Deals On Wheels

Deals on Wheels
Since the economic downturn of 2008, a record number of homeowners have traded in their overpriced, upside down, stick built homes for a taste of the simple life in a mobile home... yes, I said mobile home. Now wait a minute, don't turn the page just yet, this is just when it starts to get interesting and lucrative... 
That former homeowner takes what's left from their less than stellar (if any) remaining equity and oftentimes can pay cash for a state of the art, amenity filled home with no payments. Couple that with a lot rent of less than $500.00 a month, no grass to mow and you have one happy camper... well not really a 'camper' more often than not, a double wide with permanent brick skirting! Imagine a park filled with these lovely units, virtually maintenance free with a price tag of $1.5mm and up... now do I have your attention?

A number of years ago, I was talking to one of my wholesale AE's about diversifying our revenue streams since the multi-family market was maxing out. He mentioned a few programs that were available to the mobile home community market and images of Sanford and Son went through my mind. Well, I must have chuckled a bit because the next thing out of his mouth was, 'no seriously'. As he went on to explain how many he was closing and what 'cash cows' they really are, I was all ears.

Mobile home communities offer deceptively lucrative revenue streams, not only for those brokers who understand their quirks in operation but who see beyond the often misconstrued public opinion of the property type itself. Mobile home communities are often preferred by many of the occupants over the only alternative, an apartment building. A mobile home provides them with independence, a driveway, a yard and most importantly, a sense of pride of ownership one never has in an apartment complex. That same pride of ownership is a win-win for the park owner who wants to maintain a certain level of quality for his property. When tenants own their units, they usually keep them in good condition and likewise the park they are renting space in.

Now to be clear, I'm not talking about the mobile home parks you've seen on TV with old shopping carts littering the dirt roads lining the way for their fine array of 1952 and older single wide trailers decorated with only the finest 'coat hanger' satellite TV service antennas.

Far from it... today's' quality mobile home park communities are tree lined, amenity filled and rival some of the best HOA properties out there. The homes are professionally decorated and custom designed. The communities are security gated, professionally managed and beautifully landscaped. They offer clubhouses, gyms, pools, and even concierge service at the senior only parks. They tout price tags well above the 1.5mm minimum of most banks, some larger communities are even in the $10,000,000.00 and above range. Best of all, with the current state of the economy, most are at maximum occupancy with a waiting list which makes most lenders really sit up and take notice.

The key to financing these properties is the cash flow structure. Since some communities take in a great deal of cash, it can be difficult to document the DSCR. When you get above the $2mm mark, most properties show the cash flow and are well documented but when it is under that amount, it can become a bit of a challenge. I've found that getting connected with the realtors in your area that specialize in this property type is the foundation to success. I have one realtor in particular that I've worked with for so long that he practically prequalifies the property himself. If he gets a call to purchase one of his listed parks, he marches the client through a series of 4 or 5 basic questions, if the answers don't add up, he's done.

What makes for a good prospective transaction?

To start with, is the park a single or double wide community? There can be a mixture of both or predominance of one or the other. Banks prefer doublewides all day long but there are alternate sources for those parks that have great cash flow, but are covered up in single wide trailers.

Secondly, is your loan size over 1.5mm? There are less than a handful of small balance lenders who will entertain the smaller parks so it's best not to invest marketing dollars into the end of the market. The majority of lenders have a 1-2mm minimum on mobile home communities.

Park owned vs. tenant owned... This is a two edged sword because both types of property make for great cash flow but 99% of the time, a conventional product won't accommodate but a very small percentage of park owned units. They want the community owner focused on 'pad' revenue not maintaining an aging home that requires work.

Photos are very important to the longevity of a package on the underwriter's slush pile. Make sure the park is photographed in its best light. Would you buy it? That's what I always ask myself when I'm sending in photos of any property type. If the answer is no, have the client send in better photos.

Lastly, location, location, location! If the property is located in outer Slombovia, chances are the bank won't be interested but a credit union may be. Always check out the area population density and drivers prior to sending in the package. I want my underwriters to want their mother to move there... that's the quality they're looking for.

With the past four years in the rearview, it's time to forge ahead with optimism and explore new opportunities for increased revenue and viable closings. Mobile home communities are the next big alternative housing option and offer a new frontier for your business.

Anita Huedepoh 
lLiberty Funding 
615.417.4710

Anita Huedepohl
615.417.4710