We have never had much enthusiasm for the handyman special – it is reasonable for us to assume that 1/2 of the tenants “stick” whether homeowners or renters, and in any case you’re going to get the home back a certain percentage of the time if you had it to begin with. I’m not a marketing expert but perhaps I need one. So, finding the “right” handyman is probably harder than finding a tenant so why not just look for “regular full fare” tenants and not offer the discount? It seems to me there’s no higher likelihood of getting a “handyman” that doesn’t rip you off than a tenant who doesn’t rip you off.
Once you accept the fact that you will always be dealing with POH in some form or another (unless perhaps you are at the high end of the rent and therefore value spectrum), you will have to invent some kind of business plan to handle the rehabilitation. I use the long form of the word here because really you will have to satisfy your jurisdiction (state/county/province whatever) definition of “habitability.” You’ll have to police the handyman or you’ll have to manage your staff (employees) or contractors (if you sub it out). There’s no easy answers and all three are difficult and the name of the game in this business. In our experience, employees are best, but …
Everyone would like that! The name of the game is how to get a home “into your park” (and someone living there paying rent) but then get “out” from under cost of obtaining the home without being liable (on average) for some loss.
Getting “out” means getting your (sunk) capital back, presumably with some time-value-of-money interest; but given the applicable interest rate, discount rate, whatever you call it, an infinite rental stream looks a lot like a single lump-sum payment. The point is that selling and renting look economically similar to the park owner if the customer “sticks around.” (Regulatory-wise, it’s very different of course).
But, selling and renting look really similar when it comes to the customer point of view also – how much down and how much per month? So. We price our homes a lot higher than $8,000 – more like $20,000 (and probably higher if we could). here’s an example –
Lot rent $300 per month, home rent $650 (includes lot rent). That’s $350 that could be rent or a mortgage payment (home rent premium over lot rent). If it’s a mortgage payment, over about 7 years at 12% interest rate that’s about $20,000. I think I did that math right. Figure a home “dressed up” is worth $20k retail, and an unknown home is worth wholesale about $5k-$15k depending on general condition ($10k average?) that’s about $10k sort of leeway to “sink” for rehab on average and hope that you get that $10k back (on average) through rent (time value of money / hassle / whatever included) or through “principal paydown” at some reasonable interest rate which captures the time value of the money / hassle / whatever included. The home depreciates and the mortgage amortizes and at some point the wholesale FMV exceeds the amount due on the note but it’s a really, really long time in the future. The longer the note, the longer the date of “crossover” (where the customer has equity from a wholesale (or from the lender’s) point of view – the customer has equity from the beginning from a retail point of view since they chose to live there).
Congress makes a big stink about subprime mortgages and subprime lending in general (payday or auto title lenders for example, used car salesmen, one step up is probably MHP sales on their radar?) but the truth is that in the trenches most people are not being taken advantage of by housing that “costs” $25k-50k in principal amount of value. An excellent home can be purchased new for this amount (although moving it and hooking it up and adding failure points like A/C machinery and decks and skirting adds a lot of trouble and cost – that’s why wholesale prices are different from retail prices.)
At $20,000 (average) used or $40,000 new I think there is a legitimate market that we are targeting. I had never considered a real estate agent but curious what MH Village and real estate agents pull in in terms of leads. (We use craigslist, newspaper & “pennysaver”). Also curious to others’ reactions.
Long post, I know, but just to summarize we’ve had bad luck with selling a $6,000 handyman special and moderate luck with selling a $20,000 ready-to-shine (used) home. In markets that can’t afford a $40,000 (new) home.
If your market can’t support a $20,000 home (~$600 rent), you’ll have to figure something out (and maybe we will too!). Better cost control over your rehab crew, and better tenant selection control – is how you will make more money (or avoid losing it, which amounts to the same thing, on average since I’m aiming for net $0 in the “homes” side of the business). Let the customer take the rest of of the “profit” so to speak and you will always be able to find a customer.