I’m a new member to this site and I’m learning a lot!
I appreciate all the great comments.
I’m curious about all the posts regarding POH vs TOH.
My question is regarding why it’s better to have a tenant owned home verses POH.
I have a park with lot rent of $250 for a TOH and rent of $550 for POH. My tenant turnover for POH is relatively low and my expenses are under control.
With 10 TOH generating around 2500 per month and and 10 POH generating 5500 per month, I’m struggling with why I would would want to convert from POH to TOH and cut my revenue significantly especially with low tenant turnover and minimal maintenance and repairs. At the end of the day I feel like my profitability will drop significantly with this transition.
I’m relatively new to this industry and I have a lot to learn. What am I missing? Thank you!
History in the industry has proven that POHs will require more maintenance and cost will generally result, at best, in a break even scenario on the home rental portion. This is due to a combination of quality of manufacturing and the tenant class you are dealing with. That along with depreciation on the homes makes owning a home as a rental a losing investment long term compared to renting only the land.
New investors rarely see long term and generally will only see the profits up front.
If you are interested in being a landlord renting buildings you should invest in conventional rental properties where expenses will generally be lower and appreciation is a upside compared to owning a depreciating asset class.
As a investor buying mobiles to rent you can make money however you do so by keeping maintenance costs to a bare minimum and must function without regard for the overall condition of the community. You can make money but your priority must be making a profit ahead of fully maintaining the home. This is best accomplished with the oldest homes that have depreciated to near zero and by targeting the lower C-/D class communities (usually).
There are exception as many I am sure will point out.
Bottom line is that POHs will be a drain on your bottom line long term. This is the reason that POHs must be seriously discounted when purchasing such a community.
We invest in MHC to avoid owning brick and mortar. POHs are contrary to that investment philosophy for a good reason.
Generally, POH’s require a lot of maintenance and any proceeds from the home rent will go towards fixing them. Like you, I’ve had pretty good luck with my homes being rented but I only have a couple. My renters are always late paying their rent though and I have to spend time chasing them for payment.
Eventually you’ll have to start fixing/maintaining your poh’s. And clean them so they can be remarketed once your tenants move. This headache alone is not worth the additional rent $$ to me to have poh’s.
You have a spread of $300 for the “home” rent. This is adequate, but barely. You are saved by your tenant turnover low and expenses under control. How do you keep that under control? Eventually all your tenants will cycle. Even if there’s great demand, how are you going to avoid the bad ones? A single bad event can take out all the profit from months and months of rentals. (Roof repair? leak damage? etc).
Not to mention taxes, insurance, aggro, need to respond to plugged toilets, non-working heaters, & other maintenance emergencies, etc.
It’s difficult to assign a value to pride of ownership. But I think everyone can agree that people who own their own home generally take better care than people that rent. This means less headaches for you to deal with so you can spend your time acquiring more parks.