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Seller Financing a Mobile Home Park — Structure and Exit
By Jaken Finance Group · Principal, Jaken Finance Group
Seller financing mobile home park acquisitions — note terms, balloon structures, and combining seller carry with bridge for off-market MHC deals.
Seller financing on mobile home parks is the off-market standard — retiring operators prefer a carry note over a single-year cap-gains event. Combined with bridge first liens at 8.99%–13.5% interest-only, seller notes reduce equity requirements on sub-$3M parks agencies will not finance day one.
Hub: manufactured home community financing
Why sellers carry notes on MHP
| Seller motivation | Buyer benefit |
|---|---|
| Tax deferral — installment sale | Lower cash at close |
| Broader buyer pool | Win off-market without full cash |
| Legacy preference | Operator continuity messaging |
| Price premium | Pay slightly more for terms |
Mom-and-pop sellers who own parks free and clear often accept 5%–7% seller rates — below bridge first-lien pricing at 8.99%–13.5% — because IRC §453 installment sale treatment defers capital gains. Buyer CPAs should model interest deductibility and below-market rate implications alongside the combined capital stack.
Typical seller note terms
| Term | Range |
|---|---|
| Rate | 5%–8% |
| Buyer down payment | 10%–20% |
| Amortization | 20–30 years |
| Balloon | 5–7 years |
| Seller portion | 20%–40% of price |
Seller note must subordinate to bridge first lien — negotiate standstill (no acceleration during bridge) and balloon after projected refi date. Without signed subordination and intercreditor agreement, bridge lenders decline the combined stack.
Combined capital stack example
$1.2M park acquisition — 38 pads, 76% occupancy
| Piece | Amount | % |
|---|---|---|
| Bridge first lien | $780,000 | 65% |
| Seller second | $240,000 | 20% |
| Buyer equity | $180,000 | 15% |
Bridge at 8.99%–13.5% IO for 18 months → refi pays off bridge → seller note remains as below-market carry or paid from refi proceeds if LTV allows.
Playbook: bridge-to-agency MHP
Intercreditor terms bridge lenders require
| Term | Standard language |
|---|---|
| Standstill | Seller cannot accelerate during bridge term |
| Payment priority | Bridge first — seller receives scheduled payments only |
| Balloon alignment | Seller balloon 6 months after projected bank refi |
| Assignment | Seller note assignable with bridge consent |
| Default cure | Seller gets 30 days to cure after bridge default notice |
Without signed intercreditor, bridge lender declines subordinated seller stack. Negotiate these terms before LOI — not at the closing table.
Due diligence on seller paper
- Existing debt search — hidden bank lien triggers due-on-sale
- Seller note subordination agreement — signed at close
- Balloon vs refi timeline — model POH conversion delay
- Seller estate — note assignability if seller dies
- Title insurance — endorsements on subordinate position
Hidden seller mortgages are the most common deal-killer on combined stacks. Run UCC and title search on the park entity and seller individually before bridge application.
When seller financing alone works
- Stabilized 85%+ occupancy — bank first at 65% LTV + seller 25% + equity 10%
- Retiring operator with no mortgage — clean seller carry entire price (rare)
- Family transaction — related party terms with documented FMV appraisal
Turnaround parks still need bridge speed on first lien — seller cannot wait 90 days for bank approval while occupancy sits at 72%.
When seller carry replaces bridge entirely
Rare but viable on stabilized 88%+ occupancy parks with clean title:
| Structure | LTV | Rate | Best for |
|---|---|---|---|
| Bank 65% + seller 25% + equity 10% | 90% total | Bank variable + seller 6% | Retiring operator, no turnaround |
| Seller 80% + equity 20% | 80% | 6%–7% seller only | Seller owns free and clear |
Turnaround parks at under 80% occupancy still need bridge speed — seller cannot fund first lien at 14–30 day close on value-add execution risk.
Exit paths with seller note
| Exit | Seller note treatment |
|---|---|
| Agency/bank refi | Pay off bridge; retire or retain seller sub |
| DSCR permanent | 5.75%–10.5% on stabilized NOI — partial seller paydown if LTV allows |
| Sale to third party | Seller note paid from proceeds or assumed |
| Pad fill stabilization | Refi at higher NOI — full stack refinance |
Permanent DSCR exit fits sponsors who plan to hold non-owner-occupied parks without waiting for full agency qualification. Underwriting sizes on executed lot rent — not seller pro forma.
Worked seller-note amortization — $1.2M deal
Seller note: $240,000 at 6.5% · 25-year amort · 7-year balloon
| Year | Seller note balance (approx) | Bridge status |
|---|---|---|
| 0 | $240,000 | Bridge IO active at 10.75% |
| 1 | $233,500 | Stabilizing occupancy |
| 2 | $226,200 | Refi prep — bank LOI at month 10 |
| 3 | $218,000 | Bank refi closes — bridge paid |
| 7 | $208,000 balloon | Pay from refi or renew |
If bank refi at $896K on $1.28M value (70% LTV), proceeds pay $780K bridge + partial seller note — negotiate $50K–$100K seller paydown at refi in LOI.
Documenting seller carry at close
Closing attorney should record:
- First lien bridge or bank deed of trust
- Subordinated seller deed of trust with standstill
- Intercreditor agreement — seller cannot accelerate during bridge
- Balloon date after projected refi month
- UCC search on park — no hidden seller mortgage
Missing subordination kills combined stack — negotiate before LOI, not at table.
Risks on seller-financed MHP acquisitions
- Hidden seller mortgage — due-on-sale acceleration
- Balloon before stabilization — forced sale
- Seller note sale — third party buys note at discount
- Subordination refusal — kills bridge stack
- Over-leverage — total debt exceeds refi LTV at 65%–75% permanent cap
Bridge extension triggers with seller note in stack
| Trigger | Mitigation |
|---|---|
| Pad fill 6 months behind | Model 6-month extension at origination |
| Seller demands early balloon | Align balloon to refi month + 6 in LOI |
| Bank refi declined | Second bank LOI at month 10 |
| POH conversion delay | Holdback for haul-off in bridge budget |
Size bridge term for worst-case pad fill — seller note payments continue during extension; standstill prevents acceleration.
Negotiating seller carry in the LOI period
Off-market MHP deals close faster when seller financing terms are locked before inspection — not renegotiated at title.
| LOI term | Why it matters |
|---|---|
| Seller note rate and amortization | Sets combined debt service vs bridge IO |
| Subordination commitment | Seller signs intent before bridge application |
| Balloon date | Must align with projected bank refi month + cushion |
| Due-on-sale search | Seller discloses any existing liens in writing |
| POH inventory schedule | Affects stabilization timeline and refi DSCR |
Retiring operators often accept below-market seller rates (5%–7%) in exchange for a modest price premium — the spread between seller carry and bridge first lien at 8.99%–13.5% IO is the economic reason combined stacks work. Buyer CPA should model total cost of capital across both notes, not compare seller rate to bridge rate in isolation.
Rate stack comparison — seller + bridge vs bridge-only
| Structure | First lien | Second lien | Equity | Total leverage |
|---|---|---|---|---|
| Bridge-only | 65% at 10.5% IO | — | 35% | 65% |
| Bridge + seller | 65% at 10.5% IO | 20% at 6.5% | 15% | 85% |
| Bank + seller (stabilized) | 65% at 7.2% | 25% at 6% | 10% | 90% |
Combined stack reduces equity from 35% to 15% on the same acquisition — the tradeoff is legal complexity and seller relationship risk through pad-fill execution.
Permanent DSCR exit with seller note in place
Sponsors who hold rather than bank-refi may exit bridge into 5.75%–10.5% DSCR permanent debt while retaining a subordinated seller note. DSCR underwriting sizes on executed lot rent with investor taxes and insurance in NOI — the seller note payment remains in global debt service. Model whether in-place rent supports 1.0+ DSCR on first lien plus seller payment before you assume the seller note survives refi.
Use the DSCR calculator on trailing T-12 NOI after bridge stabilization — not seller pro forma at LOI.
Related
- MHC hub
- MHP loans under $3M
- Commercial real estate financing
- Land contract refinance — residential parallel
MHC hub · submit commercial scenario · all 50 states.
Seller carry reduces equity at close but requires clean subordination — document the stack before bridge funding.
Seller Financing a Mobile Home Park — Structure and Exit — next step (2026)
Qualified non-owner-occupied files run 8.99%–13.5% IO bridge and 5.75%–10.5% DSCR when exit and comps are documented at submission.
Submit scenario · Pre-qualify · (833) 264-7776.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. Closing times may be delayed due to appraiser property access . All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
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Jaken Finance Group, 2300 Barrington Road, Suite 400, Hoffman Estates, IL 60196