Quick question regarding expenses on homes under 'lease with an option to purchase, rent to own, or rent credit agreements.
I understand that park owned homes will generally break even, or lose money (assuming a high enough home rent) mostly due to turnover costs and repairs and maintenance, but when I am underwriting parks that have some POH which I will need to sell via any of the methods above, how should I go about underwriting expenses for these units? Can units under a ‘lease with an option to purchase’, rent credit, or rent to own be profitable prior to become a TOH?
The lease in the Bootcamp Reference Library for a Rent Credit Agreement is set up such that any repairs under $100 are the tenants responsibility. I understand I will still be responsible for taxes, insurance, and repairs above $100, so are homes which are in process of being converted actually more profitable than POH? Assuming a high enough home rent, are POH unprofitable only due to the turnover and maintenance costs? And what, if anything, makes lease with an option to purchase, rent credit, or rent to own, more profitable, besides the eventual tenant ownership and not having any of the aforementioned expenses?
Would I be correct to assume if a tenant sticks with the agreement until they become an owner, that these homes can have slight profit margins after taxes, insurance, R&M, or would it be better to always assume I won’t make any money on these, similar to POH?