Financing of mobile home parks and the homes in them has changed dramatically in the last two years. More lenders have entered the market place to serve this industry. Many factors need to be considered when financing a mobile home park. Some of these considerations are the type of park, the parks net income, age of park, land lease or rental Home Park, age of homes, location, and buyer’s experience.
A large percentage of older mobile home parks are seller financed for all or part of the purchase price. Seller financing is a good way to acquire a park if your plan is to improve the park, thus increasing the cash flow, then refinance with a third party lender and pay off the seller financed note. A loan clause allowing for subordination of the seller financed note to a bank loan to make park improvements would be a good clause to have in the terms of the seller financing note.
Bank loans and third party lender loans are available. Often on older parks the loan limit is 65% of the valuation or purchase price. If you have a high percent of park owned homes, expect a higher equity requirement and a tighter scrutiny of the parks profit and loss statement. The debt service coverage ratio is higher on older parks.
The type of park makes a difference. Senior living parks and 4 and 5 star rated parks’ get loans of 80-85% of value and a lower debt service coverage ratio. Older parks and parks with a high % of park owned home will need seller financing or a higher amount of cash equity and may require a higher debt service coverage ratio.
Vendor financing is a possibility, there is a least one manufacture of mobile homes who will consider partnering on parks of 100 spaces or more. Several manufactures will work with you to finance the homes to put in a park.
Financing for buyers of Homes for sale in your park has improved a good deal in
the last 2-years; with many new lenders actively seek to make mobile home
(chattel) loans to buyers in land lease communities.
Often a combination of financing is needed to put a deal together and improve
Your well thought out and well-funded improvement plan, detailing what you are
going to do to make your new park purchase more profitable, so that it brings you
the capital return you want, and maintains your ability to repay the financing is
the most important part of your purchase.