When PMC Financial works on a project, one of our responsibilities is to arrange the financing package so your mobile home park cooperative or resident group can purchase the park.
It is important for resident groups and mobile home co-ops to understand the various financing options available. The size of your park, the quality of your park real estate and the nature of your resident group will influence which lenders might be interested in working with you.
Most of the money to buy the park comes in the form of a first mortgage loan secured by the park real estate itself. Other financing may come in the form of grants, state or municipality low interest loans and other benevolent funds. The larger the first mortgage loan, the smaller the amount of grants, municipal loans, etc. that will be needed. This is good, since such additional funding is generally very difficult to arrange. In addition, resident groups need equity (that’s cash money) to buy their share. Often, financing for their share is needed when some residents don’t have enough cash.
FIRST MORTGAGE LOANS
FHA loans are made by a private lender, but are guaranteed by HUD/FHA under various multifamily housing programs. If your project qualifies, the key to this loan is negotiating enough time with the seller to obtain the FHA guarantee. FHA has backed away from doing these loans in 2020 – not enough staff, don’t understand them, etc. etc. etc.
Recently, the Quasi-Governmental Corporations (Fannie Mae and Freddie Mac) have expressed interest in making loans to resident groups in manufactured home parks. This source is worth a look.
Private lenders make conduit loans. They do not hold those loans but place the completed loans with investors. This market has been very (very) difficult lately (which means they are NOT presently available for resident park purchases), but the outlook is improving.
LOCAL BANK LOANS
Local community banks may be a source for some projects. However, bank loans tend to be difficult to get, have a smaller loan to value ratio (meaning you get less money and have to come up with more equity or more subordinated financing), and have a relatively short amortization period (meaning your monthly payment will be larger).
FEDERAL & MUNICIPAL FUNDING
Many resident groups and mobile home co-ops are hopeful that funding will be available from the Federal Government or from local (state, county or municipal) entities to accomplish their purchase. The truth is that such moneys are very limited, hard to get, and will typically not cover all the financing needs. In addition, all the sources of money have to coordinate together in order for the project to be successful. Sometimes this coordination fails and the project does not close. Finally, such loans come with strings that restrict the activities of borrowers. We encourage resident groups to look under every rock to find potential piles of funds. Just don’t count on these entities to completely fund your purchase.
Many residents in the park have some money available to purchase their share, but some residents may need additional financing to purchase their share. PMC has generally been able to find sources for such loans. Share loans must be available to residents with a wide range of income, and wide range of credit in order to have enough participation to complete the project. Sometimes it is possible to get share loan funds from Federal or municipal sources, but this source is very (very) difficult and comes with lots of requirements.
For additional information, contact Deane Sargent
PMC Financial Services