As with almost all things in life, there is a right way to do mobile home financing and a wrong way. For the sake of discussion, let’s assume that you’re interested in purchasing a mobile home park that actually makes money. To some extent, you will be hamstrung by the policies of the bank or lender but it helps to know the kind of deal you should be looking for.
Your mobile home financing loan needs to be in the form of long-term, fixed-rate money. The longer the better. Look for 20 years at a minimum, 30 if you can get it, and 40 if your stars are aligned correctly. The reason is this; the goal is not to pay off the mortgage. The goal is to delay the due date of the loan as long as possible. Here’s a concept you might not have considered before. The longer the bank holds the note, the more the value of the principal deteriorates due to the effect of inflation.
Inflation is your friend.
It’s really a great idea to partner with a bank in this manner and they don’t even realize they’re holding the short end of the stick, what with their obsession over interest rates and fees. Look at the arrangement like this. You put up a small amount of the total purchase price, maybe 20%. The bank puts up the rest. Assuming your tenancy stays stable, rental income should cover the monthly mortgage payment, day-to-day business expenses and, hopefully, with a little left over to stick in your bank account.
But that’s not even the best part.
Do you realize what’s happening? The bank loans you money to buy an asset which someone else (tenants) pays off for you. Eventually, you own the asset outright, which has probably double or tripled in value over the life of the loan. This is mobile home financing done right.
The MHP Listings Team
Flickr / Jim Linwood