Please give me your feedback folks.
One aspect of park ownership has troubled me, coming from a multifamily background where I actually take psychological comfort in pouring money into my buildings (because that way I know they are well maintained and are not turning into slums).
Yes we preside over an oligopoly with high switching costs and sharply limited supply. Yes our demand is extremely elastic. But that does not mean our customers’ incomes are extremely elastic.
There are only so many hours per week one can expect a customer to work. All structures have some rate of deterioration constantly - components age. 50 year old mobile homes which look and function like new have had a lot of loving care and $$ put in them over the years.
This brings me to my point - $500 lot rents. The theory we all go by is that lot rents in general are too low when adjusted for inflation. Thus the story goes they will naturally rise as the professional investor takeover continues in the industry.
We high five each other for turning building maintenance and cap-x reserves into an externality - an externality we push off onto a consumer we turn around and tell each other out of the other side of our mouths is so poor and so lacking in financial discipline that we must be sure to get lot rent on the 1st of each month or risk him drinking/smoking/gambling his rent away.
We cannot simultaneously believe that this consumer must be treated like a child (get the rent as soon as he is paid) and yet also believe that this person has the ability to save up to replace building components.
In this model, the only way a $500 per month lot rent (plus $200 more for water, electric, gas, phone, cable) remains “affordable” to a family of 4 where mom & dad earn a combined $20 per hour - is if the owners of the trailer simply let it deteriorate until they live in an unsightly hovel.
There is a huge difference to this demographic between $250 per month lot rent and $500. YES I believe we can get $500 - I’m rapidly catching up to market in the two below-market, off-market parks I bought last year. But I do the math on the income of many of my customers and it simply does not compute that when I get lot rents to the $400 and $500 level, these folks will maintain their homes. I do not think they will move - $500 sure beats $750, $900 or $1000 or more. But I look 10-15 years out and wonder what will become of the homes.
Your thoughts folks?