How long do i have to wait to refinance a mobile home park?

Question

I have a small mobile home park under contract that is only half full. I know the area needs housing so I am genuinely looking forward to getting homes in there, providing affordable housing, and doubling the value of the park.

My goal is to fill the park in 12 months (24 at most) and refinance at this time. Is this realistic? Can anyone speak from experience? Will a bank refinance this quickly?

John West · Answer

Thanks @Rachel H. COVID is a huge concern for all of us right now. Thankfully, I only have one tenant right now not paying rent. For me that’s only 5% non payment.

My understanding is that technically the moratorium in Maine has expired, but that doesn’t mean you can get a tenant out. The local courthouse still isn’t giving out court dates, so my hands are tied on that one. :-/

Henry Clark · Answer

@John West

Recommend you clean up park and tenants first, before financing concerns. Or trying to bring in more units.

Reach out to your mobile home broker in Maine.  They do “in park”,but tell them your looking for trailers to move in.  I would also ask them to visit and do an “audit/recommendation” list to improve your site.  They already know what sells (refi).

Talk with your trailer dealer.  Ask if possible to do personal guarantee on mobile home purchases subject to contractual ties to them using the park.  Check on insurance coverage for owner damage to the units. Also ask them for repo units.  Get financing from them, interest only or zero down financing.

Check on section 8 renters from your local veterans support group.  Tie electric and service fees into the rental price.  This way you get their full funding.  Do multiple renters per unit.  Try for $1,500 per unit.

My mom wanted a trailer park.  15 units.  My brother and I were digging water and sewer lines all summer.  Then we had to build/pour concrete parking.  Then we built wood porches.    I hate trailer parks.

Sameer Bhalesha · Answer

Who's lending to purchase? If you are buying with cash, then you do not have to wait any months to refinance after you bring the occupancy up. If you are taking a loan, then the loan itself will state which you can negotiate when you are allowed to pay that loan all at once. The loan may allow you to refinance early if you pay a fee.

A small mobile home park may be difficult to get a refinance loan or cash out an equity loan. Heavily depends on the location. Small mobile home parks in major metropolitan cities may still be attractive to small banks.

Brenden Mitchum · Answer

Hey @John West

@Sameer Bhalesha did a great job of explaining the situation from a loan perspective.

You will also want to take a real close look at demand, which it sounds like you may have already done. Filling vacant lots is no simple task and could take you longer than a year, depending on the number of vacant spots and the demand. You will also want to have pretty significant cash on hand to fill the lots. Whether you plan to fill with new or used homes, this can be a highly capital intensive endeavor.

Regardless of how long it takes to fill the park, expect some kind of "seasoning period" where the bank will want to see that the park is stabilized for x months. Best bet here is to start speaking with local banks now. The last thing you want is to close on the park and learn that no bank is going to finance it, ever, no matter how stable you get it.

Please, feel free to message me anytime if you have other questions or just want to chat!

Paul Moore · Answer

@John West, I agree that it could take some seasoning. But the smaller the bank, and the more your relationship with them, the better chance you should have to convince them to be flexible.

One great strategy to find homes is to drive through the other parks regularly and look for little for sale signs in the windows of the mobile homes. And through bidding for slightly used homes from FEMA.

John West · Answer

Thank you for your insight @Sameer Bhalesha and @Brenden Mitchum. We are financing through a small bank that does portfolio lending. We are currently working to increase our capital stack because I do realize it will take significant funds to bring homes in. Thankfully, we have a few strategies that I believe will get homes in pretty quickly and affordably.

Worst case scenario, if we can’t get a refinance, the plan would be to sell. Locally, parks are going for quite a bit and we should do very well either way.

John West · Answer

Great idea @David Marshall. Great minds think alike. I already have a couple appointments with lenders to talk about future refinancing.... but as you already pointed out, who knows what lending practices will look like 12-18 months from now. 🤷‍♂️

John West · Answer

@Henry Clark The end of your post made me laugh - thanks. We’ll see how I feel about parks a year from now. I’m sure we will have some pushback from enforcing park rules, but that’s expected. The park should clean up pretty quickly. Thankfully the underground lines are PVC and were replaced in the last 10 years. Additionally, the park roads were recently paved as well.

David Marshall · Answer

@John West It is great that you have multiple exit strategies. If I was in a situation like yours, then I would contact potential lenders for the refinance option and see what terms are being offered and how long the seasoning period is for each. The mortgage markets are changing dramatically during COVID so constant updates by potential refi lenders would be helpful.

Rachel H. · Answer

@John West You'll probably have to fill the park first before trying to get refinancing for it. Also, be aware of the situation with COVID-19. There are still plenty of eviction moratoriums going on across the country. Should you have any residents who cannot pay due to it, just be prepared to hold for a while and have the cash reserves to do it. Best of luck!

How long do i have to wait to refinance a mobile home park?

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