Loans (more than 5 years) for Manufactured Homes?

Question

Hi BiggerPockets!

My parents are interested in getting 2 manufactured homes for investment purposes, and they are hoping to get a loan for both of them combined. We are guessing that the total cost would be at most $150,000.00 (including 2 manufactured homes, sewer connection, and setting up a foundation).

Do you know if there are any loans for something like this?  They will be able to put at least a 20% down payment, and they already have a few manufactured homes on the property that are cash flowing.  They are also hoping to get as long of a loan term as possible, with as low of interest as possible (just like all of us!).

Thank you for any help!

Denny

Ken Rishel · Answer

Could we clear something up so that we are all talking about the same thing?

If one is buying a manufactured home to live in, there are a number of lenders out there. The most complete list is published by George Allen of GFA Management in Indianapolis, Indiana. He has a new list coming out this month. If you call him or email him, I'm sure you could get it. He is a consultant to community owners. In addition, most state manufactured housing associations list lenders on their web sites.

Mike Collier is correct in stating that all lenders have minimum amounts to finance - which will vary from state to state. I do not believe that Triad will do a 10K loan anymore, except for possibly a community they have a special relationship with. Most lenders, because of limitations contained in the Dodd-Frank Act, don't really want a loan under 25k anymore.

With all of that said, I thought we were discussing borrowing money to buy a home that the borrower intended to rent out and not live in. That is a different issue altogether, and means different lenders and different programs.

Which of these are we actually discussing?

Mike Collier · Answer

I believe Triad will allow a minimum of $10k for financing manufactured homes. The other big one is 21st Mortgage but I don't remember their minimum.

Stephen Franco · Answer

did that, most have a 20k minimum.  this house is 10

Bill Neves · Answer

@Stephen Franco

Google search for manufactured home lenders in your area. You'll find several.

Stephen Franco · Answer

can anyone suggest a mobile home lender they have used for cheaper singlewides like 10k

Jeffrey H. · Answer

Your numbers don't have any expenses...  Where is insurance, repairs, lawn mowing and tree trimming, etc?

In my opinion these numbers after expenses do not work for strictly renting.  You need to be looking to spend 40K per home for this to be viable, and even then I think it will be tight.  This is why people rehab homes compared to renting new ones.

Denny Le · Answer

@Jeffrey H. Thanks for the response! I've looked up chattel loans, and emailed a few companies to see if they would lend with the situation that my parents are in.   They're hoping to pay around $100K for both of the homes, but I was conservatively adding $50K for the hookups and miscellaneous expenses.  I've found a company in Oregon that will build, and ship both double wides to where the land is for $50K each, and possibly receive a discount on the second building.  I'm not really sure how much the rent would be for a single wide in their area, but that's definitely something I'll look into. Thanks for the advice!

The numbers are really dependent on the interest rate, and the length of the loan, but the numbers so far are:

Total Loan: $150,000.00

Down Payment: $30,000.00

Loan Period: 15 years

Interest Rate: 10%

I plugged these numbers into zillow's mortgage calculator and got a monthly payment of $1408.00

Rental amount for double wides that they currently own: $950.00 each

$1900.00 - $1408.00 = $472.00 /month cash flow

Cash on cash return: ($472.00*12)/$30,000 = 18% (Is this a good amount?)

@Ken RishelThanks for the response! Yes, you are understanding correctly, but I am not looking for a hard money lender, or private loan because those typically last for only 5 years. Jeffrey was able to give me a response with additional options other than the ones that I have already looked for.  Do you know where I can find such a lender for investment purposes?

Ken Rishel · Answer

If I understand you correctly, you are asking if there are lenders who would lend your parents the money with which they will purchase two homes that they will rent for income?

The quick answer is Yes, there are lenders out there that might do that deal. If that isn't what you are asking, please clarify.

Jeffrey H. · Answer

Yes, you can find information about chattel (e.g. personal property) loans online, there are several companies that service these.

Aside from that $150,000 sounds like they're going to pay too much for two mobile homes, unless this is for high end doublewides.  For rental properties there are very few cases where you should be paying more than 30-40K for a brand new singlewide, and then another 10K per pad to get the infrastructure in place.  A conservative maximum in my opinion if 100K is you're careful with your contractors and get a good deal from a dealer for a new one.

I personally would never use a double wide for a rental unless it's used and I get it for a very very low price - they cost more to buy, move, etc and there are not significant rental premiums for them to justify the added cost in my opinion.