When you sell a home financed by 21st Mortgage, you have to play the roll of the buyer’s rich uncle and co-sign the mortgage. This means you are on the hook for the next 17 years in case you trailer-park-living “nephew,” who you don’t really know, flakes out. In my case, since I am 63, I will be on the hook till I am 80 (yikes!)
Have any of you thought through the implications of co-signing a stack of such mortgages when it comes to ever selling your park? If you have I would like to hear it, because I am having a little trouble getting clarity on this.
Fast cash would be nice, but it might turn into a bear trap.
One of the disturbing things when I think about the wholesale signing such guarantees, it is the possibility that in the next 17 years, some kind of combination of national and personal financial disasters happen which pushes you to the edge of the financial abyss.
“When you sell a home financed by 21st Mortgage, you have to play the roll of the buyer’s rich uncle and co-sign the mortgage. This means you are on the hook for the next 17 years in case your trailer-park-living ‘nephew’, who you don’t really know, flakes out.”
“Have any of you thought through the implications of co-signing a stack of such mortgages when it comes to ever selling your park?”
As per the 21st Mortgage CASH Program (based on my understanding of the Program) I am not a fan as I am extremely conservative.
I do not want to be held responsible for 17 years for a MH mortgage based on other people’s monetary behavior.
It also seems that the 21st Mortgage CASH Program’s “additional fees” are very high.
I would much rather be a MH Dealer and buy directly from the MH Factory using Cash.
Yes…with Cash I would not be able to buy as many Mobile Homes.
However, I would also have the peace of mind that I own the MHs outright and could sell them to Tenants or sell them with the MHP (if need be).
Under the 21st Mortgage CASH Program I cannot imagine a MHP Buyer who would desire to take over “responsibility” of all the existing 21st Mortgage CASH Program Mobile Homes.
“When you sell a home financed by 21st Mortgage, you have to play the roll of the buyer’s rich uncle and co-sign the mortgage. This means you are on the hook for the next 17 years in case your trailer-park-living ‘nephew’, who you don’t really know, flakes out.”
“Have any of you thought through the implications of co-signing a stack of such mortgages when it comes to ever selling your park?”
@Randy_CA , I have heard of other MHP Owners who use Passive Investor’s Money to purchase New Mobile Homes:
1.) MHP Owner: Purchase 1 New Mobile Home
2.) MHP Owner: Rent Out The 1 New Mobile Home
3.) Passive Investor: Have A Passive Investor Pay For The Mobile Home & Give Passive Investor Title To The Mobile Home
4.) MHP Owner: Use The Passive Investor’s Money To Purchase Another New Mobile Home
5.) MHP Owner: Deal With All Tenants & Mobile Homes
6.) MHP Owner: Give The Passive Investor A Certain $ Amount Monthly (With Interest) To Pay Off Mobile Home
7.) MHP Owner: Once Passive Investor Is Paid Off Then The MHP Owner Gets Title Back To The Mobile Home
8.) MHP Owner: Repeat Process / Possibly With The Same Passive Investor / Once Trust Is Earned Might Not Have To Sign Over Title To Mobile Home To Passive Investor
“When you sell a home financed by 21st Mortgage, you have to play the roll of the buyer’s rich uncle and co-sign the mortgage. This means you are on the hook for the next 17 years in case your trailer-park-living ‘nephew’, who you don’t really know, flakes out.”
“Have any of you thought through the implications of co-signing a stack of such mortgages when it comes to ever selling your park?”
@Randy_CA , there was also another post where the MHP Owner did the following to get New Mobile Homes:
1.) MHP Owner: Purchase New Mobile Homes
2.) MHP Owner: Rent Out New Mobile Homes For 5 Years
3.) MHP Owner: Sell New Mobile Homes To Tenants After 5 Years
This above process sounds very interesting as:
1.) There should be very little repairs in the first 5 years
2.) The MHP Owner gets some cash out of the MHs from renting
3.) Lastly, the MHP Owner makes a Tenant an Owner of their very own MH
I think you would be better off selling the home at the get-go and then selling the note after a year if you need the cash.
I will try to explain:
What I would like to do is self finance and write a note that would pay off very quickly. The most expensive homes I currently have are worth $25,000. With $3K down and $250/month, it would be paid off in little over seven years – a decade sooner then 21st Mortgage with a similar monthly payment.
When looking at a more typical home worth, let’s say, $15k it would work out to $3k down and $250/month for four years. I could discount the note by something like $1k after a year and sell it to someone at an attractive 8% rate if I needed the money sooner then the 3 remaining years.
Or if I charged the buyer 5% on the $12k mortgage, that would add 6 months of payments but, after a year, I would only have to discount the note $500 to give the note buyer a 8% return. And I would be off the hook in just 42 months. Not 21st Century’s 204 months.
Using the self finance model, the lower cost homes would pay off in just a couple of years or so. I would have my money back and the buyers of the homes would be owners, free and clear, and only responsible for lot rent.
We both would be in better condition to weather one of life’s storms.
But can I self finance and be on the right side of the idiot law? My SD attorney says I can. Everyone else says no.
Contingent liabilities like getting stuck holding the bag on a bad CASH tenant can be mitigated. Right now the default rate of the CASH program is around 2%, but even if default rates were ten times that high in your park you could still come out money ahead with the proper budgeting of capital reserves - IF lot rents are strong.
Thanks for responding rmpratt. I understand what you are saying, and I have had those thoughts myself, but 17 years is a long time. And what if one was to sell for whatever reason? It seems to me that since you co-signed you would still be on the hook even though you have nothing to do with the park.
And a lot can go wrong in 17 years. It’s been almost a decade since the last national financial crisis. Can we really go 27 years without crashing into something? Maybe, but when I think of the national debt, the state’s debt and some of the huge problems looming just beyond the horizon I just get extremely conservative in my planing like Kristin.
But it is very tempting to sign the papers and get the big checks. My first 21st Mortgage deal is in the works that should give me $25k and I have 4 others at that price I can sell along with another 27 homes for lessor value.
I’m signed up with the CASH program but haven’t used it, instead opting to pay for homes cash.
I view CASH as somewhat akin to borrowing hard money - it’s a last resort option that’s used once you grow beyond your current capital supply. If you want homes and have access to your own funds or a private lender, use that cash first. If you’re out of other funds, and your park is in the right market, the CASH program is probably better than just leaving a lot empty.
I plan on holding my properties for a long time, so I don’t mind having the loans/RCP program get amortized on my watch over time.
If for some reason I desperately need that capital though down the road, I could always do a push to have the residents start refinancing with one of the 3rd party lending companies that will lend to park tenants if the park will cosign the loan. The one lender I’ve talked to in this space views successful RCP payments as a very big plus on the resident’s application.
One thing Dave Reynolds mentioned at the online conference put on recently is they will actually structure RCP payments higher than what payments would be on a 3rd party financed deal so that they tenant would have incentive to switch to financing down the road if necessary.