I’m looking at a park offered by MHRE.
They state it’s a 2 Star Class, C MHP.
I’m familiar with A, B, C, D properties from Multifamily and SFR investing.
But with MHPs, does it have different meanings?
And are the terms “2 Star” and “Class C” the same meaning?
For me, with Multifamily, Class C would be a working class area with a rent to purchase price ratio above 1%. Probably something decent but maybe some areas you might not want to walk around alone at night.
(Class D is a warzone. Definitely want to be careful at night. Class B is solid, working class blue collar neighborhood. Class A - best neighborhoods)
What should I be looking out for if I buy a Class C or 2 Star MHP?
(If anyone has insights on the other Class / Star Levels, I’d love to hear that too)
If this has already been discussed, let me know and I’ll try digging around the forums more. But my initial search didn’t turn up much. Thanks!
From the article: (written in 2012)
“1 for poor, 2 for mediocre, 3 for average to good, 4 for better and 5 for best.”
"Unfortunately, unlike the hotel business, which takes it’s star system seriously, and has many independent judges who allocate them and promote the highest winners, the manufactured home community star system has long been a joke, and about as accurate as a world atlas printed before WWII. "
“Every owner is free to pick their own number, and it’s about two times the real number.”
"The communities that are struggling the most right now, in my opinion, are the four and five stars. These are the ones that have pools and clubhouses and big lots. They have everything except a winning business model. Most of these properties have lot rents so large that they are no longer affordable housing. When a customer is paying you as much in lot rent as a decent apartment costs, then you are definitely in uncharted territory as far as affordable housing goes. In addition, many of these same properties have rules on how old a home can be. As a result, there are very few “paid for” homes. When you add the home mortgage and lot rent together, and get a number above $1,000 per month, then the customer has many, many housing options available to them. This leads to reduced demand and, often, customers walking off and leaving their homes. I have met many four and five star owners who churn 25% of their tenants per year. That is a terrible statistic. Often they resort to buying these homes to keep them in the community. Maybe I’m old fashioned, but when you have to pay your customers to live there, you’ve got a big problem. On top of that, they are constantly involved in some type of large capital expense project to maintain all of their amenities and perks.
The properties that some would call one-star, or even no-star, often have stable tenant bases and are virtually full with affordable housing clientele. They produce consistent income with little capital expenditure. They’re not pretty, but they are highly profitable."