the bane of some community owners

by Eddie Hicks

In many areas, there are either an insufficient number of local retailers who are willing and interested in the placement of new/used homes in land lease communities, or they lack the skill levels to sell prospective buyers on the many advantages of land lease community living: typically they only sell homes for land-home placement, with long term financing. 

The margins on the home set the prices so high as to take many prospective home buyers out of the market, and others are lacking in obtaining home buyer financing at rates, terms, and credit scores which match their prospective buyer’s resources. 

Many community owners have been purchasing new/used homes, installing, and selling with institutional loans or more often self financing.  This can be an excellent option for those community owners with additional working capital, and credit lines for floor plan financing, for the acquisition and institutional or self financing of the home sales.  Most often it required an on-site sales staff, who can acquire new homes, or inspect, purchase, install, and repair older used homes.  Institutional financing at rates and terms, which meet the buyers credit and cash resources can be hard to find. 

Self financing is an option but may require compliance with various new Federal and State financing regulations, which may include the new Dodd-Frank legislation or compliance with other somewhat lengthy, expensive and time consuming finance licensing requirements.  Leasing or rent to own may be an option if done properly.   Before doing so, it is wise to consult a captive finance expert like Ken Rishel.

Or another option which is being considered by several community owners is to parse off a contiguous section of homesites, provide an easement to the nearest public roadway, or develop new homesites, install and rent new HUD code homes as 'apartments.'       

If the homesites are contiguous with municipal or approved private water and sewer, with direct access to public roadways and streets, or though an easement created through an existing community, this kind of “in community” development on entitled homesites may qualify for a loan guarantee for up to 83% of the hard costs and some other costs, using the FHA 221(d)4 loan guarantee program.  HUD code homes may be used for one home on one homesite, or for duplex or multi-family units will require modular construction. If the rents meet the areas low cost housing levels, it may be possible to get up to 90% of costs.

The resulting combination construction/permanent loans are fixed rate, 40 year amortization, and non-recourse.  In many market areas, where there is a high demand, these communities may be operated as age 55+ restricted communities, and if built within an existing community, through a pre approved cross-use agreement, may share previously constructed amenities. 

The market for HUD home/apt rentals in an age 55+ age restricted community, is unknown because it is a relatively new concept but seems to have some legs. 

In current market conditions, where many seniors are not selling their homes because of large drops in market value, and due to a shortage of buyers who qualify for financing, a new option is emerging: sell the home at a lower price, but retain a small part of the equity, and lease/rent a single family detached HUD code home in a m/h land lease community, under the terms of a landlord provided long term, “lifetime” lease guarantee program to assure minimal increases over the long term in rents. 

With the assurance there will be limited increases in rents over time, and the home which provides an adequate amount of living space, not hindered by common walls with neighbors, and a car parking space (sometimes covered), adjacent to their living quarters.  And, the residents don’t have to use the equity gleaned from their home sale to purchase the home, giving them a nice little “nest egg” for emergencies or one last trip around the world (I’m only kidding).  It’s an option which is available and now being considered by several developers who don’t want to risk filling homesites in a m/h land lease community in today’s uneasy market. # #

Edward 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