A New Year's Possibilities

by Eddie Hicks

Starting the new year brings possibilities for land lease community (LLCommunity) refinance and development opportunities.

With all the site built home foreclosures, many families have turned to apartments, resulting in a relatively high occupancy rate in many markets, while at the same time, in those same areas, there may be many vacant LLCommunity homesites.

This doesn't have to be for community owners who are actively working with local retailers. Working with retailers can be problematic in areas where the sales staffs who more commonly sell homes for installation on individual rural homesites in land-home configurations, are not equipped or trained in establishing the many advantages of living in a LLCommunity. And as a result, many community owners go about setting up their own internal home sales programs.

It's a big step for many, since there are many more issues for community owners to resolve: sources of additional working capital, sales training, advertising, sub-contractors for home installations, acquisition of used/repo homes, home financing sources, and liaison with home manufacturers. And, now with the dearth of chattel mortgage lenders with viable financing terms, providing self financing for home sales, under the interpretation of Dodd-Frank legislation, there are some serious questions about legally structuring the transactions.

Still, those who have successfully structured an in-community home sales program, will reap the rewards of increased occupancy, and the associated higher value of their community.

The recent discussions about GNMA's possible reduction in lenders capital and reserve requirements, may see several more lenders entering into the FHA Title I home financing business. Although these chattel mortgage loans are now available for HUD code homes sites on homesites in qualifying LLCommunities, the strict limitations on net worth and reserves have made it possible for only two lenders to participate. With more lenders entering the market, rates and terms will be more competitive, resulting in more new and used home sales.

For older community acquisitions including rehabilitation of the basic infrastructure, the little known FHA207m program may be used. Attend my free overview on this program as part of the community finance/refinance forum at the Louisville Show for more details.

Or for those who wish to turn contiguous areas within their communities into rental units as single family detached apartments using new HUD Code homes, the FHA221d4 program may be used.

Both these programs provide for 40 year, non-recourse, fixed, rate combination construction and permanent financing for qualifying properties.

Where the property is properly zoned, it may also be possible to use Modular Duplex units at double the density, lowering the monthly rental rate for tenants. This has been an especially attractive option for markets with high student housing where seniors are virtually "locked out" by high rental rates. When available, these types of projects appeal to seniors because of the lack of entry way stairs, no common walls, no units above, parking adjacent to the unit, and effective community management.

In addition to filling vacant homesites with used/repo homes or bringing in new homes, some community owners are facing conduit or commercial loans which were placed several years ago and are expiring, requiring re-financing. For qualifying projects, the 207m loan guarantee program which is funded by private lenders may be the only viable source available in today's tight commercial lending market. And, recent lender's changes may allow for "cash out" financing of equity at Final Endorsement (after the acquisition, rehab, and audit period) when the loan starts the 40 year amortization.

Make 2012 a year of possibilities. # #

(Editor's Note: Eddie Hicks is a member of MHSpeakerTrainer.org)

Edward "Eddie" Hicks Lic. Mortgage Broker, Lic. RE Broker with offices in the Tampa Bay area has been providing development, marketing and financing solutions and consulting services to developers and retailers since 1963.  He has previously been a community developer, HUD Code/Modular home manufacturer, and HUD Code/Modular retailer, was the mobile home committee chairman for the California Association of Realtors, and a VP of the California Mobile Home Dealers Association. He may be reached at (813) 661-5901.  His websites are: www.mobilehomepark.com, www.factorybuilthome.com, and www.FHA207m.com.