Question on parks


#1

Great question!

The market (lending) is the reason park development has ground to a halt the past 6 years. There just aren’t any lenders out there now willing to finance homes in land/lease communities.

Let’s say that you had a piece of land that was zoned for a MHP. If the development cost was $8K per lot and you developed 100 sites, you would have $800K in the project. Since you don’t have any mobile home dealers who can get financing for most customers wanting to move into a park, you will have to become the sales lot.

Now, to start with you will probably need to purchase at least 6 homes to get the ball rolling ($90-100K). As these are sold, you will need more. Since you are now the bank, you will have to carry financing on the homes. You might be able to average $2K down on the sales. So, you end up getting $2K out of the $15K or so that it took to buy the home. As the park grows, your capital input (via homes) gets larger and larger. All along though, you still have to pay for the debt service on the $800K associated with the development.

As you can see, this venture can become a money pit real fast. In the end it will probably be a cash cow, but the risk and pain along the way can make you old really fast.

Bottom line, until lenders get back in the game of chattel loans and mobile home dealers start selling homes that end up in parks, development will be non-existent except for some special areas where homeowners can pay all cash like Florida or other retirement areas.

I hope this little illustration made sense.

Welcome to the site and may your journey in this business be prosperous.

Steve


#2

This might work in areas where you have cash customers such as Florida or other retirement spots.

The problem dealers are facing with chattel loans (homes in parks) is the unavailability of lenders. There are only a handful of companies left that will make these types of loans. Plus, the lender requirements are more stringent on this type of loan than a normal stick-built home.

As a rule, most of us in the park business HAVE to carry financing on the homes in order to fill lots. Some may see this as a negative to the business, but in reality it is a huge opportunity.

Now, we can make money on the home (buy wholesale, sell retail), the financing (borrow money at a lower rate and loan to our customers at a higher rate) and make profits on the lot rental.

Steve