My partner and I have been evaluating the MHP space for the better part of the past six months and have found this site extremely helpful. Our question is what’s going to happen to MHPs over the next 10 years, specifically as it relates to filling vacancies over time.
For example, you own a park that has 10% POHs, but every year some percentage of your tenants leave for natural reasons. When these natural vacancies happen, we can cross our fingers and hope that a new owner brings in a home and pays lot rent, but that doesn’t seem likely based upon my research. It seems like the norm is to buy a rehabbed unit and put it in your park.
So, I buy a rehabbed unit and put it in the park. I can try to sell it, likely at a loss, to get the lot rent, or I can rent the unit and the lot and see my POH inventory increase. After 10 years, I’m going to be 50% POH rentals, but theoretically have cash flow benefits during the interim. I haven’t taken the MHU course yet (taking it in December) and I know that Frank and Dave don’t like POHs, but I’ve spoken with a few +/- 15,000 unit owners and they all feel relatively comfortable with the POH rental business.
- What does that do to my exit value? Does my cap rate get affected or is the market now more accepting of this rental unit income stream?
- Who is buying new mobile homes and what kinds of parks do they live in? How viable is this segment of the market to fill vacancies.
- Where do you guys find info on the demographics of new home buyers?
Any thoughts around these issues broadly would be very much appreciated.