Differences between 21st Mortgage CASH program AND Legacy Housing

Hi Team,There has been lot of movement and discussions around the CASH program and Legacy Housing. Does anyone have the differences between the two offerings and in what situations you would use each of them and the benefits?If there is any other program that you are looking into and has helped fill the lots, please provide that info as well.Any detail will help. Thank you.

Legacy:* You put up 20% - 25% down.  They finance the rest (this includes the move and the appliances and HVAC.* 10 year amortization* 8% interest floor, 12% interest cap, currently pricing at 8%CASH* $0 out of pocket - they bring in the house* You pay $150/month out of your rent for 36-48 months* If/when tenant defaults, mortgage goes back on your books and you make the payments until you find somebody new for the house, then it goes back on their books* You can also pay about $5,600 and then keep all your lot rent* You must get registered as a dealerWe are registering as dealers in our states and going to try CASH.  We’ve also had good luck with Legacy.  Try both.Interested in hearing others’ thoughts on this.Best,-jl-

I spoke to the Legacy folks but my issue was one, I don’t need a lot of homes right now and two, I’m in the North-West so the shipping is prohibitive. I saw the Cash program mentioned in the newsletter but have been busy and haven’t looked into it too much. Where are the homes coming from? Overall sounds like a superior model for parks that is more in-line with the realities of the market. Win/win situation for both the owner and the program

It is my understanding that with the Legacy program that costs for set up, skirting, a/c installation (labor, line set, and pad) are all in addition to the down payment on the home.  If the down payment is 25% plus these costs then I’m coming up with total out of pocket in the area of $12K.Per the documentation on the CASH program for rentals, no money out of pocket is needed other than to cover the cost of set up and options installation which should come in the range of $5-6K.I’m unclear on the lot rent concession that a park owner has to make or why.  Perhaps someone can clarify.

Anyone have a link to a website for the program and/or contact info? Having trouble finding much,

The CASH program for rentals does not require any space rent concession, it is a 10 year loan @ 7.99%. The amount financed will be the invoice amount of the home, transport and taxes.The CASH program, where you sell the home and 21st provides the financing to the consumer, does require a contribution. Because the park owner is a guarantor of the loan, the credit criteria used to underwrite the loan is very aggressive. You will be able to order homes from any Clayton factory. 

I’ve uploaded the pdf doc for the program here: Dropbox - 21st CASH Program Breakdown BD 12-2014 (1).pdf - Simplify your life

Thanks Bruce, ya, this looks perfect. What kind of home pricing are you guys seeing? Are they competitive with Legacy? 

For those using the legacy program are you keeping any of the money collected each month or is it going to pay for the home?

Some things to ponder–25 years ago park owners were not buying new homes or having lots of rent to own programs–tenants were buying the new homes and looking for a park to place them in-- plus parks had high occupancy rates!!    What has happened that tenants are not bringing in ALL the NEW homes???       What dynamics are involved in this change???      Might be an area for discussion since if new homes are mostly brought  in from park owner or went selling the new owner MUST accept all the rent to own homes we are entering a new dimension of doing business and WHERE we will lead???     Since few parks are being built we all should have waiting list of tenants with new homes looking for a space.

Most people who can afford new homes place them on private land.

Brian I agree but they could do that years ago–what has really happened–cheap down payments for residents less than mobile homes or maybe the looks of some dated parks???      Just trying to have a discussion.

should be residential homes instead of residents

Looking into the Legacy Housing more closely. Please help with your feedback:The comps near our park is $650 for 2bd 1ba. the lot rent is $225. By the time we have the legacy home  3bd 2ba setup in our park, it would cost us around 33K. So lets assume we sell the home at 35K with 2K downpayment. Now the monthly payments will be $473.45 at 12% interest for 10 years. The 12% is the roof cap for Legacy and we thought that would be the right interest rate to charge our tenant. Total payment for the home would then be: 225+473.45 = $698.45. Higher than paying $650.1. Is it OK for the monthly payment on a home to be higher than the 2bd 2ba apt rent?  Or, would the higher payment stress the tenants, leading to higher default rates?2. This question is for community owners who bought Legacy Homes: Is it often the case that the lot rent and rental payment is higher than the rent on 2bd 2ba apartments?  I understand that the resident will own this home in 10 years.3. If we were to look at the value of the lot which will be $22512.8(aggressive expense ratio*10(cap) = $21,600. Why would you spend 13,400 more ($35,000-$21,600) to buy the new home?  When we want to sell the park and have several legacy homes in the park, many buyers won’t have the cash or will not be willing to pay for the homes, I think. Buying Legacy homes may make sense if we hold onto the parks for several years.  Just trying to understand how park owners are making the decision to buying Legacy Homes, other than filling the lots. Thank you.

Here’s a few more thoughts:1)  If you’re in Dallas, Legacy has plants close on both sides.  Transportation expense isn’t insignficant for MH buyers; and2)  A lot without any income is worth $0 x12 x 8 from an income analysis, which is what most banks use.  Now if you add the home and have a net $13,400 more in the home, now your home + lot equity is $35,000 (lot rent $21,600 plus net in home $13,400).  From that perspective, your $13,400 investment got you a $35,000 return.The goal is usually to make a net income then sell at a net profit.  Full home sites sell.  And if you put all the rental homes in a separate LLC/ownership, you can always sell / finance that separately.

Was talking with Century about their program just last month. I was setting them up with my manufacturer. My manufacturer representative called me -  they were attempting to make the manufacturer add an 8% rebate to the cost of the home that Century gets back. BE AWARE

I am thinking the same as DallasMHP in that is it worth it to invest in new homes to fill lots when you just want to flip the park.I do see your point KurtKelly about empty lots having zero value when you try to sell.How would that play out when you try to sell? Now you have 10 new homes to fill empty lots, but with notes. Is the new buyer willing to take those notes? Will it be harder to sell?I too am struggling as to what to do.

Why would it be harder to sell a park with more occupancy than less occupancy? Sure, the notes are an additional complication, but most sellers would rather have homes already in position and occupied than a bunch of empty lots that they have to fill. If you have to reduce the value of the homes by 30% to make the sale, you’re still 70% ahead of where you were on those lots, as our standard formula is only to bring in homes that cost as much as the value of the occupied lot. In that manner, if you got $0 for the homes, you’re still at a wash from the value of the lots, and anything over 0% is profit.If your park is not at 80% occupancy currently, and will be at 80% or above after bringing in the homes, then you’d be crazy not to do it, as those homes may hold the key to stabilization and getting a mainstream bank loan on the park.

I see your point and the CASH program sounds like what I have been looking for to get my park to 80%. This being my frist park just could not see how it would play out upon selling.  So what is the formula for value of occupied lots again ? 

The formula is as follows:Lot Rent x 12 x .6 (if park pays water/sewer and .7 if tenant does) x 10 = value of one occupied lot at a 10% cap rate.If you’re lot rent is not around $350 and up, it’s hard to make the numbers tie perfectly with new homes. We still do new homes all the way down to $250, believing the value of the overall park’s appraisal by looking nicer will offset the difference. But if your rent is under $200, it’s hard to make sense of it. And under $100 there’s little point to bringing in a home at all.As always, this is just a general guideline.