Around the state and throughout the country, residents of manufactured home parks are forming cooperatives to purchase their mobile home park.
Resident ownership of the land in their mobile home park enables groups of residents to stabilize rents, reduce expenses, gain control over their lives, and have the pride of true home ownership. But the task of purchasing a mobile home parkpark can appear enormous. Residents need guidelines to help them through the process.
In response to this need, PMC Financial Services has prepared this checklist for mobile home park homeowners groups. Call the Deane Sargent (541-708-5131) for additional information.
REMEMBER that the most important factor in successfully purchasing your park is the will and determination of you and your neighbors.
Only you and your neighbors can make the determination as to whether you want to purchase your park and accept the burdens and responsibilities of owning and managing your community. If you do, great! You should approach this checklist with that alternative in mind.
IF YOU HAVE QUESTIONS, PLEASE CALL ME!
In either case, you have to do much of what follows:
- EVALUATE YOUR SITUATION – Is the owner likely to sell? Do residents want to buy? Do you have a core group of committed homeowners willing to work on the project? What are your alternatives? Trying to purchase the park may be a better alternative than a lawsuit with the owner to correct park conditions. Determine the legal structure needed, often a cooperative or resident owned corporation.
- DEVELOP AN INITIAL GAME PLAN – Try to determine the most likely method you can use to purchase your park. Determine the most likely ownership structure (coop, fee simple, land trust, housing authority, local Not For Profit, state agency). Determine what financing resources are available locally (bank loans, FHA/HUD, CDBG, HOME funds, state agency, city/county/municipal funds, NFP). We can help you prepare an initial financial analysis.
- ORGANIZE YOUR HOMEOWNERS – You don’t need everyone when you start out. Many residents won’t decide to join until they can see a realistic plan, so start with a committed core group, form a steering committee, set up block leaders, and be sure to communicate with everyone. Try to dispel rumors as they arise. Remember that some residents will feel threatened by the process. Consider starting a conversion fund by collecting dues. Don’t spend it unless you have to.
- SURVEY YOUR PARK – Determine which residents want to participate and what they can contribute to the process, both in talent and financially.
- DETERMINE THE VALUE OF YOUR PARK – You need to start to think about the price that you will have to pay to purchase the park. Local real estate brokers or appraisers can tell you what other comparable parks in the area have sold for. Don’t expect to get a discount from market value. Keep purchase price information confidential, so that your interest doesn’t drive up the price.
- DETERMINE NEEDED REPAIRS – Discuss with the residents (and local engineers, the city engineer, etc.) the problems in the park that need correcting. Some loan programs require rehabilitation of the park and provide funds in the loan to accomplish this, so identify everything. We have a Park Status Questionnaire on our web site if you need it.
- ASSEMBLE THE CONVERSION TEAM – Purchasing your park is a major undertaking and you need professional assistance. A consultant can be helpful to analyze your project and organize the residents. An attorney who understands resident problems and real estate is important. (Your attorney may expect some form of retainer to cover his time and effort.) It is also helpful to have a source of financial advice. A source for organizational assistance, such as your state mobile home owners association, can provide additional guidance. PMC Financial Services provides organizational assistance and financial funding in connection with your park purchase.
- SEEK FINANCING ALTERNATIVES – Talk to anyone who might be able to provide financing. Local lenders, community development sources, state agencies, and the local community government can all be helpful. PMC Financial has loan programs for residents to finance both the park purchase and the purchase by each resident of their share.
- DETERMINE YOUR NEGOTIATION STRATEGY – This is a complex area, and is often dependent upon the information you have gathered by surveying the park residents and determining the park value and repairs needed. Your consultant, attorney and financial advisor will be important in this process.
- EVALUATE OVERALL TRANSACTION ALTERNATIVES AND DETERMINE IMPACT ON INDIVIDUAL HOMEOWNERS – This is a process of analyzing the park situation and participation level in light of the financing alternatives that are available. The goal is to determine how much you can afford to pay for the park, and what the financial impact will be on each participating resident. Remember that you do not need 100% resident participation; often 50% (or slightly more) of the group is all that is necessary. The GOALS of the PMC’s financing programs are:
- For a reasonably sized group of residents to be able to purchase their park,
- For a down payment equal to less than two months rent payment, and,
- Monthly payments for everything that are less than 20% higher then the current rents and expected to stay stable in the future.
- NEGOTIATE THE PURCHASE PRICE OF PARK – After you have determined a financial game plan and purchase strategy, the steering committee and your advisors can approach the owner. You will have to demonstrate to the owner that your group is capable of purchasing the park at a reasonable price within a reasonable time. Remember to keep the negotiations CONFIDENTIAL to avoid rumors and price increases. You should insure that the purchase contract allows you enough time to finalize your financing. Avoid putting down substantial amounts of non-refundable money.
- FINALIZE FINANCIAL ARRANGEMENTS – When the negotiations are reaching the stage where you believe you will be to purchase the park, you need to establish formal relations with the lender to enable them to begin the loan underwriting process. This process can take several months at best and sometimes will take longer if the park needs a lot of work. Most lenders will require some form of application fee and deposits for various reports required. Sometimes local or state sources can provide financial assistance for these items.
- CLOSE THE PURCHASE – This is a complex process and you will be relying upon your consultant, attorney, financial advisor, and lenders to guide you toward the successful closing. Communication between the parties is important. Often during this period you will be meeting with residents who have not yet joined the group to explain the transaction and encourage their participation.
- OPERATE THE PARK AND THE RESIDENT ORGANIZATION – After the closing and purchase, you will have to operate the park for the benefit of the shareholders in the purchasing organization, and the tenants who chose not to purchase. The tenants are important, since their rental payments are necessary for the successful operation of the park. Many groups set up committees for maintenance, operations, social functions, communication, etc. Often the lender will require professional management of the park, supervised by the Board of the cooperative.
The purchase of your park is a challenge. But often it is the best solution to the problems of rising rents and poor conditions in the park.
Don’t assume that you can’t do it!
There is help available from many sources. If you are successful, purchasing your mobile home park can be one of the best things you have ever done. The purchase can stabilize rents, improve the quality of the park, and give you control over your life.
If you would like additional information or would like to obtain copies of the questionnaires or surveys referred to above, please contact us.
Deane Sargent, PMC Financial Services