I’m in the process of buying a small (16 unit park). It’s 100% occupied by long term tenants who all own their own MHs. THE MHs are all well maintained, but a few of them are really old, dating back to the 70’s. Is this something I should be concerned about?
The older homes have some great attributes: 1) they are paid for (which means that a bank won’t repo them and the customer has only lot rent to pay, so they can handle a rent raise better and have a better ability to pay) 2) they probably can’t be moved ever, since they may lack a HUD seal and are probably not road worthy, so your occupancy is risk-free. The negatives are: 1) they don’t look as good to appraisers or future buyers because they’re old and not newer and 2) if the customer dies or runs off, you will probably have greater difficulty selling or renting the home yourself (based on the floor plan and home size). As far as banking goes, smart banks look at all homes the same and really focus on “pride of ownership”, so if the home is in good repair and looks attractive, age is not that critical [in fact, some banks see older homes as better for the reasons shown above]. It would be great if you had a mix of old and new homes, so that every aesthetic concern is addressed – that’s our favorite situation. When you have a good mix, it says “this park can attract new customers any time it wants to”.
Bottom line, having a few 1970’s homes would not bother me at all.
My park is a mix of 70s and 80s homes all well maintained. The key from my perspective is whether the exteriors have been updated. All in my community have had modern peaked roofs added and most have been updated with newer windows and vinyl siding. Many of the 70s models have had 100% renovations done interior and exterior to bring them up to present standards and appearance.
What is most important to my investment is that they are as up to date on the exterior as possible. This means no domed roofs and updated exteriors including a attractive street view.
From my perspective the age of the home is irrelevant as long as they have been modernized on the exterior.
From a risk standpoint, older, particularly pre HUD (76) homes, cause a disproportionate amount of catastrophically high liability losses. The leading causes of issues are faulty electrical wiring causing fires, gas leaks causing explosions or fires or poisoning people, and people falling through old floors and being injured. These are all manageable issues as long as maintenance isn’t unreasonable deferred. Furthermore, insurance companies charge higher rates, and make fewer insuring offers, on homes with older rental homes in them.
I think different community owners have different goals, so you are going to get different answers.
Frank who has a very strong background has already expressed his.
As a minority opinion, I would venture that the newer the homes, the more valuable the community - at least to me. That said, I don’t think that Frank or George Allen would agree with me. I know George doesn’t, because we have argued this exact point for years. I suspect Frank doesn’t because of his comment here and the different vision he has for a community he bought that I tried to buy 3 separate times that is in my own back yard.
Kurt has an important point regarding the insurability of the homes. Because we lend on homes as well as sell and site them, I want homes that can be insured for full replacement value (new) because I want the security of not only knowing that lot rent will continue uninterrupted, but the payments on the home will as well. In the event of a disaster, the homeowner knowing they are going to get a brand new home goes a long way to assure timely payments to both the community and the lender.
I also think it is much easier to sell people on living in a community where homes are larger and newer, and selling them on the lifestyle normally reaps a bigger profit on sale and a more stable resident - in my opinion.
Lastly, I want to know the lot size is large enough to at least accommodate a 16’ wide if a home has to be replaced. Older homes often mean smaller lots.
All that said, a community I developed in Florida in the mid 1970s still has all but one of the original homes we sold and the community is still thriving (under different ownership). The homes are all 24x60s with Florida rooms and ground set, so that could make some difference.
Having older homes can be a plus. They will most likely never get moved until they need demo’ed. My favorite are late 80’s and early 90’s with tip-out. They are a pain to move. I bought one one time that was in decent shape. The owner wanted it moved so no one wanted to buy it because of the tip out. I ended up getting the home for free and I paid her $150 to leave the appliances. It was in nice shape also. It cost $4,500 to move and set it, but i bet that home will never be moved. Plus it has the SQ FTage of a 16 wide.
Also another thing I like to do to ensure that home are less likely to be moved is add sheds, decks and car ports. The better the attraction is for that home staying where its at the better. Plus no one wants to move sheds, decks and car ports. Also the seller will want a higher price because it includes these items, which make it less attractive to buyers wanting to move the home. Also these items look nice and attract nice tenants. I put a 8x10 deck on every home I move into my parks now. It cost 1k, but nice steps are already going to cost 300-400$ so its worth and extra $600 to me.