Financing Mobile Home Parks: Know Your Options

So you’re ready to take your first step into the mobile home park industry. You’ve gotten all your ducks in a row, and now it’s time to secure financing. The only thing is, this can be a huge roadblock for first time buyers. Luckily, your options aren’t limited. Keep in mind, though, that you may find some to be more effective than others. Here are your options when financing mobile home parks.

Cash Purchase

Many may be quick to opt for financing mobile home parks in cash. This option allows them to refinance their sale after 12 months. During this time, the buyer has the opportunity to build good books and records. This is one of the best chances a new buyer has to secure financing independently. Our advice? Save yourself the brain damage, and find yourself a mortgage broker. They can be a tremendous resource in the mobile home park industry.

Agency Debt

Agency debt is distinguishable from other typical loan options. These are your Fannie Mae style loans. They’re the creme de la creme of their kind, and are extremely hard to get. In fact, they’re a virtual impossibility for new buyers. This is due to the vast personal requirements, loan values 1.5million in loan value and greater.

This means a 25%-30% or more deposit and/or downpayment on any deal financed in this industry. Another consideration is the debt service coverage ratio. Debt cannot be more than 25% of the NOI, no less than 50% space, and no more than 20% of the POH. Paved roads are also a requirement. Buyers have to have a sizable network to even qualify for consideration.

CMBS Loans

CMBS refers to another type of distinguishable loan. They are also called commercial mortgage-backed securities. These are typically non-recourse loans. In this case, buyers will not be held accountable for debt. There are instances where they can be recourse, loans, though. In this case, the loan value would be around $1million and higher.

CMBS loans can be complicated to secure. As with the previous selection, this even more-so the case for new buyers. Still, they aren’t as difficult to acquire as agency debt.

Community Bank Financing

Trying to get your park financed by a community bank can be a frustrating experience. You’ll likely be reaching out to countless banks. What will you receive in return for your efforts? In all likelihood, probably not much. For the few yes’s you’ll receive, they will almost assuredly be recourse loans. They’ll come with lower down payments, and exorbitant interest rates.

Bridge Lenders

This option refers to lenders that bridge the gap between buyers and loans. They charge high interest rates, ensuring money for a short period of time.  The money doesn’t ameritize, and you’re only going to get it at most for two years at the time.

Seller Financing

Of the 27 deals sold last year, not one had seller financing. In all likelihood, these accounted for less than 10% of the whole market. These are often reserved for more difficult deals. There’s a considerable amount of risk involved. Consider this the last option, particularly for a first time buyer.

Looking for more info on the industry? Reach out The Mobile Home Park Expert Today! Contact us today for a consultation!

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