What kind of financing?


#1

Finally found a park with the right infrastructure(city utilities all new) and an OK price. Only problem is it is all park owned homes. It is a 17 pad park, grosses 9300 a month and seller asking 600K. All homes as well as sewer lines and water lines are 2 years old. Owner said maybe 90K he could finance, but would rather a new loan. Park is in NC.

First of all, do pretty much all of you shun all park owned parks??

Second, hows the bank gonna look at the park when it comes to the appraisal??

Wonder how much a guy would have to come up with to buy a park like this?


#2

jb,

I don’t know about NC but in South GA you couldn’t make a living on a land lease community. Financing is drying up, dealerships going out of business, and legal hassles of getting them off your property not really in your favor.

To answer question 1…I don’t shun park owned units it is more of a challenge to manage but done right it makes money. Owner financing the units get you out of a landlord position and into banker mode. Your demographics will determine which is best.

Question 2…In my experience with appraisers, there is not a lot out there really educated enough to appraise a park owned property. They will try to use the income approach most times. My appraiser ( I firmly believe) did not understand manufactured housing and just based the final figure on land sale comps and told the banker not to worry about the homes if the land would cover the loan. Break it out by land and homes I would use NADA and use the wholesale value on the homes.

Question 3…600K seems steep unless the demographics where you are for rental demand are there to support that sales price per pad.

Sam


#3

with a slug of Park owned. Also almost impossible to hard money.

Owner financing is the only real way this seller will probaly sell this Park…or a really tight L/O. Or all cash

Greg


#4

This is exactly the size and type of small park we look for. This is not a comment on price etc. but rather a few comments on your concerns about the park owned homes and financing.

In small parks it is quite common for most if not all of the homes to be parked owned and in fact, I prefer that they are (I know that is outside the norm) for a viariety of reasons not least of which is the greatest control of the tenancy and protection of income from future zoning changes that suddenly outlaw you from replacing units (don’t ask me how I know that).

Appraisers on the small parks tend to use the income approach. This does not discount the park owned units or disregard them at all. The appraiser is supplied with copies of my leases and expenses broken down. He compares them to the norm in the area and the puts them into the formula.

Since the park owned homes have higher income and higher expenses, there is no discount, just simple math. Net Operating Income. From there the appraiser determines a CAP rate for the park and whalla… a value is given.

Like most any other appraisal I have seen or heard about, if the appraiser can safely defend appraising the property for what the bank wants to loan, then this is a non-issue.

The type of banks you want to work with for financing are the small, local bank. This takes a face to face approach and likely more than one. You have to get past the folks in the lobby and in front of the true decision makers. You may have to try several small banks but you only need one yes. Once you get it, future financing gets much easier.

Documenting yourself in great detail and detailing the deal is of equal importance.

Don’t try calling a few banks. Don’t try asking the receptionist in the bank lobby. Don’t try walking in empty handed. Most of all, don’t quit when you get told no. We all get told no, even now. Banks have the cheapest money and most of it to loan. It may take work but the money and terms are well worth it. You will eventually get a yes.

Tony


#5

I have a 11 month old appraisal on the mobile home park I purchased in NC with all city services on 38 acres.

The area the appraiser pulled comparable sales from stretched from Greensboro to Mebane with a range in per lot value of $9138 to $21951 with a $14920 average. If you are paying $600K or $35294 per lot with the homes included you might want to check the value or the price you are paying for those homes. Without knowing the year, make, model and condition (single or double wide ) I would be guessing at the value. In my park a totally rehabed single wide 1995 or newer would be worth about $14-15K and the double wides are about $27K. I dont think you will have trouble getting financing if the values are right. In my experience you would get a better deal not taking owner financing.

Rick Ewens


#6

I listened in great detail at your Bootcamp and i heard that “local bank” idea several times. Actually went out with a personal “investing resume” similar to the one Lin showed at the bootcamp (great idea BTW).

Went to 11 banks in one 10 hour day, and you are absolutely right…they all said NO at first.

One bank finally asked for some more info on one park I am working and they WILL lend on mobiles in Owner’s park. Tim, my rep, called it a “portfolio loan” and it basically is a loan the bank holds and doesn’t sell this product. They open a “credit facility” using credit scores and income approach appraisal. The downside is to qualify you must already own the park and have a min. year of income and expenses. They wouldn’t give exact rates but did say a well qualified borrower would expect 2 points over prime, up tp 80% of appraisal.

Although I haven’t found a lender to finance a park for me yet, I DID listen and act on the info from your Bootcamp. Without asking these questions, in the manner you use, I would never have found all these new terms and products. EVERY front desk person said NO…the trick is to get to the next person up the ladder, and that can be tough.

I am meeting with Ryan Needler manana and he has the scoop on a new product from Clayton that will loan (chatell sp?) on old single? mobiles set up in parks…this could be huge. Will post with info tomorrow.

Tony, have you heard these terms for loan products? portfolio, facilities etc?

None of these banks I canvassed were national Banks, and before Tuesday, I never knew these types of loans existed.

Greg


#7

You are dead on.

The “portfolio loan” is the exact reason we target small, local banks. Because these small banks hold these loans in their “portfolio,” they are able to be more flexlible in their terms.

The smaller banks are no different than most new and growing businesses. What most new businesses due to gain a foothold in an industry is to provide better service and/or cheaper prices.

Banks make money by making loans, they grow by investing in their community until such time they reach an asset level that makes them appealing for larger banks to purchase/merge with them.

We all hear the advice of working with small local banks but so many of us either fear the confrontation or don’t know that this advice is true. Greg you and many, many of us here have proven that the advice is true.

The added bonus is that as you finally begin that relationship with the small bank, you get to grow with the bank employees. As they get promoted, you get greater clout and access. These relationships can provide huge dividends down the road as well as good friends.

Enjoy the MOM in Seattle and have a safe trip Greg.

Tony


#8

It’s working in NY! After hearing 5 “we don’t loan on non owner occupied manufactured homes” from home equity loan level employees. I went seeking a small local rural bank and at the first meeting with the loan officer he said. If you can swing 15 years and bi-weekly payments we will keep this loan in our portfolio @ 6.35%! That way we can do the approval right at the main office! It was like I was hearing it right from tony/Scotts cd. The loan has not closed yet but the appraiser is coming tomorrow. I will update when i get a closing date. I also went to the first meeting with all the paperwork I could think of and photos of the property. He was Impressed. Thanks Tony!