Mobile Home Park Purchase

[Justin Waller]

Does anybody have any good contacts for banks that loan on Mobile home parks?

Note: I'm in Louisiana.

[Jack Martin]

@Justin Waller If you are doing a smaller deal, the best loan will be seller financing. If the seller won't carry, then your best bet is a local/regional bank or a credit union. You will want to confirm they have lent on mobile home parks in the past and have a continued appetite for them. If they have not, don't waste your time. Also, is important to understand that a $200k loan takes the same amount of work as a $2MM loan, so if you are working on a lower priced deal you may come across some banks who like MHP's yet they may not show serious interest in a small loan.

You can find out which banks have an appetite for mobile home parks by asking the MH/RV brokers in your area, networking through your state's manufactured housing association, or by simply asking other parks owners in your area. Otherwise you can do it the old fashioned way and simply obtain list of the smaller banks in your area/region and call them. 

If you are buying a larger park then there are more options for you:

Life Companies - Life co debt will typically have better terms than banks, but will come with tougher qualification criteria. You can access life co debt through a commercial loan broker, but again, take the time to find the broker who specializes in MHP debt. If the broker doesn't have a deep level of experience placing debt on mobile home parks, you could be in for a lot of brain damage and promises that are not met. Network through MHP attorneys and MH/RV park brokers or owners to find the right loan broker.

Agency (Freddie/Fannie) - If the park and the buyer qualify, this can be the best debt, but the qualifications are even more restrictive. Just like Life co's, you can access agency debt through a commercial loan broker, so take the time to find the right broker with the most MHP experience.

Conduit (CMBS) - Conduit can be more flexible than agency or life co, particularly with respect to the park and terms. Again, you can access conduit loans through a commercial broker.

(In addition to those sources, there are a few others that are less common, such as HUD and SBA)

Your track record of experience with the asset class will have impact on whether a loan is considered, and whether you can negotiate the terms of the loan, so be prepared to demonstrate your experience, or the team you have built around you who has the experience.

Typically, smaller deals under 50 spaces will be best suited for banks or credit unions. Once you find the right banks, there will be more flexibility with respect to qualification of the deal and you as the buyer, particularly if you lack track record.

Larger deals will open the door to agency, conduit, and life companies, all of which tend to come with better or more flexible terms, but with a higher degree of buyer experience and park requirements. For example, some lenders will require you already own and operate a similar asset in the same market wherein you are buying the subject property. Some will have a minimum number of spaces and pavement requirements in the park. Some will have restrictions as to total occupancy and percentage of POHs, while others are more flexible. Many of these loans can be non-recourse or limited recourse, but there will likely be liquidity and net worth requirements of the borrower. Some loans will come with defeasance or yield maintenance, while others will have step down prepayment penalties.

A good loan broker who specialized in MHP debt can guide you with respect to the right choice for you as the buyer, which type of lender will be best suited for the park, where the terms will be the most favorable, and where the hurdles will likely be. Having that relationship will help you get the best terms for the deal and avoid wasting time on a loan that is low probability.

All the best,

Jack