he new MHC owner and financing model
have completely changed. Potential
investors looking to break into this niche,
and the mortgage brokers representing
them, should adjust their mindset and
learn more about what lenders are looking for in MHC owners.
MHCs continue to face negative perceptions from the lender side
that they are simply old “trailer parks.” The contemporary MHC
could not be further from this outdated stereotype. More
commonly referred to as mobile-home parks, the properties
in MHCs are not actually mobile. The only mobile element
of any of the properties is that the homes are constructed in a
factory and transported to their final location. Some 95 percent
of mobile homes are never moved once installed.
The mobile-home park of yesteryear had owners who considered the parks net-leased properties that didn’t require
much from an operational standpoint. But these days, an
MHC owner serves as property manager and as the governing
body of property operations. They are responsible for the
delivery of basic utilities, like water and sewage, as well as
other services that enhance the quality of life and improve
the safety and well-being of the residents. These services can
include communitywide amenities, enforcement of rules and
regulations, and maintenance and implementation of capital-improvement projects.
Many new MHCs include communitywide amenities like
clubhouses, swimming pools, and tennis and basketball courts.
The majority of homes are move-in ready, three-bedroom units
with full kitchens, bathrooms and laundry facilities. The
subdivision setup of MHCs allows for private parking, individual
gardens, lawns and patios on small, easy-to-maintain lots.
Affordability comes into play considering that the quality of
new MHC units are equal to site-built homes, but the costs are
a fraction of that of site-built homes. This allows residents to
possibly save hundreds of dollars per month on their monthly
rent or mortgage payments, as well as utilities, when compared with living in an apartment or site-built home.
Buying an MHC
The affordability factor also makes owning an MHC an attractive opportunity. If you’re considering buying an MHC, be
sure you have thoughtful answers to the following questions:
■ Can you get three months of bank statements that prove
all of the rents are being collected and deposited?
■ Do you have any experience owning and managing
MHCs, or any other type of commercial real estate?
■ Do you have good credit, a personal financial statement,
proof of liquidity, a driver’s license, a resume and two years
of federal tax returns?
■ Do you have the 25 percent cash equity in the bank
required for the acquisition of this property?
Although some of these points seem like no-brainers, ensuring your client is prepared to provide all of this information
will help you, the broker, in the pursuit to secure financing.
Additionally, the lender’s first impression of the site is a
make-or-break factor, because many lenders won’t make a
loan on a property that does not seem safe or secure, or one
that lacks the potential to be well-maintained. If the site’s
first impression is positive and you can answer the lender’s
key questions, your project may be viable.
Many commercial lending institutions still frown on the MHC
market segment, but that narrow thinking opens the doors
for numerous other lenders and financing options. Commercial
banks may shy away from MHC lending for various reasons,
including unfamiliarity with MHCs or because they want to
focus on local properties and borrowers.
For out-of-state buyers, this challenge opens up the opportunity for national lenders, such as debt funds, that will make
loans and are agnostic as to where borrowers are based, or
where the properties are located — so long as there is good
cash flow and demand generators for the long-term viability
of the asset.
<< Affordable Housing continued from Page 89