My goal is to hold a park so I’ll need to look for a REFI lender as soon as their seasoning terms of a deal are statisfied. IE 12 mo or after only 6 mo of ownership?Lets invent some numbers: buy at 10 cap for $1M, you put down $200k from a private lender (8% interest only), and owner financing at 5%. Reduce some expenses, sell off park owned rentals to owner occupants so the cap rate now includes more lot rents. There are 10 pads at park owned rent out of 60 total. From a lot rent perspective this increases income contributing to the cap rate by 10/60 = 16%. Lets say we’ve increased the value by 20% (reducing expenses and increasing number of pads contributing to the cap rate) keeping a constant cap rate of 10%. Might a REFI lender cash out 100% of the current debt based on me creating 20% equity and the loan would be 80% LTV. Assuming REFI lenders will do 80% LTV…What’s reality and from what lender?
You should check with Pierce Redmond at Security Mortgage regarding what he is seeing in the market at any particular time. I had a situation I asked him about a while back and at the time (this changes by the day so you really need to speak to him), lenders would finance based on seasoned income after 12-18 months. In the case where a property is not cash flowing to support debt at the time of purchase, the lender will require approximately 3 months of seasoning of NOI that will support the loan based on covenants (approximately 1.20 cash flow to debt service) but limit the amount of the loan to the LTV based on the price paid for the park. I believe for loans below $1million, you should assume 70-75% LTV and a shorter amortization period. Again, give Security Mortgage a call.
We use Security Mortgage Group for virtually all of our lending (everything over $500,000). Pierce’s phone number is (585) 423-0230.