What would you advise?

I have a mobile home park that I developed 15 years ago. I have 17 singlewides- (owner-owned) and 2 Doublewides on seperate lots (owner-owned.) The rents average $ 350.00 for my SW’s and $475.00 for my DW’s.

I have some debt against the park 80k. My question is???

Should I sell the homes and rent the lots only? Lot rents in this area averages $100.00 to 175.00 per month. Should I finance the homes to my renters? I have a 90% tenancy rate with 70% of my tenants living there for 3 or more years and about 50 % have been there 5+ years.

Because the homes are getting older I have been undecided whether to sell the homes and just rent the lots or continue on the way I have been doing things. All of the homes are in good repair, however the cost of maintenance is going up. What would you do? If I did sell the homes, then the equity I get out of the sale of those homes would be use to reinvest into developing and expanding the park to double the size with lease lots only.

I have listed the park for sale but really don’t care if I sale it or not. I know most people now are looking for parks with lease/lots. I could expand the park easily and get about 10 to 15 more lots. You can check it out at www.swvar.com mls#15103.

What would you do if it was you? I appreciate any honest feedback.




First off let me say that I do not have a park of my own (yet) but I thought that since no one else has taken a crack at your questions yet I would.

There are several factors that come to mind when considering your situation. First off it seems that you have no problem being a landlord as you have been doing it for some time so that is not an issue in this case.

On the financing issue I would highly doubt you will be able to sell many of these homes for cash for prices that will make it worth doing (unless your area is different than most). So with that in mind you are looking at having to do financed sales and the question becomes is that going to change your situation from rentals very much. Yes you will not have as many repairs but you will still have a significant amount with the expected default on the sales.

Then the other issue is if it is easier in your state to get someone out of one of the homes via an eviction or a repo. In other words is it easier to get back a non payer home that is just rented or is sold. And if it is harder to get back a home that has been sold HOW much harder. Some states require that the home be towed to a holding lot for repos and this makes the idea of selling the homes very unattractive versus rentals.

Now on the other hand if you are truly looking to sale the park you will open up more buyers if you do convert the park to lot rent only but if you are more inclined to keep it yourself than it is a different story. I would say from what I can see if you want to hold onto the park you would be better off keeping the homes as rentals to maintain your level of control. You can always haul off and replace any that become excessive on the maintanence and repair. I would also look into other sources of funds and do the extra 10-15 lots as long as your market will fill those extra lots. By doing this you could more than double the value of your park based off of 15 more filled lots along with other improvements that will surely go along with these new lots.

One other thing to consider is that if you do sell the homes on financing it might be a way to raise your lot rents up with a little creative sales. Since you will be selling an overall price you can assign however much you like to the home payment and the lot rent. Now of course you can do this with your current rentals but in the event of selling your park you will be much better off with somewhat higher lot rents and owner occupied homes setup.

Hope my rambling thoughts help,


I would sell older homes on Notes and adjust lot rent for say 200 per month. maintenance will be cut by a bunch and you could possible sell seasoned Notes (or partials) to improve the added 15 lots. Is your exit strat fill and sell?

If you had 34 lots rented at 200 per, plus some Note revenue, the Park is much more saleable in my opinion…I may be biased, but I have owned a Park with Park owned rentals and for me, they were a pain. I was much happier with all lot (dirt) rentals…my expenses went from 45% to 33% almost overnight. On sale, most serious investors prefer dirt only rent.

A random thought…a downstroke of 2K per home on 19 homes would give you almost 40K for expansion or debt reduction,…

Good Luck,


Hi Cherrie,

I think there are a few things I would like to add from the perspective of a lender and buyer.

Though it would be nice to be able to appoint whatever amount you want to lot rent and home rent, an appraiser doesn’t see it this way. When a mobile is park-owned, say with a total rent of $500 for pad and mobile, an appraiser will look at market pad rents (if you have lot-only renters that amount will be considered on all others in park otherwise will look at pad rents in other parks) to break down income types. Say $175 for pad, and $325 for mobile. Income from mobiles is seen like a time-extensive business income, whereas income from lot rents is considered passive investment income from a lending and tax standpoint. Income from park-owned mobiles does not contribute to real estate value. So, if you want to build some investor value (not real estate value) into the park, park-owned mobiles can do that.

Another consideration… There is a HUGE difference in the financing available for a park with a certain percentage of park-owned mobiles. To be eligible for most conventional national lending programs (much more competitive than local bank financing), you will need to keep the ratio of park-owned mobiles below 25% (Some programs require a lower ratio of say 10% or less). Once you go over that threshold, you can expect your rate to jump at least one full percent if not more. The other terms will be less desirable too. Typically more restrictive prepayment penalties are put in place in addition to other nuances. (As of 12-26-06 I can offer rates for conventional mobile home parks between 5.98% and 6.78% fixed for 10 years with a 30 year amortization at 80% LTV. Non-conventional today at between 8.125% and 8.750% fixed for 3 years with 30 year amortization at 80% LTV. On a $500 thousand loan amount at 8.50% payments are $3,884/month. On a $600 thousand loan amount at 6.50% payments are $3,792/month. Both considering 30 year amortization)

Lastly there is the control issue. When you sell the home via seller note, you lose a certain amount of control. If the tenant does not pay, you will have quite an expense to go through to get them out and foreclose.

If it were me…

I would sell off 75% of the park-owned homes by offering a lease-to-own agreement. Whatever you are currently renting the homes per month you can offer as the new lease payment (sometimes a bit more since instead of renting the tenant is going to own their home). This does a few things for me. I will have a park that fits the cookie cutter mold in terms of financing options as soon as homes are finished being sold to tenants (Obviously the most crucial point for many buyers is what type of financing is available). I have a good proportion of real value to personal property value (financing on real estate is much more desirable than financing on personal property which depreciates quicker. So majority of real estate value makes for a good park in terms of collateral and long-term value.). I have 25% park-owned homes still which gives me some extra cash-flow (a good investor-value point). I have some flexibility in attracting new tenants. I can offer new tenants the choice of renting lot only, renting lot and home, or a lease-to-own option. Also instead of being responsible for the removal of most old homes, the tenants will be responsible by the time they own the home 3-4 years from now when they are fully purchased. With a lease-option I have much more control over getting rid of non-paying tenants as I still own the unit in addition to the much lower cost of eviction compared to foreclosure.

Whatever financing I currently have in place with 100% park-owned mobiles I can take out with much cheaper financing given that I have a park with less than 25% park-owned mobiles. This increases my cash-flow. I can also take out cash and still have lower monthly payments than I did before. This allows me to construct more pads. Once the pads are in I will have a much higher real estate value due to lower expenses (less personal property to repair, much cheaper monthly payments), higher income (more pads, higher occupancy), and more pads to collect income on. Plus I should have some more free time to post on Mobile Home University since I’m not taking care of as many mobiles!

Now this message was just shot from the cuff straight through from beginning to end. So please bare with the flow and structure. Feel free to correct any mistakes in grammar and spelling… :slight_smile:

Oh yeah, one more thing… The idea of putting tenants on notes and then selling those notes is a good one. Then you don’t have to deal with foreclosures. Also, you would have to wait a few years to lease-option these homes and have enough sold to be available for good financing. So to speed things up a bit, putting on note and selling note may be good. However remember that when selling notes typically only 50%-70% of note’s face-value will be paid so you’ll make money quicker but over the long run going a different route could you make more.

There’s my two cents.

and very interesting. Do you have stated income- lo doc 80% LTV products?

30 year ammo/ 10 year call?

I would like you to have more free time to post here more often!LOL

Greg Meade


I would like to thank everyone for their advice. It has made me rethink the way I am managing the park and it has helped me to have an objective view at what I am doing. I hope the advice keeps coming for I am learning a lot.



In regards to Greg’s inquiry about the sweetest mobile home park product I have… MFG Advantage (Multifamily Group Advantage)

This is an apartment product for mobile home parks! The difference… 10bps (.10%) in rate!

If you are looking for a program with minimal borrower requirements, this is it! 90% of the weight of qualification is based on property factors. 10% is based on borrower factors. This is straight from the risk model our underwriters utilize!

Borrower Requirements:

680 + FICO (Possible Exceptions)

No Net Worth, Personal Debt to Income, Liquidity to Loan ratios calculated!

3 Months of Principle and Interest Payments in Liquid Account Required (401 K, Stocks, Bonds, Savings, Line of Credit, etc.)


*3, 5, 7, 10 year fixed rate (no balloon)

*30 year amortization

*30 year term

*85% Purchase, 80% Cash-Out or Rate/Term Refinance

*after initial fixed period adjusts to 6 month LIBOR + 2.500%

*Prepayment Penalty goes away by last year of fixed period (10 year fixed has 8 year prepayment penalty, 3 year fixed has 2 year prepayment penalty)

For a $1,000,000 loan at 80% LTV, today 12-28-06, with an average borrower of 680 FICO looking to purchase… I could get them on our Advantage program for 10 years at 6.72% with costs of $5,500 + 1%. Can get 7.02% fixed for 10 years with costs of $5,500 + 0%.

****NOTE: the term “stated” can be very misleading to someone coming from a residential background into the commercial arena (yes mobile home parks require a commercial loan, though multifamily has its own special commercial category). Stated in residential means that a borrower states the income they make instead of “proving it” as they say. This affects the risk of repayment and in now way affects the collateral (the house value isn’t any higher because borrower stated their income higher than it actually was). In residential the borrower is the only factor in repayment.

In commercial if you were to “state” the income of the property (in commercial, income properties pay for themselves in terms of expenses and repayment of loans), it would affect the collateral in addition the risk of repayment. This is because the income a property produces affects its value directly in commercial.

Wasn’t quite sure of Greg’s meaning, but I felt it was worth clarifying because I actually had a broker call me yesterday and we had the following conversation…

Broker: “Do you collect leases?”

LO: “Yes we do. After we pre-approve the property we collect leases as a verification of the information already submitted and analyzed.”

Broker: “Will an appraiser collect leases?”

LO: “Yes, an appraiser will see all the numbers we provide them. Is there something about the leases I should know?”

Broker: “Oh no, but if we went with a “stated” program can’t we state the rents as higher than they are actually? Rents are a bit below market.”

LO: “No. I’m afraid that’s not what we mean by “stated” in commercial. Really though, you don’t need to state the income of the property, you need to find a lender willing to utilize a lower debt-service-coverage ratio in proposing a loan dollar. Would you like to know the difference in how an appraiser will look at this compared to a lender on a below market rents program?”

Broker: “Oh well, no thanks. I need a real stated program…”

Phone: “Click.”

The broker was so stuck in his residential mind-set he had already decided that he needed a program where he could state the income of the property before he contacted one lender. There are options for these types of properties, but having a professional with experience who can assist you becomes invaluable to a broker or an investor.

Commercial is a very strange animal as you emerge from the jungles of residential lending. I find commercial a breath of fresh air sometimes compared with residential (Don’t get me wrong I love doing home loans). The reason this is so is that residential is a commodity business. Commercial has seemed to edge that direction over the past 6 years, but it’s still a long way off. I see commercial as a services and relationship business. In residential the loan goes to the lowest bidder (usually). In commercial I have snagged the best deals from the competition by having an unmatched relationship with the bank that funds our deals (we are a correspondent lender). Below are highlight examples from 2006.

*Exception for 8 borrower deal where 3 guarantors were at credit scores of 636-658 (Required 680 typically). Same deal, got exception for approving a 90% loan. Our bank’s first deal to ever have 90% financing secured on a single property!

*Piloted the first 80% interest only product this year for our bank. It is now commonly available for borrowers with 700+FICOs.

*Exception on cash-out refinance seasoning. Borrower was short $40,000 to pay for construction work to add pads to his park (when he met me he had already begun construction and was in a bad spot). He needed more money than we typically allowed, but since he did such a great job of turning the park around in such a short time (it was partial rehab partial construction project) I prepared a proposal that my bank loved as much as the borrower did! The borrower got money to pay off the people providing the construction.

Commercial isn’t quite as “cookie-cutter” as residential.

a commercial loan Colby as Seller, but you are DEFINETELY someone I would like to meet and talk to…what are you doing the weekend of Jan. 26-27, 2007? We have a local lender who would not loan us 2.1M (on a 3M) Park with FICO’s of 751 and 726 (me and my business partner) cuz on our 1040’s we look like paupers after depreciation, rehab costs and expenses…yet we could fund 900K in cash for acquisition. Appraisal came in at 2.6 so we were making up difference in down. we lost this park due to failure to finance. Reasons given? Too high of DTI for us…which is ironic as Park itself currently cash flowed at 276K with 11 spaces vacant and no rent increase since 2002. They used OUR income as a qualifier…weird!

Would love to see you at MOM…this would be a great opp for you to network!

Greg Meade

Hi Greg,

MOM sounds like a great opportunity to get together! Unfortunately I have been taking quite a bit of time of lately for holidays and a development project I am working on for myself. The first trip of 2007 I’ll be able to make will be at the MBA Multifamily Conference in February. I can consider making some more trips in April or May and later in the year. I definitely want to meet up with some passionate mobile home park owners!

I would need to know a bit more about the property before I could comment on this. It sounds like the park is in need of some rehab?

Typically to look past personal debt to income ratios we need a park that has the following…

Conventional Program: Paved roads typically, < 25% park-owned mobiles, cash-flow 1.20x DSCR considering normal and recurring expenses (not depreciation, improvements, or rehab)

Non-Conventional Program: cash-flow of 1.25x DSCR considering normal and recurring expenses

  • DSCR = (NOI / Annual Loan Payments)

*NOI = Gross Income - Normal Expenses

With strong FICO’s and net worth, a borrower always stands a good chance for an “exception” to guidelines. If we don’t already have a program for you, we may be able to create one for you.

If your interest rates are very high on your homes, you may want to consider refinancing, this could possibly save you money.

Go to www.mymhls.com