I wish you had some good ideas for GAP funding, the partner we had lined up couldn't put his money where his mouth was, and I am still under contract. So now I'm shuffling around trying to find $350K gap funding by the end of February, got any ideas?
Originally posted by
@Jack Martin:
@Gene Nelson the type of lenders that will be appropriate will depend on the park itself and your qualifications as the buyer. Generally, outside of seller financing, the common types of debt available for MHPs are:
Local & Regional Banks or Credit Unions - You can find out which banks have an appetite for mobile home parks by asking the MH/RV brokers in your area, networking through other owners of parks in your area, or simply obtain list of the smaller banks in your area/region and call them to see if they have lent on parks in the past. If they have not, don't waste your time. Keep in mind a $200k loan takes the same amount of work as a $2MM loan, so you may come across some banks who like MHP's yet they may not show serious interest in really small loans.
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 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 commercial loan broker.
Agency (Freddie/Fannie) - If the park and the buyer qualify, this will likely 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 most experienced MHP broker.
Conduit (CMBS) - Conduit can be a little 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 MHPs may have significant 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 or locations that are more rural will be best suited for banks. 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 a track record.
Larger deals and locations in larger MSAs 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 may require you already own and operate a similar asset in the same market wherein you are buying the subject property, some may require a minimum number of spaces, some will have pavement requirements. 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
