Have you read the article in the Colorado Sun from yesterday in which the author says the tenants are trying to purchase the 3 Mile mobile home park from its owner to prevent a corporate owner from buying it and “jacking up the rents?” The irony is that the tenants paid $120,000 per lot for a money-pit, and they have to raise rents on themselves by 18% to make ends meet and to avoid a $26,000 negative cash flow. See the original article at this link and see my retort at the second link. So often the corporate buyer is perceived as evil, yet now the tenants realize that lot rent increases are necessary to pay the bills.
Just sold one of our parks to the tenants. Even with subsidized below market financing (110% LTV to allow for an operating account) it computed out to a $250/month (~50%) rent bump on themselves. Worked just fine for me but the logic on their end was tough to follow for sure.
Out of curiosity…did the tenants approach you to purchase the park? How did that come about? Were they qualified to purchase the park? How did you get the financing to work? @westewart
What is don’t understand when a community sells to the tenants is how do they manage it? Rather than 1 owner, you have 100+ owners. So when a sewer line breaks and it only affects 10% of the communities, who makes the decision to spend $50,000 to fix it, and how do they pay for it? I cannot imagine trying to get 100 owners to come to consensus on that type of issue.
Thank goodness they are planning on $4000 emergency budget surplus after they raise the rents. What is fascinating is different tone of the article vs what we are normally subjected to as evil park owners. The non profit (while taking all the positive press) is truly setting these residents up for some serious crisis in the future. This is not going to end well and it will be the residents overpaying for their own rundown park that will end up in disaster. Bookmark it.
Right of first refusal law in the state — property was listed and had an offer from an investor. Tenants decided to match price and terms and the rest is history. Local bank financing for 70% I think and ROC USA (non profit) provided the rest for them. I’m really not sure the terms on the bank financing, I imagine ROC had to sign a guarantee of sorts on that. They also provide management training and oversight to the tenants.
Did ROC provide a pure grant of the 30% to the tenants or is it a second mortgage on the property to be satisified by the tenants. Wondering what protections are in place for the ROC investment as my gut is telling me this will end in failure and foreclosure. They wont have the financial resources to cover any major utility repair.
ROC is a second position mortgage providing the 30% and additional working capital. I think this was park #110 or so in the state (started in the 1980s I believe) using this model, so obviously it’s proven to work: never been a community go back to private ownership. But whether financially it’s better for the tenants in the long run, that’s a whole different question.
It’s odd the buyer was about to buy under these terms anyways with that much rent increase needed to break even sounds like a bad buy, tenants did them a favor.