I’m looking at a small park with 25 lots, 21 occupied but 12 are POHs. 3 of the POHs are LTO already. Some of the POHs are not in great shape either but have long term tenants. I have seen the statements and know how much they make but I can’t find a lender that will take the rental income into account. Good market and lot rent is 350 per month. The rentals are pulling in around 650 and tenants pay all utilities and they are city water/sewer. So I’d like to do what I can to make this one work. Thoughts?
The problem you may run into if a lender does account for the revenue, is they may want the homes as collateral. The reason you could be having problems is precisely because of the LTO contracts. The bank doesn’t want you selling the collateral…
Personally I would lend on rental home income if I were a bank, but I would never allow you to sell the homes.
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I hadn’t thought of that. It may not matter in this case because the NOI without the rental income may justify the asking price. But I’m not sure exactly how the lender will appraise the park.
I’ve read, particularly in owner financed scenarios, that when you sell the collateral it must go to pay down the loan. This is a good situation for both the borrower and the lender as it pays down the principal and reduces the lender risk over time. If you are selling them off, and returning the capital, for at least what the lender appraised them out, then there shouldn’t be any issue.
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That’s certainly a case I can make with the lenders. Thank you.
Clayton Bank of Knoxville, TN does “park and home” financing.
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@Dominic730, i’d be curious to know what the bank tells you.
I hear that a lot of people separate homes from lot financials. But not sure how that’s done. Either people are getting 2 loans, or if there is a set amount for the home portion of the loan, so that you indeed can sell and re-pay that home-portion principal.
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I spoke with a representative from Clayton Bank. Their MHP department seemed better than many lenders that I’ve spoken to. They typically lend on the nicer parks with loans 1 million +. They DO take into account POH rental income. Although I don’t believe that they use 100% of that income in the valuation. I believe they also do 75% LTV if buyer meets certain criteria.