Mobile Home Park Mastery: Episode 23

The Ultimate Program For Financing Mobile Homes

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As the final installment in our series on insider secrets in mobile homes, we’re going to interview Ryan Howerton of 21st Mortgage regarding the CASH program – the only way to fill vacant lots in your mobile home park with zero dollars out of pocket. It’s also a way to finance used homes in your park. Since you can create $20,000 to $60,000 in value by filling just one vacant lot in your community, the CASH program can be a huge engine to create profits. Learn about this exciting program for increasing occupancy and maximizing net income in this week’s Mobile Home Park Mastery’s podcast.

Episode 23: The Ultimate Program For Financing Mobile Homes Transcript

Frank Rolfe: This is Frank Rolfe with Mobile Home Park Mastery. We're here for another exciting segment in our four-part installment on the Insider Secrets of Mobile Homes. I have with me Ryan Howerton from 21st Mortgage to talk about a program in the industry we call the CASH Program.

Let me give you some background on this. It's the only program out there that effectively allows you to bring in a mobile home on a vacant lot. Through the good graces of 21st Mortgage, which is part of Clayton, which is part Berkshire Hathaway, they will effectively finance the cost, not only the home, but the move, and the set, all that Ryan will give you more details on.

What's terrific about the program is if you buy a mobile home park, and it's got a lot of vacant lots, as we all know, the only way to tap the value of the vacant lots is to put a customer on them who's paying rent. That requires a home. If you buy a park, and it's got 10 vacant lots in it, and you want to fill those lots, the capital required to fill those might be 30,000 or 40,000 times 10, $300,000 or $400,000. That's a lot of capital to come out with out-of-pocket.

Under this program, however, you're able to do the same thing to get customers in those lots, paying rent, tap it into the value of the lot, but without the money coming out of your pocket; instead, coming out of the CASH Program. Ryan, are you here?

Ryan Howerton: I'm here. Thank you, Frank.

Frank Rolfe: All right, Ryan. Well, tell people a little bit about the CASH Program. Again, it's unique to the industry. It's a very powerful program. Just tell them just, basically, essentials of how it works, and maybe some history of it.

Ryan Howerton: Okay. The CASH Program stands for, a lot of people what CASH means, it's community affordable spec home. When we started this program, it was all about providing the capital, just capitals to go out and purchase homes, like Frank just described. We'd let those homes be out there as spec homes because it does take a little while to sell it. Then, what we did was we backed it up with a finance program for the customers that was really a good fit, and made it affordable for the type of customer that's coming in. You see a wide range of customers, and we can do all the way down to lower credit scores, and all that, to higher credit scores all at affordable rates and terms.

Because of the way we structured the program, we keep the cornerstone of the program. Everything that we do is about affordability. When we looked at it, we make it easy for the operator bringing in. We make it cash flow-friendly to the operator. We turn around, and we do have a pricing restriction on the homes. We keep the price low. We want to keep homes sold at cost. Then, we offer the lower rates and terms because on the back side of it, in the event of any kind of repossession or repos, we have it where the operator agrees to purchase the home back. It's pre-negotiated they would buy the home.

It's a good win all the way around for everybody because it allows us to offer the lower rates, the better terms. The home stays in the community at the end of the failure. It lowers the limits of failures because everything is affordable. Lower priced home, not sold. We're talking about home sold near cost, not like retailers who will sell them 70 to 80%, the markups on those. It ends up being a very successful mix.

What we've done over the years is we've added features and benefits to the program. We've looked at the customers, the operators, and how they manage their business, and tried to help fulfill anything to make up for needs where we could do that. We've looked at marketing. We support marketing features on that. We've got banners. We want to get information from the customer because it's hard to find out about financing for manufactured homes. We want to make that easier for the customer.

We also give the operator support and effective dedicated MLOs. They can walk the customers through the deal because one thing about the model for manufactured home parks is you've got a property manager that's managing the community. They're sitting there, and they're expected to, one, there's enough just to manage the community, but you turn around, and have to be good at sales, have to know the mortgage process. It's very difficult. We give you a dedicated person to that. That's the big game changer when you really look at how we can help that customer through the deal.

It gives the customer a chance to be educated about how the process works. It gives them the comfort levels. They go through it, so they can understand it because it is complicated, and it is highly regulated. We did add some other features and benefits to the program. That's the used home financing. We started out just with new, to spec homes, and then we added used.

Then, also, there's going to be situations and times when the customer doesn't have the down payment. Even though we offer very affordable, low down payments, they just don't have the down payment necessary to come up with this. We offered rental programs to the operators, so the customer can come in, and do a lease with option to purchase. Then, once they saved up the down payment, they can then be converted to the homeowner, which is what they came in and originally wanted. It really fits the market very, very well. It's very, very affordable. It's all built into the transaction. I think that's a good summary for where we've been, Frank.

Frank Rolfe: Sure. Let me tell people why this is such an exciting program because here's how it works. If you have a vacant lot, these are your options. For free, you can maybe bring in an RV. RVs are not treated like mobile homes. What happens is when you bring in an RV, an RV can leave at any time. It's not really favored or even counted by some lenders as even being an income-producing object in the mobile home park.

Up from that a notch, you can try, and go out, and bring in a home from somebody else's mobile home park. That's called an organic move-in. There, you're already out about $5000 in transporting and set-up. Additionally, it can sometimes cause, obviously, a lot of bad will with your neighboring park owner who you pulled the home out of.

From there, without this program, if you wanted to fill a lot, you'd have to buy a used home. Let's say, you've gotten to buy a used home, a 1980s home even. You found it on the newspaper for $5000. It will cost you another $5000 to move it. Now, you're at $10,000. Then, it needs $5000 to rehab. You're at $15,000. As you can see, the capital piles up really rapidly when you're trying to fill this out of your own of pocket in the absence of this program. That's what makes it exciting.

Now, there are some other wrinkles to the program I also wanted to discuss with Ryan here. One is if you have a mobile home in your property that you brought in or you inherited, when you purchase the property, you also have the ability of tapping into 21st Mortgage to finance that. Ryan, tell people how that works.

Ryan Howerton: If you come in, and you already have some community on homes, that's where you can use the used home program to help those customers. If you have customers that are renting those homes, or you want to put those homes up for sale, we offer a program called the Used Program that will allow the customer to come in again with low down payments and affordable rates.

One of the things that is very difficult for the lender is giving affordable rates. Having this partnership allows us to come in and give reasonable rates. We've got rates from 675 all the way to 975 for these customers that are coming in and looking at these homes. Again, you keep hearing me say it, affordable, affordable, affordable to the customers because that's what we're focused on. That's what will help you get success long term. That's what we're looking for is long term, not short run success.

Frank Rolfe: Let me give you an idea just on the financial side on this. If you bring in a typical new home from the factory, a lot of people don't realize, it's probably another part of Mobile Home Insider Secrets is how affordable these homes are produced today. If you go to the Clayton Plant, for example, we buy a lot of homes out of Wakarusa Plant up in Elkhart, Indiana. They're producing about 11 floors a day of home. By 11 floors, obviously, a single wide is one floor, but a double wide is two floors. They're producing these homes at a price level where some of them are coming off the assembly line you can purchase in the $20,000 range, 24, 25, 28. You look at what they make for that price, and it's amazing.

If you go look at a car manufacturing plant, they build a car today in America that comes off the assembly line, and it's priced at $40,000 or $50,000. It's just a body and an engine. You can't live in it. You can drive it around to town. These are giant objects. Some of these are 76 feet long, 14 to 18 feet wide. Complicated things, cabinetry, windows, doors, carpet, flooring, the frame, the roof. Absolutely amazing that they can produce these at that price.

Really, what you're doing is you're tapping to two things on the new home side. You're tapping into these amazing objects that are big and roomy, and look great, and incredibly low prices. Then, you factor the second leg of that, which is the 21st Mortgage program on that on the CASH Program. It's an incredible win-win for everyone. You're allowing customers, who need affordable housing, to get something that looks terrific at a really low monthly rate. Typical rate on these, and Ryan can correct if I'm wrong, typically around 350 a month, I think, is what most of this run.

If you couple that with our lot rent, I think our US lot rent average is about 280 a month. You add those two together, and you're producing a fantastic object for under 700 a month, which comes with the yard, three bedrooms, two baths. That's very powerful. If you can, then, put that in a manner where the park owner can do that at no out-of-pocket cost, and you can see the power of the program. That's why in the sake of transparency, we're the largest users of this program, I think, in America. If we're not, we're close. We do it because we see this as a complete win. It's successful for the folks at 21st. They get to put loans on the books at attractive rates to them. As the park owner, I'm filling lots, which produces value because, now, I'm taking a vacant lot and making it occupied.

Then, on top of that, and maybe the biggest winner of all three wins is the consumer, who gets an object that looks just like new single-family construction or a class A apartment in their own yard at a price point that is far under stick built or apartment rent. Just bear in mind, the stick built median in the US is about 200,000. The average apartment rent in the US is running about 1300 a month. I'm coming in at about 50% of that with a product that is equally as good or better than those products. It's really amazing program for any park owner.

The reason we want to do have right it on here to tell you about the program is just it's so unique and so powerful. That's why when it came out … What? Five years ago I think originally.

Ryan Howerton: 2012.

Frank Rolfe: 2012, we jumped on board with both feet. The program has gone through different versions like Microsoft software. The latest version, of course, being the best. We knew from the beginning, it had a lot of promise because of it's win-win nature. Ryan, tell people who listen to this if they already have a mobile home park, how do they get the program going or how does that work exactly.

Ryan Howerton: When somebody has a mobile home park and they're interested in getting started on the program, one, we always talk about how many … It's extremely robust, and it's hard to condense into a very short conversation, but there's so many features that are built into the program that are beneficial. We have a team dedicated to helping you do that. It's lead by Candice Doolan. She has two people work with her, Paul McDonald and Heather Vires. You can call in to our number at 800-955-0021 at extension 2902. Any of them could answer the phone, and help you, and walk you through the questions that you have. We'll be glad to do that.

We have a website coming soon. We'll get that URL out too. I'm sure it would be a resource that Frank has available to you guys. That does some good explanation on the program as well. Bottom line is we want you to be really informed about the program, and the power of what it can do for your customers and your community. It's just really become so much more streamlined over the years. I mean, you look back at the success we've had on it from the first year. It's 40 times larger than it was from the first year. It was popular then. It's gone through several transformations as we've learned more, and as we better tried to serve our customers.

That's what we try to do. I mean, when you look at the cornerstone of us, it's affordability. Then, we look at service for that. I love how you point out about the new homes and the price points on these homes. We look at it. We constantly now analyze it. It's about every thousand dollars is about $10 in the customer's payment. We constantly look at that. Clayton does a great job of putting out a lot of models, and different variations, different spec levels. They've got homes as low as $18,000 to $20,000, and single-wides, all the way up to $45,000 to $50,000 that meets all the criteria that any community should have.

It's a great fit. We do consultations, basically, with the operators and help them. We try to share best practices, our knowledge. What Frank does here is amazing, and what he provides for his audience. We do the same kind of thing as far as saying, "Hey, here's what we've learned. Here's what's in that market. Here's what's available." We try to help guide you through it the whole way.

When you're in program, we're helping you. It doesn't just flow automatically. It just takes the driver in that. We help push that because we know that you've got a property that you're not necessarily there every day. In some cases, you have somebody that's right on site, but you have a manager run it. We try to help move that along, and try to help share best marketing practices, and campaigns that we do to help this fill up, and be a successful venture for everybody involved.

If you can reach out to the community's team on that, we'd be glad to help you, and glad to walk you through there, and answer all your questions. We can provide you also with some materials that would help you understand a little better too.

Frank Rolfe: All right. We want to hardly vouch for the folks at 21st, again, where I think we're the largest users of the program. We love the program. We also love the products that Clayton produces; although they do it through 21st now, finance home brands, other than Clayton. Clayton products is among the best in the industry. You can happily see that any show you want to go to or any home you see for sale at any community across America, it's got Clayton in it. It's just a terrific product and a terrific concept.

This completes the fourth part of our mini series here on Insider Secrets on Mobile Homes. It's Frank Rolfe with Mobile Home Park Mastery Podcast. I want to thank Ryan Howerton for being here from 21st. I would know he would love to get your call and talk to you further about the program if you have any interest in it, which you definitely should if you're either on a park now or buying one in the future. Again, this is Frank Rolfe. Thanks for being here. We'll talk to you again soon.