Hi all, new to both the forum and to mobile home park investing. I’m learning as I go but I did have a question regarding typical loan terms for banks on mobile home parks. Can anyone tell me what I should expect as to what a bank would typically offer as to loan terms (duration, amortization, etc.)?
I understand that a buyer’s best bet as to a lender would be a local/regional bank but I suspect the terms would vary greatly depending on location, but maybe I’m mistaken.
Typical loan terms are 20-30% down, 300bps over the 5 year treasury, 20-30 year amortizations, and 5-10 year terms.
Five Star Bank out of CA is probably the best recourse lender in the country. The only thing that can compete with them, I’ve found, are one off local lenders. Princeton Capital has a great relationship with them and you shouldn’t approach that bank by yourself because they will most likely ignore you. They’ve systematized a process with Princeton so it’s best to go through that mortgage broker.
Non-recourse terms are generally better but most parks that people on this forum are after, don’t qualify for Non-recourse at purchase.
If you are over 4-units, you will be considered “commercial” by the banks (regardless of residential vs commercial real estate).
In that case, most commercial loans are 20-25 year amortizations with a 5-10 year term. In low rate environments, I always try to push longest loan term possible. This is not the current market we’re in, however. And regarding interest rates, like someone else stated, expect rates to be 1.5 to 3% above index. These terms may vary some, but in general, do NOT expect terms similar to that of a primary residence.
My apologies for the late response. Thank you both for your responses!
From what I see hear, and from what I heard anecdotally, its probably best to work with a mortgage broker than to pursue a loan on my own, unless its a local bank which might be more receptive.
As to interest rates being 1.5 - 3% above index…is that typical, or just given the current market?
Thank you again!
Interest rates 1.5 to 3.0% above index is typical. Note, some banks may try to go higher than these margins; ask them why? Many cite the fact its not your primary res, or that the property has some attribute that increases their lending risk.
Interest rates for agency loans tend to run 1.5-2% above their related treasury. 5 year term = 5 year treasury, etc. Similar methodology for recourse lenders but their spreads are closer to 2.5%.
The recent environment has pushed recourse loans to 3% or more. I don’t keep up as much with agency loans but I assume they’ve increased their spreads as well. These spreads fluctuate so that banks can manage risk, portfolio building, etc.