@Ivan_ilych , as per your question:
- “Should I be renting homes, not selling them?”
As per your post:
“Well, roughly 10% of the homes in this park are POH. The thing is - the three bedroom, mid-80’s singlewides with siding and pitched roof POH’s are renting for $500 / month over the lot rent of $325. Plus the POH residents pay their own water/sewer.”
“With these margins I’m thinking maybe I should go ahead and do the rentals?”
My Husband and I own a Turn-around Mobile Home Park where 2 of our POHs are similar to your situation.
We have 2 POHs that we purchased and moved to the MHP that are:
- Years: 2000 & 2004
- 3 Bedroom
- 2 Bathroom
- Delta Between Lot Rent & MH Rent: $500
- Lot Rent: $250
- MH Rent: $750
- Tenants Pay: Water, Sewer, Electric & Gas
Currently, we rent both of these MHs.
Similar to you we also are in a strong market for Rentals. We probably could get much higher for the MH Rentals. However, we prefer to be below market, so that Tenants will think twice about moving out .
In fact just last night my Husband and I were calculating the Rent (Lot & MH) received on the 2000 Mobile Home. We purchased and moved this 2000 Mobile Home into our Turn-around MHP 2 years ago.
Here are our calculations:
- Purchase Price: $15,000
- Moving Costs: $3,000
- Renovations: $750
- Months Rented: 20 Months (Out Of 24 Months)
- Rent (Lot & MH): $750 Total
- Calculation: 20 Months x $750 = $15,000
Some will say that we should not include the Lot Rent. However, I disagree as there would be no Lot Rent if we had not purchased and moved the MH.
Thus, renting the MH for the past 2 years has allowed us to cover the Purchase Price of the MH.
Now there is the Moving Cost = $3,000 (which could be covered in the next 4 months).
In the above formula we did take into account Tenant turnover and initial renovations (4 months of no income).
You will notice that the formula did take into consideration the initial renovations, but did not take into consideration repairs during the rental period.
However, to be honest there have been no repairs needed, since we moved the MH and did the initial repairs prior to renting (and it is relatively a newer MH…2000 versus the 1966 POH that we renovated). Please understand that we strongly believe in repairing any issues. We are all about repairs. We even have a wonderful Contractor. We just have not had any repairs needed.
So @Ivan_ilych the answer to your question in our situation is:
- Yes. Renting our 2 newer POHs is working for us versus selling them.
As per my Husband he states that in the past Frank has stated that if the Delta (difference between Lot Rent & MH Rent) is $400 or more then renting becomes a profitable venture.
Now, renting is work. Renting a MH is much more work than Renting a Lot.
As a MHP Owner you just need to evaluate if that “work” is worth the extra money.
We are blessed with a wonderful Licensed Manufactured Home Repair Person. Thus, when issues arise, we are able to address and fix them quickly.
So for us…we Rent.
And for us…raising Lot Rent is not the answer (now Frank would probably disagree on this topic as he owns a MHP in roughly the same area).
- When the Delta between Lot Rent and MH Rent is high enough
- And you have a great Contractor
- And you have a strong Rental Area
- And you desire to do the “Extra” work
- And you or your Manager have the social skills and ability to show the POHs
Then Renting a POH can be a viable and profit earning venture.
We wish you the very best!