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MHOO-OSTA NEWSBRIEF Resident Park Purchases Explained
Let’s assume that the park owner has agreed to sell the park to the residents. Further assume some of the residents have formed a park purchase corporation. Let’s also estimate that there are 100 spaces in the park. The purchase price is four million dollars ($4,000,000). Assume the corporation could obtain a first mortgage on the park secured by the real estate of 80% of the price ($3,200,000). The residents would need $800,000 in equity to complete the purchase. The corporation is authorized to issue only 100 shares of stock, one for each space. Only 80 residents have agreed to participate in the purchase of the park which would mean that each of them would own 1/80 of the park at a cost of $10,000 per share. Some may be able to pay cash for their share, but most would not. These folks would need to borrow some or all of the $10,000 to be able to participate. Financing may be available using the value of their share as collateral to get the loan. Also, there may be 30 year low interest loans available for not-for-profit resident park purchase co-ops. Residents would not own the piece of ground their home is on. They would, however, be a stock holder in the corporation that did own the ground. This corporation would have a board of directors elected by the stock holders. The board would hire the expertise required to manage and maintain the park. Most lenders would require the park be managed by a professional management company. The cost for those who are relying on borrowing in order to participate in the park purchase should be no more than 120% of the rent they are currently paying. This cost would include the cost of monthly loan repayment and membership fees to the cooperative. Those residents who chose not to participate would remain tenants, renting their spaces from the corporation. For those who wish to purchase shares later, the corporation could sell them a share at a price determined by the board. When residents decide to sell their home and they are share holders, they can sell their share along with their home. It has been the case elsewhere around the country that the home and the share sell at premium prices, due to the stability and cost-effectiveness of park living. If a new person buys a home from someone who did not participate in the corporation the board, depending on the corporation by laws, may or may not be required to sell them a share. The price of the share would be determined by the board based on the prevailing prices for this kind of property. All in all, if we had the opportunity to participate in a park purchase in our park we would jump on it. You may recall we tried here at Nut Tree and we were out-maneuvered by an out-of-state investor. That is why we need the right of first refusal, but that’s another story. Again, you would not own the ground your home is sitting on! You would be a stock holder in the corporation that does own the ground your home is sitting on! I hope this makes things a little clearer… Fred Schwoch
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