12-09-13 - mobile home financing1Quick Intro:  My name is Aaron Kinney and alongside my dad we invest in mobile home with land properties in South Carolina.  To date we have completed 15 buy-and-hold deals.  In our market we have been to able to purchase and renovate these properties for an average of $20,000.

Funding Our Mobile Home Deals

Let’s talk about how we have funded these mobile home investing deals.

We have used very little of our own cash.  (I bought the first deal with $15,000 of my own money and invested another $10,000 in our business to earn money at a higher interest rate than leaving it sitting in savings.  My dad hasn’t used any of his own money.)

We assumed a loan on one deal to cover about half of the purchase and were able to negotiate seller financing for about half of another purchase.

We haven’t been successful in obtaining any bank loans.

Financing Options For Mobile Homes

Personal Lines of Credit and Personal Loans

We have used these to fund the rest of our deals.  In case you don’t know, a personal line of credit is an unsecured credit line that can be tapped whenever the borrower needs it.  These really come in handy as you are only paying interest on the amount you are actually using.  The personal loans are a little less desirable as you begin paying on the full amount of the loan as soon as you receive the money.

These loans and lines can be found at most banks in your area, both the large and small banks.  The approval process takes about a day or two and the period to access your money is typically within a week after approval.  This is great for moving quickly on your next deal.

In our case my dad has fairly high income (W-2 income) and excellent credit so he has had a relatively easy time obtaining these lines and loans.  It’s been harder for me.  I’m a recent college graduate so my credit is still relatively new but good and my W-2 income is much lower.  I’ve gotten a couple, but hopefully this will improve as time goes on.  We have seen typical ranges of $10,000 to $50,000 and 6-10% interest rates, again depending on your income and credit.

Home Equity Lines Of Credit

I’m also including home equity lines of credit as well in this section which can be a great source of capital, especially due to the much lower interest rates.

Working With Banks & End Buyers

Ideally we would like to acquire and rehab a property using these lines of credit and then place a mortgage on each property to replenish the lines to be able to repeat this cycle.  The problem is that we have not found a bank who has an appetite for our particular properties.

I have called about 40 banks in our area, both large and small, to see if they would make loans to investors on these mobile home and land properties.  All have said no.  Some will make loans to owner occupants for mobile home and land properties (government-insured loans) but are not willing to take the risk with investors.

I had heard that 21st mortgage would make these loans but our application was denied when we tried in June 2013.

We do have a conditional acceptance from a local credit union who is looking over the last portion of our documents to place a mortgage on one of our properties.  The credit union may just be the way to go with this asset class.

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