Best Option for Funding Mobile Home Park Purchase

General Real Estate Investing
1

There is a mobile home park for sale I am trying to figure out how to buy…

Asking Price: $360,000
Probable Purchase Price: $325,000
Makes $3463/mo, NOI: $41555
Expenses: $19,550
(Taxes+Insurance: $1500, Landscape $800, Plumbing $1600, Water $9385, Electric $1k, Garbage $2879, Environmental Dept $230, Septic Service $2156)
Cash Flow: $22,005
20 units on 2.25 acres
4 lots vacant, 16 trailers, two of those are park owned.
Lot rents are $250-$275 a lot with no rent increases in the last 5 years
Two park owned trailers rent for $450

The first route I am going to try to take is to get a loan, I will try SBA and bank. Any suggestions there?

I am not hopeful, I am a real estate agent and have only been doing that for 9 months, before that I waitressed. I have pretty good credit though, about 720.

I can probably scrounge up $10k down. With that much down at 5% on $325k my payments are estimated at $3122 for a 15 year. I’d be in the positive just 300 or so a month but I would be building my future and there is plenty of room for improvement!

The potential for the park is another $20k a year by increasing rents to $285-300 and putting trailers in the four empty lots. As an agent, I come across trailers people just want to give away and get hauled off for free all the time. My boyfriend is a contractor and has big trucks and we could team up on it.

The sellers offer owner financing, but the listing agent said several offers with about $50k down were rejected and he doesn’t think the sellers will owner finance with anything less than $100k down

What are the options for buying this? How can you buy an income producing property?

2

All I know is that an SBA loan is probably out of the picture because the only RE investment that they lend on is self storage.

3

I don’t have a general idea about mobile home investments but I have been hearing that the potential cash flow from it is great. You could check this out
http://www.robertwoodruffinvesting.com/blog/the-10-most-frequently-asked-questions-about-mobile-home-investing/ I believe they offer tips and financing options on mobile homes. Good luck!

4

Your best option will be your local bank. You will not get an SBA loan to purchase a mobile home park. Basically, anything under $1M and you’ll be looking at rates around 10% and LTV’s around 65% for mobile home parks under $1M unless you find a bank willing to provide financing. Visit a local bank with your proposition first. If you are declined, I’ll be more than happy to provide options on any property you come across.

5

Here are some ideas to consider from one who owns mobile home parks and has bought and sold hundreds of mobile homes over the years:

  1. Private funding (via IRA’s or Pensions) first mortgage for full purchase price. If this is an option for you, there is a good likelihood you can negotiate the price with seller as that would be considered an ‘all cash deal’ from seller’s perspective.

  2. Private funding (same as above) second mortgage behind seller first for the $100k down payment required with seller financing.

  3. If you can negotiate a seller 2nd rather than 1st for the ‘seller financing,’ you can do #2 above as a first mortgage or hypothecate the cash flow you are buying to the bank in exchange for the $100k down. Most banks could be sold on this with a good credit score and proof of performance by the cash flow property you are buying.

  4. Delay closing with a deposit and sell some of the park owned homes with ‘owner financing’ and then sell the notes at a good yield to cash out some of the equity for your down payment. You can sell to the renters with owner financing and sell the notes to friends in their IRS’s at 12 to 18% and cash out…I’ve done hundreds of these over the years.

  5. With good credit, you can get various lines of credit including HELOC, credit cards, etcs. and use those lines for a cash purchase and then the cash flow will pay down the borrowed money.

Make certain in the event you secure ‘seller financing’ that you include a ‘performance clause’ in that mortgage to assure your payments are in proportion with the performance of the cash flow which is represented by the seller. So, if the cash flow turns out 75% of what was represented, then your payments on the seller financed portion are only 75% of what was promised to be paid. If the projections shown at the sale are accurate, then the seller should not object to a performance clause. If there is an objection, good chance there is misrepresentation of the cash flow. This is particularly important with MHP’s in that many sellers receive cash and have books or journals that are different than those they use for returns in the public record…be cautious with this issue.

Good luck on this one. Personally, I’ve stuck with less expensive and smaller deals. I like the small deals so that any one problem will be small in nature and won’t pull me under financially.

Hope this helps.

RC

6

Rob in Atlanta gives real good advice. He owns parks. If you follow anyones advice follow Rob’s.

Most metropolitan cities have womens organizations that are also backed by the SBA. These organizations are open to men as well although the organizational name and advertising is targeted at women. The sole purpose of this organization is educating women on business start ups, business plans, and business funding. They hold free bus. education seminars and classes (all free). I’ve attended a few here in KC.

What I found out was that you do a business plan and submit your plan and financing paperwork to one or two banking institutions. Once turned down you can submit paperwork through this organization to qualify for up to $50K in business start up funding.

Now I got that information before the economic down turn. It just might be more now. Our government is giving away a lot of money these days.

Do an internet search to just hunt for an womens business organization that does this kind of work. Their service is free and like I said it should be part of an SBA program.

Now as mentioned the SBA doesn’t loan on real estate but I would attend the classes and see if MH Park land leasing might be an exception. With MH Parks you are providing jobs, your park managers.