RV and mobile home park investing has become increasingly popular among investors in recent years. The truth is that RV and mobile home park tenants have low turnover and pay their rent on time, making RV and mobile home park investing a potentially profitable investment with minimal overhead.
However, obtaining the financing needed to invest in RV and mobile home parks is something that new investors may struggle with. Below, I’ve outlined some of the financing options investors have when looking to fund their RV or mobile home park investment.
Why financing is important for investors
Financing is a crucial aspect of investing in any commercial or residential property, but it’s especially important in commercial real estate.
Commercial real estate investments are more expensive and have higher down payment requirements, making it difficult for some investors to access the capital they need.
Financing for RV and mobile home parks also offers the following benefits:
- Flexibility. Investors can choose from several financing options that best suit their needs. They can also take advantage of Green loans and special incentives for businesses that prioritize energy conservation.
- Access to capital. Most investors would not be able to buy commercial real estate properties without financing options. Without the various financing options available, investors may need to rely on their equity or savings, which limits their ability to invest in the RV and mobile home park industry.
- Return on investment (ROI). Financing your RV or mobile home park purchase helps investors generate a higher return on investment by allowing them to invest in additional properties or financing upgrades to increase the property's value.
Private money lending
Private money lending is one of the most popular ways investors fund their RV or mobile home park purchases.
This type of financing involves private individuals who provide investors with funding for their commercial real estate projects. These individuals are known as private money lenders, and the borrower is usually a real estate developer or investor.
Private money lending provides a wide range of benefits for investors. Private money lenders often provide funding faster than traditional lenders like banks. Also, there is often less bureaucracy among private money lenders and less corporate red tape to navigate.
Additionally, private money lending is an asset-based lending program where the lender lends based on the property's value as opposed to the borrower's creditworthiness like traditional financing options.
On the flip side, private money loans typically have higher interest rates than loans from banks and financial institutions. Lenders charge higher interest rates because they assume more risk from their investments and need to account for that in the repayment terms.
Hard money lending
Hard money loans and private money loans are similar in some ways, as both involve lending from private individuals instead of traditional financial institutions. However, there are some key differences between the two:
- The purpose of the loan. Hard money loans tend to be short-term, high-interest loans to buy and rehab commercial real estate properties, while private money loans are meant for longer-term investments in commercial properties and other income-producing real estate.
- Credit and income requirements. Hard money lenders are known to have less stringent credit and income requirements because these loans are more focused on the property value as collateral.
- Repayment terms. Hard money loans may have a balloon payment at the end of the loan term, while private money loans have longer repayment terms with regular monthly payments.
Hard money loans are ideal for investors who want to quickly acquire and improve their properties to sell or refinance with a traditional lender. Hard money lenders may also require a lower down payment, making it easier for RV and mobile home park investors to acquire properties.
The Small Business Administration (SBA) provides financial assistance to small businesses in the United States through various loan programs. SBA-backed loans are designed to help small businesses obtain the funding they may not otherwise qualify for with traditional lenders.
The SBA guarantee reduces the lender’s risk and makes it more likely the loan will be approved for small business owners. The guarantee also allows the SBA to set guidelines for the loan and control terms like the interest rate and repayment period.
However, it’s important to know that SBA loans may have a longer application and approval process that can delay the financing of your commercial real estate deal.
The bottom line
RV and mobile home park investors have plenty of financing options that make it easier than ever to qualify for a commercial real estate loan. The option you choose will depend on your financial standing and how fast you want to get the funding for your next project.
Are you looking to get your investing career started? Visit HardMoneyOffers.com to get the financing you need for your next commercial real estate purchase.