The greatest misconception about financing Mobile Home Parks is that the lender who finances the park will also finance the homes. The fact is that nothing could further from the truth since the value of the homes are of no value to the lending institutions. The reason is that the homes depreciate in value, people tend to trash them when they leave, and even if the tongues are cut off, they can always be welded back on and the home

can be towed off. Rent from the homes is not applied to the income of the park, but depending on the financials of the borrower and the park, in some instances the income from the homes may be considered as personal income.

The ideal scenario for an investor is to seek a park that has no park owned homes because there are no problems getting it financed and there is no maintenance to contend with for the homes. However, there is still hope for parks with park owned homes since there are ways to get the job done providing a little creativity is shown by the seller, buyer and mortgage broker. Some lenders will allow seller seconds, with restrictions, and some will allow for the seller to finance the homes on a separate deal from the real estate since there are lenders who will finance the homes only
- which offers an option. Many lenders have a 25% limit on park owned homes, and there are lenders who are more liberal and have no limit.

The following is a guideline for buyers to keep in mind when looking for a Mobile Home Park. Very basically the types of loans available can be divided in to 2 groups – Small Balance Loans and Conventional Loans.

Small Balance Loans – $250,000 to $2.5 million range, no limit on park owned homes, allow gravel streets and driveways, must be permanently attached, 85% max loan to value depending on credit scores and the debt service ratio which the required minimum is 1.2, 650 minimum mid score, minimal paper work, seller seconds negotiable, only partial environmental’s required, Interest rates are a little higher than with conventional loans but up front costs are much lower. These are the easiest loans to get and usually close in 30-45 days.

Conventional Loans – $500,000 to $10 million range, 20% max park owned homes, hard top streets and possible gravel driveways, must be permanently attached, 80% max loan to value, 1.2 debt service ratio, 650 minimum mid score, full documentation, seller seconds negotiable, partial to full environmentals required, and generally close in 4-6 weeks.

When buying any commercial property with a business, the type deal a borrower will get depends on the credit scores and financials plus the profitability of the park. Lets face it, the better the financials of the borrower and the park the better the deal. Another point worth mentioning is that owner occupied properties get about a half point interest rate break versus remote investor. I recommend getting as much park data as you can in writing plus digital pictures and lining up your finances before making an offer – I can assure you that you will save a lot of time, money, aggravation and will eliminate any surprises.

Buddy Dufau
Residential and Commercial Mortgage Company
Sevierville, Tn
865-428-6995
buddydufau1@msn.com

In case you need background information, I am a petroleum engineer with a successful 32 years experience in industrial engineered pump sales and have been doing commercial mortgages with my wife Kathy, who is an accountant and previous business broker, for the past 7 years.