@MHP_John , thank you for sharing your knowledge.
You indicated that these were Clayton homes.
@MHP_John , I have a couple of questions:
Thanks So Very Much!
Wow, yeah, the prices you quote seem high based on what Frank has been posting. Are you getting these homes at dealer price?
Thanks.
Rolf
Keep in mind these are folks with credit scores that are usually in the 500-599 range. With this credit score these folks will never qualify for a stick built home but would likely on the CASH program since it is a subprime mortgage backed by the park owner.
Depends one which factory you select. Frank is buying a lot of Clayton Wakarusa which is a mid level home built in Northern Indiana where wages are higher therefore the costs of the homes and freight is higher as well.
If you want the least expensive homes you will want Clayton’s TruMh. He purchases those as well.
The CASH program does not work in all markets – 21st Mortgage will be the first to tell you that. You need to have high home prices and apartment rents. You are looking at new homes costing, including lot rent, in the $700s to $800s per month in the northern markets. The sale there is not only based on price, but on the benefits of a mobile home over an apartment (such as having a yard and privacy). In some markets, the CASH home will only be $200 or so less than a similar apartment, but the customer is attracted by the fact that they can own it, that it’s new, that it has no neighbors banging on the roof or walls, that they have a yard, and that they can park by their front door. In addition, they are attracted by a great school district (super important in most markets) and competitive pricing that precludes them from living in that desirable area in any other way.
While the TRU product is the cheapest, you need to buy a home that is in-line with your potential customer’s demands. In our northern markets, our customers are much more affluent and demanding, and they’re willing to pay for an upgraded home.
The total cost of the home, transport, set, skirting, stairs, A/C, is easily in the $35,000+ threshold even in Texas where the homes sit on dirt and are only a short distance from the factory. But if you’re in a good market, that works fine all day long.
The CASH program will not work if you do not have 1) decent tenants with cash for a down payment and a steady job 2) a desirable location 3) high SF home prices and apartment rents 4) a manager who has decent people/sales skills and 5) a test ad that pulls at least 30+ calls in a 10 day run. If your park has these qualities, then CASH is a good test of the market. If it works, you get more homes and if it fails then at least you tried and know the truth.
If you are selling only on price, it will never work. Customers who buy on price only will never pass the credit requirement. You are not selling $500 1970’s used cars here, but new cars that demand a more affluent buyer.
Frank, thank you for sharing your ideas and experience. We are going to go with two mid level homes with a few upgrades. Each home will be a 3 bedroom, 2 bath, with a monthly cost (lot rent plus mortgage) of about $750 which equals the rent on a 3 bedroom apartment. From what you say, we may have a challenge ahead, yet we will try and see if it works.
Also, Frank, would you please provide some thoughts on how having Cash Program homes in the park (where the park and park owners are guaranteeing the mortgages) affects selling the park?
Great point. Injecting new homes into a park pays huge dividends beyond just filling lots, including:
it improves the appearance which attracts better quality customers and greater current customer retention and satisfaction, as well as promoting greater pride of ownership.
it is an affirmation to future buyers and bankers that the park is capable of receiving new homes going forward.
it impresses appraisers and lowers perceived cap rates for the appraisal.
it makes city hall happier as it upgrades the community’s appearance.
it attracts a more affluent customer base that filters down to used homes, as well. We market our most expensive homes first, and then “down sell” those customers to our used homes and even handymen specials.
In summary, new homes have macro benefits, as well.
We just got our first tenant buyer approved for a CASH program single wide, TruMH, $22k base, setup includinig AC $8k. After 21st’s fees and AL state tax the selling price is $39k. Yes from $22k to $39k. At their interest rate per the borrowers credit this borrower was offered a $564/mo mortgage, 15 yr. Our lot rent is $395 and are squeezed between existing lot renters at $360. So to bring the total of $964/mo which is UN SALEABLE in our area we can’t drop the lot rent below $360 due to existing tenants.
So now we are working tactics to drop the financed amount, fees and etc to get the $564 to something the buyer will accept. 21sts in house home owner insurance was astronomical. I called around to other retailers and found a great MH insurer for 50%… Ok shaved $50/mo now in order to salvage these 2 homes and 28 more for our empty lots we need to figure out how to come in close to $400 mortgage amount for the home…
I read re Frank saying where CASH works and where it doesn’t. Our beach location is where is SHOULD work.
What have folks done to drop the mortgage amount? This 21st loan is already 15 yr. And We bought the cheapest 3/2 singlewide made, TruMH.
What other programs are you using to be Dodd Frank compliant in that the lender uses their own Licensed Loan Originator to originate to the occupant. This is where Legacy etc fall way way short, leaving the park using the Sun Communities rent credit program which is not case law tested… Which wouldn’t work for a $22k home + 9k setup. IMHO. The lender does need to originate directly to the occupant, not the park. In this aspect 21st Cash is doing it right.
Wow! $22K to $39K is one heck of a jump. Having a little trouble reconciling your real world experience with all the hype that is out there about how wonderful this program is.
I am having similar problems with used homes I’ve brought in requiring way more work than expected. I can sell the home at market pricing, but then I take a loss. What I have done is sell homes at really more than they are worth, but then don’t charge lot rent during the RTO period. The payments are high, but the home is paid off very quickly. This approach has been successful.
Moving, setting/tie down, a/c, deck, skirting, hookups, adds up to a lot compared to the cost of a cheap home. And 10% overhead.
It still doesn’t add up. Moving, tie down, skirting, mh steps at both doors total about $5500 for me. Even if I include covered porches, I still don’t get a $17K difference between the home cost and buyer cost. What the heck does doing business with 21st cost? This concerns me a lot as I am in the process of getting approved through them.
Hi Frank, Install/setup and simple 8x8 deck ono the front and steps with landing on the rear cost $6.5k. We will rebid that. AC cost via a deep discount via blevinsinc.com an excellent source of deep discounted ACs. 3T straight ac + A coil installed is around $2.4k, your discount depending. So total setup including AC is $9.6k all said.
Alabama sales tax is $2k, TruMH does not have built into their inivoice pice a kick back to 21st, that we had to add to the invoice, $1.7k. 21st has 5% kickback to the park. then the points and orig fees by 21st makes up the rest. Then the loan is based on the sum of all fees and taxes which means you are financing state tax, park kick back etc etc etc.
The only way I see to drop the monthly is to do the obvious, the park gives back the 5% kickback, 21st cuts fees, interest rate and possibly stretches term from 15 yr to something longer. I do land-homes on seller financing after 12 mo renting (then long term cap gain AND qualify for installment sale of investment property) so I know a good goal is shorter terms not longer. For my doublewide land-homes I like 14 yr or shorter, but I don’t have tons of fees so my mortgatge for a $70k land-home ends up beig $850/mo PITI, 14 yr, for a 3/2 doublewide on land. Equiv to rent for the buyer.
But a $38k singlewide without land goiing for $964 PITI (lot rent $400 + $564 home mort) doesn’t make sense for anyone. Our other lot renters are at $360 so we can’t solve this with cutting lot rent to $200, we need to be higher then others, so we can cut to $375, the rest of the fix needs to be in the home mortgage.
21st must have had this happen in the past so they gave us a very nice work sheet that we cranked $350-$400 PITI. What was missing was sales tax and all the fees so the work sheet gave a false sense of security that the deal will work. I suggest that folks looking at CASH and playing with their work sheets make sure ALL costs, expenses are added into the cost being financed. Reverse engineering $38k finanal less $22k cost delivered = $16k of costs. Besure you are close to $16k of add ons on top of delivered home cost in your work sheet… Ask what interest rate is likely for your buyers to make sure the work sheet is in the right ball park. I’m not mentioning our buyers loan details intentionally. 
@curt504 , thank you so very much for sharing your experience!
We greatly appreciate it!
We are sorry to hear that the price point goes from $22K to $39K. That seems like an incredibly high increase.
We wish you the very best!
Here’s a few more thoughts/issues:
In the high AC cost areas - Southern US, bigger homes can hurt value as they are more expensive to cool. Electricity costs can be a real factor in the value proposition of living in your park;
Both banks and insurance companies value aesthetically pleasing parks over those that aren’t, maybe even more than they should. When you add a new park owned home, it can make the place nicer;
Insurance requirements/costs for a park owned home vs simply a lot differ significantly. With a park owned home, liability rates are usually about 3x that for a simple lot. Also, you’ll have the cost of insuring the home itself which should be anywhere between .7% and 2.5% of the value of the home annually, depending on where you are located.
@MHP_John and others… any updates on your CASH experiences? Curious as to how the SW vs DW experiment worked out.
Hey Everyone,
I’d like to revive this post if possible! I recently purchased my first park at auction in Nebraska and am looking into the 21st mortgage program as well. I have 24 pads on city water/sewer, but only 4 are filled (previous owner kicked off everyone else). I’m looking at using the CASH program to fill the other 20 spots.
My dealer prices for a new champion/redman 16x80 home is around 35k plus transportation, setup, skirting/foundation, hookups, fees, 10% split ‘comission’, etc.
Anyone recently use the 21st mortgage program?
Any positive results in the midwest?
Thanks,
Justin
I would also like to know if anyone can answer the other part of the original question in relation to selling the park if you have homes under the CASH program. I have wondered exactly how this program works and if it is really a good idea to be co-signing loans for anyone. My first instinct would be to pass on any park that I found for sale with homes under the program unless the seller kept the responsibility for the loans. I would only be benefiting from is the lot fees as a buyer and the home is already in place.
Hi Curt, thank you for sharing your experience. Do you mind giving us an update on what you finally wound up doing?
Thank you.
I own a park in Minnesota and use the cash program. Yes it is amazing how quickly the sale prices rises from the invoiced price of the home. In my experience if I order a new Clayton Wakarusa Pulse home 16x80 that home is $38,000 delivered to my park. Then add another $10,700 for installation (concrete piers), skirting, AC unit. Front and back wooden stairs with small landing cost $1,600. Sales tax is $2,000+. So right there I am at $52,300. Then you have to add the fee’s from 21st Mortgage like the 10% margin on sale ($5,200) and your at $57,200. That is without including electrician and plumbing hookup costs.
So your home for $38,000 goes to $58,000 real fast at least where my park is and my experience.
Has anyone else had the same experience or found a better way to do it?
JCas06 – I also own parks in MN and I share your pain. I do not currently use the CASH Program but I have and do buy homes from Clayton Homes in Minnesota (great to work with BTW). I agree with your comments that the home price from the factory is reasonable, but as you move forward with the transport and installation the costs quickly add up (as you described). Adding to our misery in MN is the lack of movers and installers available to bring in and setup new homes. If you can find someone to return your calls, they will generally let you down somewhere along the way. I have had too many situations in which an installation service, contracted weeks/months in advance, simply does not call or show up for the install leaving me hanging and scrambling to get things done. Same for some movers.
My solution (and I’ll admit I can be a control freak) was to get an MN Installer License in addition to the MN Dealer license. This allowed me to order installation materials from the Mobile Home Stuff Store at reasonable prices (and have it delivered directly to the site). I pay ~$525 for fiberglass steps and allow for the new owner to build a wood porch/deck after purchase if they like. I then have my onsite manager/handyman and me boss around a contractor that can provide tools and labor to get the install done under my installer license. A guy that was recommended to me to do the installation charged about $12,500 to do the install not including steps and skirting (and he flaked out on me at the last minute, and prior to that would not provide an estimate after repeated requests).
So, your $20,000 above and beyond the cost of the home from the factory is very realistic as you laid it out. With three homes under my belt I have managed to reduce that number to about $9,500 per home. This is important in the affordable housing arena, and with solid competition out there. This includes the foundation (footings 24 inch diameter & 48 inches deep), blocking, leveling, anchoring, steps and skirting, but not tax, plumbing or electric. I am trying to work through the plumbing cost creatively as an installer, or with the homeowner; MN allows for the installer or the “owner” of the home to do this without a licensed plumber (restrictions apply though). As an aside, why the heck do Sonotubes cost so much?? If anyone has an alternative to that, let me know.
Good luck to you, and, fill them empty spaces!