Financing 101 Question

I’m currently searching for my first mhp.

I want to get a handle of the financing side so I am prepared when I find a park to move on. And I would love some lessons learned and perspective.

  1. Is it worth speaking to lenders and mortgage brokers now so I have a relationship to immediately work with when I find the right park? Do I just google them up in states? What the best way to find a lender for a park? local banks?

  2. Since I am new to mhps (no track record at all), is it going to be harder for me to find financing? I’m not looking at anything too big park wise, but has anyone noticed hesitancy to lend to newbies in the industry or do they not care so long as the land/deal value makes sense?

  3. How do you plan for closing costs and down payments? Is it possible to have it all rolled into the loan? I have little to no liquidity as an individual and so I am trying to find ways to make my first deal happen when it gets to that point.

  4. Is it hard to get a no-recourse loan? My wife is pretty risk adverse and is nervous about me entering the mhp industry. I want to isolate myself/my family (for her peace of mind and also an added layer for my own). Has anyone found this hard/easy to get in loan deals? Or is it “easy” if the land/deal value makes enough sense?

I know seller financing is something to aim for, but I want to be prepared with options.

I haven’t even set-up an LLC yet. I imagine I will set one up in my current state, then use it as a holding company and leverage a 2nd LLC since I am looking at parks in a few different stages.

I live in VA and am looking at parks in MD, VA, PA, DE, and NC.

Thank in advance for any tips and advice!

  1. Yes, It is worth speaking to lenders and brokers now. Just be mindful of their time. If you bring them a small deal, be sure you don’t spend 5 hours on the phone asking questions.
    I am sure a broker will reach out to you on this site. Keep in mind they all want to work with deals over $1.0MM loan amount.

  2. Yes, It will be harder for you to qualify. It will also be harder for you to buy a deal. Sellers and Banks want known performers. It makes the transaction go much smoother. So be prepared to be rejected. One way to avoid this is to partner up with a Bigger Player. They will bring credibility to your deal. Lenders and Sellers will like that. Once you have done a deal or two, then you will be better qualified on your own.

  3. Closing costs will depend on the lender. Expect to pay 1-3% points, depending on loan size, to the broker/bank. Some lenders require a Phase 1, a Property Condition Report, Flood Cert, etc.
    Some banks do not. Non-Recourse lenders will look harder at the property.

  4. Yes, non-recourse loans are available. They will usually have a higher interest rate and will require better insurance. Likely, you will get funding from a local bank or credit union and they will require a personal guarantee. Be sure to set up an LLC for holding the title to the property.
    Side Note: There is no such thing as a truly “non-recourse” loan. Every “non-recourse” loan I have done has carveouts.

For Example, You can’t dump hazardous waste on the property, Commit Fraud, or mismanage the property.

A good rule of thumb to remember. Anyone can sue anyone for any reason at any time.
Having a non-recourse loan doesn’t mean that the lender can’t come after you later.

Best of luck with your journey. I am sure you will find a good deal!

Hi, I’m a mortgage broker focused on financing mobile home parks sub $1mm. It’s typically best to go with local banks if you can qualify, and such search can begin only after you’ve identified a property, allowing me to identify the best bank fit for that type of property/submarket. Alternatively and if you have trouble qualifying with a bank, I work with national specialty lenders that focus on small MHP’s. They will look primarily at your FICO + the property income, but the rates will be higher versus rates offered by banks. Feel free to reach out if you’d like to discuss further.

Herold,
I have a buyer looking for a lender in Western Indiana (Terre Haute) do you lend in that area? Thanks, Grit