I think everyone should read this.
Finally, Frank lays it out clear and simple. The “narrative” of MHP needs reframing.
MHP is low-cost “affordable” housing that is not government subsidized - “if it could be cheaper, it would.”
Typically the landlord has to “fill” the empty spaces and sometimes has to pay to evict or rehabilitate homes. So there is a risk/reward ratio on filling every lot. It’s a potential liability if the home is ruined and the tenant abandons. The landlord is taking the risk that the tenant is a “good” tenant and never becomes a “bad tenant.”
If it’s less risky for the same reward as other investors are able to maintain, then it’s a “good investment.”
The landlord takes the risk of filling every vacant lot, and a new 16x76 HUD-code home can be had for about $40k-$50k. So if the landlord spends $40k or $50k someone can have a home (in exchange for rent). Thus the landlord can bear the cost of the new home if the value of the “lot rent” equals the cost of the home. The value of the lot rent depends on the actual performance of that lot, though. So there is risk and commensurate return, and it is the ratio that is important.
In other words, every new home brought in and “rented” turns into an annuity for the owner; the monthly payments are whatever is left over after expenses, and the term is indefinite. The principal cost of the annuity is the cost of putting up the capital to get the home to where it is ready to provide low-cost housing. A portion is better turned over to the resident after a certain period (“home profit”) and they own the home and the responsibility. Another portion continues indefinitely.
This interplay of large lump sums spent by the landlord (filling, evicting/demo/rehab) and the little monthly rent payments creates an implied discount rate. Would you trade $50k for a stream of payments? Depends on how much, and how long, and how much effort and aggravation and stress it takes. The fact that one can do this in MHP means the landlord is the “capitalist” happy to shell out the bucks to “create” “affordable” housing where it will be used most wisely. If the extra rented lot plus home profit is worth the “return” compared to the “risk.”
If the extra rented lot plus home profit is not worth the risk, the park will go “downhill.”