Financing Options for MHPs

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Finance companies may be another source – including credit cards to take a cash advance against the card.  Make sure your numbers show you can profit after considering the cards’ finance costs and monthly payments.  

Another source – the seller – may be an option, depending on the seller’s circumstances.  Below we will explore a few of these alternate situations.

Mortgage Assumption.  You may be able to assume the seller’s mortgage.  That means you will be responsible for the loan obligation and payments that they were under contract for.  

Mortgage Assumption and Seller Second Mortgage.  If the agreed sale price is more than the first mortgage balance, you assume the first mortgage. The seller gives you a second mortgage for the remaining amount owed (after any deposit you may have agreed to). You will have two payments, so be sure to work those into your numbers when calculating your cash flow. 

Cross collateralization.  If you have other valuable assets, you might use that as collateral for a lender or seller to hold a lien against your loan.  

Asset-based loans (a/k/a Hard Money Loans).  A hard money lender could be an option for a first lien.  They usually have higher interest rates, but the availability of money is sometimes more important than the cost – depending on your exit strategy. 

Lease Option.  In this case, you control the asset by leasing it from the owner with the option to buy it for a pre-determined price at some point during the lease term.

In addition to lenders and seller financing, you may be able to use private money partners.  This type of capital can be used to purchase rehabs and be structured with repayment arrangements that incorporate various exit strategies like rentals, resales, and home financing.  Do not pool investor funds from multiple people to do one deal to avoid complications and securities regulations.  Find investors that can fund multiple projects. Have an attorney spell out the terms in a contract in plain language.  Investors using self-directed IRAs to invest with are an excellent resource for private money.

An Overview of Mobile Home Parks/Manufactured Housing Communities

There are some benefits to the Mobile Home Park (MHP)/Manufactured Housing Community (MHC) asset class that make it very attractive to investors seeking multi-family properties.  With tenant-owned homes (TOH), an investor is responsible for the common areas and utility systems up to the point of connection to the homes but not the upkeep and maintenance of the homes themselves.  This is a significant benefit that is evident by the low expense ratios (operating expenses divided by the income) as compared to apartment communities where the roof, the plumbing, the electrical, and the interior maintenance are part of the operating expenses – not to mention insurance rates for the replacement cost of those structures.  

Another difference is with this type of property is the low turnover of tenants.  Since it is rather expensive for someone renting a lot to pick up a home and move it, there is generally little turnover where someone – even if it is a seller and a new buyer – is responsible for the lot rent at all times.

Over time, some park owners have inherited abandoned homes and turned them into rentals for more cash flow.  That may mean you will add to your expenses as well. You will have to decide if that will be part of your business model or not.  Many large investment companies opt to keep their parks as tenant-only homes and sell or remove the abandoned homes, depending on their condition and visual impact on the neighborhood.

In addition to collecting the lot rents, processing lease applications, and move-ins/move-outs, management will maintain the common areas.  Depending on the amenities and the location, this may consist of lawn care, snow plowing, street repairs, clubhouse/pool cleaning, water testing for well water systems, assuring adherence to park rules, etc.  Many of these things can be contracted out, and systems can help reduce their time to handle others.  

Finding mismanaged parks can create an opportunity to realize profits from bringing the park up to its optimal condition and stabilizing it to keep or flip.  In the case of a property that is already performing profitably, it can be purchased as a turnkey investment if it meets your investment criteria.

Your investment criteria should include a market location that has a healthy growth population, a diverse employment force (i.e., not just military, not just one primary employer), demand from people interested in the lifestyle or affordability at a price point that the property can profitably offer, a location that is within a reasonable commute distance to employers and convenient to shopping and restaurants.

Residents will be comparing the cost of the home plus lot rent to the cost of apartments in your market.  You should know what a 3-bedroom apartment rents for and how it compares to the cost of a home and lot payment.  People looking for affordability will often find the lower cost of a home and lot rent combined with the ability to be a homeowner with more privacy more attractive than apartment rental.  

To become familiar with MHPs/MHCs in your market, start looking at websites like and These websites list parks for sale.  They may be a good source for turnkey properties if they provide the return on investment you seek.  Suppose you are looking for properties with upside potential at attractive prices or possible seller financing. In that case, you should look for mom-and-pop-owned properties that are likely off-market deals.  That means networking and advertising will be required.

Financing for an MHP/MHC can come from various sources:

Owner Financing. Traditionally, it has been difficult for mom-and-pop sellers to sell to investors using bank financing because of the condition of their records (often cash transactions that are not always reflected in detailed financials requested by the lenders).  Also, lenders have requirements of the property condition that are not met (paved roads, proper lighting, TOH only parks, etc.).  For these reasons, sellers often realize that using some form of seller financing is the only way the property will be sold.  If the property is not owned free and clear, check with the owners to see if they have a loan that can be assumed as part of the financing arrangement.

Private Investors.  As mentioned in the previous section, private investors can be a great source of capital.  It is essential to lay out the expectations in an attorney-developed agreement.  

Commercial Lenders.  Some lenders will provide loans for this asset class when their underwriting guidelines are met.  Keep in mind this is a commercial property, and you will need to speak to a commercial lender or someone in the commercial loan department.  Be sure to understand the loan terms you are offered.  An adjustable-rate mortgage needs to be factored into your financial planning for the property.

There are more advanced options for financing parks.  It may be helpful to work with a commercial loan broker who can walk you through the options available to you.

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