Issue link: https://read.dmtmag.com/i/562838
SEPTEMBER 2015 24 THE JOURNAL Ask Eddie BY ED HICKS DEVELOPMENT MARKETING My partners and I have an opportunity to purchase some pre-developed homesites in a small (5,000-6,000 pop), rural town where new housing is "stagnant", with 3/2 site built home resales in the $80K to 90Ks. Alex P., Hot Springs, AR What do you suggest? Some generalities for the use of factory built homes in a development which you should con- sider are: 1. M/H Land Lease Community (aka mo- bile home parks) Senior or non-age restricted. Seniors com- munities generally do better with residents if they have some kind of amenities, and aren't necessarily near schools. Non age restricted (family buyers) want to be in a "good" school district which should close by. Bussing is ok, as long as it's not perceived to be a long drive each way. Travel time to employment centers should be minimal, and take advantage of thru ways or freeways with a minimum of traffic control devices. Home sales must be either on-site by an dealership which is wholly or partly held by the same partners who own the development. The successful use of outside retailers has shown to be problematic in many cases, due in part to a lack of "common interest". As chattels aka personal property, double wide homes are usu- ally financed at 90% of the sales price (which may be limited by the lender's "advance" pro- gram), with an amortization of not more than 20 years, at rates from 6.5% (rare), to 9.0% and upwards to 11.0% in some markets. Development financing may use the FHA207m loan guarantee program to acquire an existing property, with will require "sub- stantial" improvements, or may be used for new community development if the market is strong and the costs moderate. This type of loan is privately funded and is non-recourse, up to 40 Years if the market is good to excellent, and as much as 90% of appraised value. It may be difficult to obtain approvals for sen- iors only communities, although there have been several cases in which the lender lender has obtained approvals. Homes must be HUD code (no RVs), no modulars, and no duplexes or other types of multi-unit structures. Multi- family may qualify for financing under the pro- visions of the FHA221(d)4 loan guarantee program. 2. M/H Sub-division, or cooperative This form of fee simple ownership of home- site is more popular with newer, younger fami- lies, but not necessarily with seniors. Most younger buyers would prefer to have 1/2 Acre of land or more. If the home is sited on a "per- manent foundation" conventional or FHA fi- nancing may be available (30 year, 97% of valuation, at a rate which is usually 0.5 to 1.5% higher than for site built. Home type of real estate transactions are required, including requirements for survey or platting, title insur- ance, stricter buyer credit requirements, and other restrictions. No FHA development loan guarantee fi- nancing programs as described above are available for sub-divisions, except as a cooper- ative mhp. In those cases, it may be able to use the 207m loan guarantee program. How- ever, outside major metropolitan centers, It has been difficult to explain cooperatives to prospective buyers. And in some markets, de- velopers have found that Home Owner Associ- ations for limited resident restrictions (HOAs) have been problematic in some markets, pre- dominantly Texas and Oklahoma. 3. SFD (single family detached) apartments using HUD code homes Apartments with HUD Code homes as Sin- gle Family Detached (SFD) units may be fi- nanced with the 221d4 program, which will provide 85% to 93% of it's completed appraised value. It may have restrictions for seniors. If duplexes for the units are desired, the factory built home units must be "modulars", and placed on permanent foundations. Loan guarantees are also up to 40 years, non-recourse, and assumable by a subsequent buyer for a small fee. The sale of the commu- nity and the payoff of the FHA loan will incur a "pre-payment" penalty which may be applica- ble for up to 10 years, on a reducing scale. I can't tell you off hand, which I would sug- gest, but would have to visit the property and do a market analysis. Most factory home manufacturers these days will sell directly to qualified retailers, but rarely will provide inventory financing. This requires a "line of credit" often referred to as "floor plan financing" with a lender who knows the busi- ness. There are usually some limitations on length of time to sell, inventory management, turnover of model center homes and the fi- nancing of sold homes from inventories, etc. That market has historically been single sec- tion homes, with double wides primarily on pri- vate larger homesites or parcels of land such as ranches, etc. Edward "Eddie" Hicks, lic. RE Broker, and Lic. Mortgage Broker has been a manufactured housing community developer and industry consultant, re- tailer and home manufacturer since 1963, and is currently a manufactured home resident and the sales manager for a "boutique" sized seniors Age 55+ m/h condominium homesite community in Central Florida: Hidden Harbor on Lake Harris. He may be reached at (813) 300-6150 and at easteddie@aol.com His websites are: www.mo- bilehomepark.com www.factorybuilthome.com T J