Creative Mobile Home Park Financing

One of the best aspects of mobile home park investing is the availability of creative financing. While traditional bank financing is available for this real estate niche, there are other options that allow first-time buyers to enter the industry without the traditional 20% down payment, perfect credit, or a lengthy resume of properties owned.

Mobile home park financing through seller carry

One of the most common – and desirable – methods of financing a mobile home park is with seller carry. Seller financing offers some extremely attractive benefits including 1) no loan committee or credit checks 2) non-recourse 3) no pre-payment penalties 4) low down payment (as low as 0% in some cases) 5) allows for assumption. There’s no better financing option in real estate than seller carry, and that is one of the key components that attracts many investors into mobile home parks. The reason that seller carry is so common in the mobile home park sector is that the sellers are normally moms and pops who own the parks free and clear, and have no restrictions on how they sell them.

Mobile home park financing through wraps

Another possibility is doing a wrap. In a case in which the seller already has an existing loan on the park with a bank, you can sometime “wrap” that mortgage by essentially taking over payments on the loan, and the seller carrying a second position on whatever is paid for the park over and above the underlying mortgage. You need to be extremely careful in this construction, however, as to not violate the terms of the existing loan. If that occurs, the bank may call the note due in full, and you could potentially lose your down-payment unless you can pay them off.

Mobile home park financing through Master Lease with Option

A new, exciting method of creatively financing a mobile home park purchase is through what is called a “Master Lease with Option”. Under this construction, you pay a set amount per month for complete operation of the park (the Master Lease) and also have the option to buy the park at any time at a set price, for a defined period (normally 3 to 5 years). Let’s look at an example of how this works. Assume there’s a mobile home park that currently generates $4,000 per month in net income, but could do substantially better by raising rents, cutting costs, and just basically cleaning it up and managing it right. So you lease it for $4,000 per month, with the option to buy it for $500,000. You then go in and turn it around so it is generating $7,000 per month, so you can put $3,000 per month into your pocket. And then you have the ability to buy it for $500,000, even though you now have the park worth $840,000. In addition to being able to flip the park, you might also finance it for zero down, as the bank’s appraiser will show a value of $840,000, and the bank will loan you 70% of the appraisal, which is $580,000 -- $80,000 more than what you’re buying the park for.

Conclusion

Creative financing for mobile home park acquisitions is a huge attraction to this industry sector – and rightfully so. There is no other real estate niche that offers such a variety of methods to finance getting into the business.

Frank Rolfe Mobile Home Park Investment Expert
Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with over 250 communities spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.