the type deal a
borrower will get depends on the credit scores and
financials plus the profitability of the park. Lets face
it, the better the financials of the borrower and the
park the better the deal. Another point worth mentioning
is that owner occupied properties get about a half point
interest rate break versus remote investor. I recommend
getting as much park data as you can in writing plus
digital pictures and lining up your finances before
making an offer
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I can assure you that you
will save a lot of time, money, aggravation and will
eliminate any surprises.
RESIDENTIAL
AND COMMERCIAL
MORTGAGE COMPANY
Buddy Dufau
Office 865-428-6995 Cell 865-604-2797 Fax 865-429-2391
Email buddydufaul@msn.com
Web site www.rcmortgagetn.com
1234 Barton
Fields Drive Sevierville, Tn 37862 |
