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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   August 2012

Find Your Deals on Wheels

Mobile-home parks offer growing opportunities for commercial brokers

Find Your Deals on Wheels

Since the 2008 economic downturn,  the housing market has seen significant changes to its makeup. One of these changes has been the number of homeowners who traded in overpriced, upside-down, stick-built homes for a taste of a simpler life in a mobile home. This increased interest in a traditionally overlooked property segment has given rise to numerous mobile-home communities nationwide.

The owners of these mobile homes often are former homeowners who typically take what’s left from their less-than-stellar remaining equity and oftentimes pay cash for an amenity-filled home with no payments — plus a lot rent of typically less than $500 a month. 

"Because some communities take in a great deal of cash, it can be difficult to document the debt-service-coverage ratio."

Commercial mortgage brokers who are looking to diversify their revenue streams should take advantage of the opportunities available in this niche. Mobile-home parks offer lucrative revenue streams not only for those brokers who understand the quirks in their operation but who see beyond the often-misconstrued public opinion of the property type itself. 

Mobile-home communities often are preferred by many occupants over the only alternative, an apartment building. A mobile home provides them with independence, a driveway, a yard and most important, a sense of pride in ownership one never has in an apartment complex. That same pride of ownership is a win for the park owner who wants to maintain a certain level of quality for the property. Because tenants own their units, they likely will keep them in good condition and likewise the park they are renting space in.

Quality matters

Mobile-home parks vary significantly in quality. If you still think of them as they often are portrayed on television — with old shopping carts littering dirt roads and single-wide trailers decorated with satellite TV antennas — you may need to get a quick update.

Today’s quality mobile-home communities are often tree-lined, amenity- filled and rival some of the best homeowners-association properties out there. In some cases, the homes are professionally decorated and custom-designed. The communities are typically security-gated, professionally managed and nicely landscaped. Many offer clubhouses, gyms, pools and even concierge service at the seniors-only parks. Their price tags, therefore, are well above the $1.5 million minimum of most banks, and some larger communities can reach $10 million and higher. With the current state of the economy, occupancy rates can be pretty attractive for most lenders, as well.


Commercial mortgage brokers who consider financing these properties must focus on the cash-flow structure. Because some communities take in a great deal of cash, it can be difficult to document the debt-service-coverage ratio. Properties that exceed the $2 million mark typically have cash flow well documented, but smaller ones may prove to be a bit of a challenge. 

One of the first steps a commercial mortgage broker should consider is to get connected with the Realtors who specialize in this property type. By asking some simple questions, brokers can learn from savvy Realtors who can provide great insight into these properties. Based on how the answers add up, they can decide whether to proceed or not.

Good deals

There are a few factors that determine whether a deal is viable or not. Commercial mortgage brokers must keep the following points in mind.

  1. Single-wide or double-wide community: There can be a mixture of both or predominance of one or the other. Although banks typically prefer double-wide communities, there are alternate sources of financing for single-wide trailer parks as long as they have great cash flow.
  2. Loan size: Does your loan size exceed $1.5 million? There is less than a handful of small-balance lenders that will entertain the smaller parks. The majority of lenders have a minimum of $1 million to $2 million on mobile-home communities.
  3. Park-owned versus tenant-owned: This is a two-edged sword because both types of property make for great cash flow. Most of the time, however, a conventional-loan product won’t accommodate but a small percentage of park-owned units. Lenders perhaps want to ensure that the owner is focused on the “pad” revenue rather than maintaining aging homes that may require repair.
  4. Appearance: Photos make a great addition to the longevity of a package on the underwriter’s pile. Make sure the park is photographed in its best light, and ask yourself if you’d buy it yourself. If the answer is no, have the client send in better photos.
  5. Location: A bank may not be interested in a property that is located in the middle of nowhere — even though a credit union may be. Always check out the area’s population density and economy. The underwriter will need to know that the place is safe and attractive.

• • • 

With the past few years of economic difficulties hopefully in the rearview, it’s time for commercial mortgage brokers to forge ahead with optimism and explore new opportunities for increased revenue and viable closings. Mobile-home communities are the next big alternative-housing option and offer a new frontier for your business. 


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