Anyone here used a hard money lender for your park down payment?
Im not sure how much help this is, but I can tell you that ive heard from others in MHP land (Frank and others) these types of lenders are hoping that you default so that they can own your park. This means that their interests are not aligned with yours which can cause issues where they are trying to get you to default.
I can tell you my personal experience when i was trying to find a hard money lender for a great deal where i was talking with a park owner about a sales price at about 50% of what it would be worth at a 10 cap, so thats what would make it attractive to a Hard Money Lender: limited risk if i defaulted (even if they were contributing the down payment) but a high rate of return for them for the 1 or 2 years it would take me to refi.
I called around to brokers asking for HM lenders they knew and i talked with two separate people who, after about 10 seconds they were raising red flags. They were both very rude in their manner of speaking, pressing for information in a very gruff way. It could have meant nothing, but in my experience this could be indicative of their way of doing business and it was alarming for someone that was trying to earn my business.
I decided it was better to try to find a partner to go in on the deal together. It would mean lower returns for me, but otherwise it seemed i would be dancing with the devil.
Looking back, i figured maybe it would have been a good idea to try to find a Single Family Hard Money lender instead as there are more of those, they are easier to find, they are probably not the bottom of the barrel, and i would maybe attract them with even higher return than what they were used to. Again, this was buying a park far below market and thats what they are looking to lend on.
Hope these ideas help even though my experience is limited!
How would you go about finding a partner if you don’t have a large circle of investor friends? And if you plan to own more than one park would you establish a partnership just for the one park or for the future parks you want to own as well?
Thank you so much for taking the time to tell your experience. I appreciate the input greatly!
Using a HML/private lender for the down payment is strategically a risky move for both the borrower and the lender. Why?
If you borrow your down payment, how will you secure the lender?
Remember, private lenders want two things:
- A return on their money.
- A return OF their money.
Most lenders I talk to including myself want the borrower to have some skin in the game.
No skin = no loan.
In regards to finding a SFH lender to step up to lending on a MHP, good luck. Their expertise is houses. That’s what keeps them safe, their knowledge of that market. They know how to do their DD on a house. Not a MHP.
Now tell me again why you want to borrow the down payment?
Are you a private lender?
Realistically you probably need an equity partner.
Excellent points mhmike. I do a little private money lending as well and would be very skeptical of a borrower who can’t or won’t use his own $$ for a down payment. It is also worth pointing out that most banks won’t allow the borrower to borrow the down payment for the exact reasons you mentioned. Foreclosing is a hassle that lenders do NOT want.