I am new to MHP investing and am in the “studying the business phase”. I would like some clarity on a question I have in regards Seller financing and bank financing to acquire one park.
Let’s say a park sells for 400k and the seller is willing to finance 300k with 100k down. If I go to a bank and ask them for a 100k loan for this park and they want 30% down, does that mean 30% of 100k which would be 30k? Or, do they need 30% of the total value of the property which would be 120k?
In the scenario you provide you would be asking the bank to finance a 100% purchase loan. $300 from the seller and $100 from the bank. This will not happen, banks will not agree to a purchase involving 100% financing.
If you were to approach a bank to finance a park purchase, assuming you could find one that is interested, they would ask that you provide, as a down payment from your own finances, a % of the total price of the purchase.
If they require 20% down that would be, in your example, 20% of the full purchase price of $400,000. or $80,000 of your own money and they would provide the additional $320,000.
If you do find a bank that is interested do not be surprised if they require far more that 20% down.
The better option in this scenario would be to partner with someone that could bring in the 100K needed for the down payment (if you don’t have that amount yourself). As long as the numbers work, this can be a really good way to purchase a park.
It IS possible to find a bank willing to lend with $0 down, although unusual. I am talking to two such banks right now on a deal. It is rare, but they are out there.
In my case, the seller will be carrying-back 20% - 30% fully subordinated to the bank’s 70% - 80% mortgage. That means $0 invested from me. (I’ll save my money to rehab homes and bring in a few new ones - perhaps from Legacy Housing because they finance their homes.)
I’ve found banks to be very inconsistent. On the deal I’m working on now I’ve had several banks turn me down flat because they don’t like MHPs, I’ve had several say they are ‘interested’ and want to see the package, and I had one bank say ‘we love MHPs, and might finance up to 90% LTV.’ So you never know what a bank might do until you call them. Call every bank within 50 miles of your property.
Jefferson,
Please followup and let the group know if you are able to close a deal structured like this. I would think that the bank will put a lot of weight to the DSCR being 1.25 or higher, when including the seller second interest payment. So that means that the deal has to be really good on the present numbers.
Robbie