Manufactured Housing Land Lease Community1 . . .
Investment, Financing, Development, Marketing, Operations, Real Estate Brokerage & Consulting Services
Range of Services

For information on the upcoming FHA 207m M/H Community Private Financing Loan Guarantee Program in Louisville, KY Jan 12th, 2011 go to:

This website is intended for: investors, community owners & managers, lenders, prospective community buyers, and community developers of communities in which safe, functional, homesites and infrastructure are provided to residents who may own, lease, or rent their single family detached HUD code manufactured homes, Modular Homes2, or RV units3. 
  • Investment analysis services for buyers with the acquisition of existing communities
  • Market and economic feasibility for acquisition and development of new communities
  • Financing new and existing communities using FHA 207m Guaranteed Loans
  • Survey of existing housing options, demographics review, fill rate analysis
  • Business and marketing plans for new and existing communities
  • Establishing an ancillary in-community sales center
  • Manufacturer's homes, options, and policy evaluations
  • Selection of homes, accessories, installation and foundation systems
1Manufactured housing (HUD Code) sited in a land lease community aka "mobile home parks", or "trailer parks" are one of America's unique and best real estate investments, while providing safe, functional, affordable housing for a wide range of residents.  
Edward Hicks,
Lic. Mortgage Broker
Lic. R.E. Broker
(813) 661-5901
 
Mr. Hicks is also columnist "Ask Eddie" for the popular m/h trade publication Journal of Manufactured Housing  
Community Financing

Conventional Commercial Loans
Full recourse loans at 115% to 125% DSC of N.O.I. and 70% to 75% of appraised values for existing communities.  Difficult to find any financing for new development, or communities with more than 20% rental or LTO homes.

Seller financing
Commercial loans for 3 to 7 years, 5 years more typical with 25% to 30% down payments, and full recourse to buyer.  

Limits on underwriting
Underwriting usually based on income from homesite leases only (no income from rental or LTO homes).  RV homesite income allowed if less than 10% of overall revenue.  

Interest rates and amortization
Rates range from 190 bp to 250 bp over the 10 year T-Bill with 20 to 25 year amortization.   Some interest only loans from participating lenders, but with stiffer underwriting requirements.

Loan term
Commercial loans ranging from 5 to 10 years, with 7 years considered to be a good term.  Seller financing usually has shorter terms.  

FHA Guaranteed loans
Private lenders providing 40 year loans at low interest rates, at 90% of valuation for acquisition or refinance of existing communities with rehabilitation.  Also will make new development loans at 111% of DSC when at stablilized occupancy.  For more information go to: FHA Guaranteed Private Lender Financing Program



Residents Home Financing1:

Commercial chattel mortgages
Also called personal property loans or security agreements. These loans are for 15 to 20 years from conventianal chattel mortgage lenders with 15% to 20% down payments and interest rates ranging from 3.5% to 7.0% and higher over 30 year conventional home financing rates, with credit scores at 620 or higher.  

Seller financing
Shorter terms and higher interest rates than for conventional chattel mortgage or real property loans. Often the only option for many sellers.  

Lease to own
One of the most often used financing programs by community owners who are acquiring, refurbishing, and re-selling used and repossessed homes.  Minimal first months lease payment plus security deposit, and structured so the on-going combination of homesite lot rent and home lease payment is equal to or under that of area apartments.  Often can provide a 3/2 home for lease/rent combinations which are near that of area 2/2 apartments.  Lessee must provide maintenance on the home.

Rental Homes
Similar to the LTO program but with a lower first months expense, and the land lord often providing home maintenance.

FHA Title I home financing
Newly revised for chattel mortgages up to $69,678 (Indexed) for 20 years on leased homesites.  5% down payment for borrowers with credit scores over 500, with qualifying credit scores ranging from a low of 600 to 630 or more.  May be used to re-financing the sale of an existing home or for a new home from a qualified retailer.  Land-home financing for homesites not valued over $23,226 is also available.  

Lenders with credit lines for rental or LTO Homes
A limited number of commercial lenders provide financing to community owners in the form of a guaranteed line of credit which may be used to purchase/install/lease new or used/repo homes to their residents to assure a continuous income stream from homesite leases.  

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2 Modular Housing vs Manufactured Homes
Manufactured Homes are built to a pre-emptive Federal standard (Federal Safety and Construction Standards for Manufactured Homes) commonly known as the HUD Code, in effect since 1976.  In 1980 an act of Congress changed the name from mobile home to manufactured home.  HUD Code manufactured Homes can be personal property - in a mobile home park or real property when affixed to the land through a permanent foundation system.  In most juristidctions, they require specific zoning, and in many areas are not allowed in areas zoned for single family site built housing. 
Modular homes are also factory built but conform to most state and local building codes which generally allows them to be sited on permanent foundations in zones which allow for single family residences. 
HUD Code homes may be built to the modular standards, and features appearing in every way as if they were built to the  modular codes, but at a 10% to 15% lower price.

3 RV Units
Temporary factory built dwelling units with less than 400 sq.ft. (except FL which allows up to 500 sq.ft.), which may be travel trailers, motor homes, and park models.  They must be sited in areas which are zoned for their use, and in some areas their use may be limited to 6 month or less at a time.  In many resort areas, park model homes are being used as a  lower cost alternative to m/h communties with single section homes.  Additional structures such as covered, enclosed patios are often used to extend living areas.

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1 With the possible exception of 55+ age restricted communities for seniors, the success of operating communities depends heavily on resident's home financing options, LTO terms, or rental housing rates.  



M/H Communities as Investments

Why invest in m/h land lease communities?
A m/h land lease community can provide an income stream from homesite leases by residents who own, rent, or LTO their home.  The investment generally includes the land and infrastructure only, with the exception of those communities with rental and/or LTO homes.  For investment grade non-age restricted communities without rental and/or LTO homes, maintenance is minimal, and with good homesales management and homebuyer financing to keep occupancy at a maximum, the resulting income stream can be substantial  For seniors age 55+ communities and no rental or LTO homes, at high occupancy, management is minimal, and in resort and/or near major metropolitan markets, occupancies are high and stable. 

Where to find properties
Better quality properties are often listed with a RE Broker/Specialist, but also may be found on various websites or by direct solicitation.  Be aware that those being sold from websites may have been "picked" over and may not be of interest to more experienced buyers.

Investment Grade Properties
Those properties with sufficient income to provide for a full time, on-site manager are preferred by most investors. Communities with rental or LTO homes often will require full time on-site management.  Typical budgets for managers ranges from 7% to 10% of the gross revenue.  Owner/managers are often in smaller communities or those in resort areas: FL, AZ, Carolinas, etc.  

Property Valuation
Many investors use a simple "capitalization rate" calculation to determine the value of a community, to be followed by a professional appraisal. These "cap rate" values are determined by a simple formula which uses the Net Operating Income N.O.I. (or EBIDTA), divided by the Purchase Price.  So, for example if a community has an NOI of $80,000 a yaear, and the purchase price is $1,000,000 then the property is said to have a "cap rate" of 8.0%.  

Market "Cap Rates"
Each market establishes "cap rates" based on the size, condition, type, and quality of the community. The lower the "cap rate", the higher the relative value.  High quality, age 55+ age restricted, investment grade communities will sell at "cap rates" in the high 6% to 7.5% range. More moderate quality non-age restricted communities will sell at "cap rates" from 8.5% to 12%, and smaller/older communities or those with large numbers of rental or  LTO homes may sell at "cap rates" which are from 15% to 20% or higher. 

Some Area Legal Issues
In some markets, local and/or state laws may provide the residents of an existing community with "first rights of refusal" to purchase their community if offered for sale.  Some local and state juristications may require leases if requested by the residents, and may require a "prospectus" to be filled with the state.  Other areas may limit any change of land use of a property if there are rent paying residents occupants in occupancy.   Some may have instituted "rent controls" which may limit a landlords ability to increase rents or reduce services.  

Using a Buyer's Broker/Agent/Consultant
Some investors prefer to use the services of an experienced consultant in assisting them with the acquisition of m/h communities. These transactions may be structured to provide the buyer with expertise at no additional expense.

Existing Community Property Types:
  • Smaller, older non age restricted communities w/o on site manager
  • Larger, older non age restricted communities w/on site manager
  • Non age restricted, with substantial rental and/or LTO homes
  • Non age restricted, w/no rental or LTO homes
  • Non age restricted, with RV sites
  • Seniors Age 55+ age restricted
  • Elderly Age 65+ age restricted
  • Resort Communities with lakes and/or golf courses
  • Resort Communities in popular retirement areas
  • Communities with substantial vacancies (over 10%)
  • Communities with zoned, vacant land for development
  • M/H sub-division with unsold homesites
New Development Communities
  • Raw land zoned for m/h land lease or sub-division community development
  • Raw land un entitled for m/h land lease or sub-division community   development
  • Raw land for RV Community development
Home Types (in order of size and price range)
  • Park Model RV units
  • Single Section HUD Code Homes
  • InterlokTM HUD Code homes: http://www.interlokhomes.com/
  • Multi section (sectional)HUD Code homes
  • Modular Homes
  • Lease To Own (LTO) or Rental homes (may be single or multi)










Content copyright . Edward Hicks. All rights reserved.
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