what are some successful measures you have taken to convert POH to TOH? In the park I am U/C with, the rents (home/lot) are low (which I will be increasing but not until several months into ownership) so the delta between owning and renting is maybe $50/month…
The POH need some deferred maintenance attention and tenant damage repairs. Does it make sense to offer to the tenants “I’ll do XY and Y if you choose to purchase the home”? (Working with 21st Mortgage on the consumer financing piece)
Do I offer a lot rent discount over a course of 6 months or something to entice people?
I’ve read several threads on infill… If you were to “do it all over again” for those that have successfully infilled a park (I will be looking at infilling 18 spaces over the next 3 years), what would you do the same vs different?
Don’t be in too big of a hurry to convert the homes over. This should happen organically. The important first step is to fix the issues with the homes, fix the tenant base, and fix the park. After you’ve done those things, then home selling can be successful. Look at the operators who do big infill projects as an example.
They fix up the park and fix the tenant base. Then they infill. When they infill, they typically rent the new homes the first time through because it makes the lease up quicker. Then as those homes turn over, they push the sales program heavier.
First thing I would do for home sales is make sure you can get people through the 21st mortgage process. They say a lot of things over the phone but sometimes the reality can be a little different. You’ll want to go a little slow here so you can actually see what they’re willing to do. I had a similar situation a few years ago with them and it turned out that we had to over-renovate homes slightly to get them to appraise. They said they did loans as low as $10k, but the reality was they wanted to write nothing lower than $20k, which meant the home had to appraise for $22-24k to accommodate the down payment.
For new homes, the new home gets the customer to the property. From there, you are likely down-selling into a used (w/financing) or a rental (if you have an overage of inventory available). This means you always want to keep 2-3 new homes in stock because it helps you sell the other inventory. If a new home ends up selling, great! Bring in 1 to replace that one. That’s how I would do inventory management between new and used based on your timeline. Buy used when they come up and just maintain 2-3 vacant new at all times. Let the market decide the right mix of new and used on those 18 lots.
I personally hate rent credit and lease option. For one thing, in house “financing” programs create confusion over who owns what. Is it their equity or is it the parks? Ask that question here and you’ll get a variety of answers. Should I be paying the taxes and insurance or should the tenant in a rent credit, lease option, rent to own, etc.? Answering that one wrong, or doing it wrong, can create confusion for a judge as to who owns what.
Possibly the most damning reason against rent to own or rent credit or whatever is that the income is now not financeable after you create the agreement. If you had left it as a rental, then a lender may consider it in a refinance or your buyer may be able to finance that income (meaning your buyer can pay a higher price if you sell the park). There are a plethora of national lenders who take POH rental income into consideration when sizing a loan. (Five Star, Vanderbilt, 1st Bank, etc.). None of those take RTO income into consideration though. They consider it largely worthless which doesn’t value very well in a sale.
What places are you finding used homes that are not coming out of nearby parks? what’s typical target pricing on single wides and average Reno cost to get them ready for sale? Thanks