Is it necessary to insure all the park owned mobile homes when purchasing a park? The premiums seem pretty high for those old homes. $900 each for a $48,000 replacement value? In that case, I’d be spending $3,600 just to insure the homes. And another $1500 for the liability insurance… Thoughts and suggestions?
Depends on your level of risk tolerance. If the home burns down and you have to haul it out, how bad would that hurt you. Meaning do you have enough reserves to pull out and get new one moved in. Also if you goal is to sell the homes back out on payments, as many do, then you might just take the risk and go ahead and get that done.
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Yeah I am planning on selling the home to tenants. Another question is that I have a mortgage on this park, and can I still sell the homes to the tenants with a mortgage on the park itself?
If the homes are part of your loan (sometimes the bank only loans on the land) you will have to get clearance from the bank.
It’s seller financing actually. Would I still need to get clearance from seller?
Check you loan documents it will have the terms.
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Good idea. If I were to bring more homes in to fill lots. These homes should be totally fine since they are not even financed by the seller - I will buy them. Correct?
If I were to sell the home to the tenants. What insurance should I require them to have so that their home is protected?
Currently the loan doc doesn’t say anything about it. I haven’t closed yet. I asked the broker and he told me to just ask the seller when I sell the homes. However, I dont feel safe about that. What if the seller says no? Is there anything I can do now to make sure the seller wouldn’t have a problem with it? Any advice is appreciated.
This is a risk question. If you have a bunch of 5K shitty mobile homes and the aggregate value is 50K for all of them then you could probably self insure (e.g. you eat the cost if there is a total loss) given your lender does not require it.
But if you have a bunch of homes where the blended average is 20K I’d probably get insurance regardless of the lender document requirements.
In my market here in Texas a 25-30K mobile home has annual insurance with a $2,500 deductible for about $500 per year.
Thanks. Let me explain my question better - I’m planning on not insuring the homes because the costs just eat into my bottom line too much. I plan to ask all my tenants to get home owners insurance as the insurance for the home. Now, there are 3 homes that are park owned, and I plan on selling them to tenants once I take over. My question is how do I make sure the seller ,who is the lender in this case, doesnt give me problems when the time comes to sell? I haven’t closed yet but the broker told me just ask the seller after closing. I think that doesn’t guarantee anything. How do I make sure the seller will not give me trouble?
Make sure the contract that you sign has a set release price for each of the homes.
I missed this on our first park where the bank wanted to roll the homes into the park loan. We agreed ahead of time that the homes weren’t worth much and that we would sell them off. Now that we’re unloading them, the bank suddenly thinks they’re worth way more. Your seller may have the same mentality - get it in writing, before closing.
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