We own a 162 lots MHP with 141 POH and the rest are empty lots. We are located in Arkansas.
We came from the MF industry and so we operate the same of renting as a package both lot and home.
Most of our homes are 3/1 3/2 renovated singles wide from the 80s and we rent them at an average of $750/m
We are considering moving to a only lot rent model and sell the homes to the tenants because ongoing maintenance is killing our profitability.
We need your consultation or references on how to move from a park owned home model to tenant owned home. We don’t have any knowledge or expertise in this, nor in mortgages.
Wow. You have a major undertaking before you with dozens of variables to consider. First off you need a extensive meeting with your real estate attorney and accountant to potentially find a feasible way to unload those homes- RTO or bank financing (if even feasible for a majority of your tenants)
At $750 per month average rent you don’t have much room to entice your renters into RTO and usually a large majority of renters are not interested in purchasing. As renters move out you could try to sell the homes for a fire sale cash price and start the transition over but that will take years.
If you are hiring outside contractors for the maintenance you could also consider going in house with your maintenance creating a second company with a couple skilled employees to keep up on your maintenance at the park. We did that and we also pick up business at other local parks which helps defer the overall cost.
First, try to sell the homes for cash. I assume they are worth 10k to 15k at most. Most will not buy them, but you may get a few who do if the price is low enough. Second, develop some type of rent-to-own model. We use a lease option. Keep lot rent and home rent separate even though the unit is rented as a package. Each year, provide a notice that shows how much is left to buy on the lease option. Eventually the option price is low enough (1k to 2k) that more people will buy. To further entice, raise the lot rent and home rent each year and illustrate that if they buy, the home rent will no longer go up. Expect the process to take 5 to 10 years.
Another strategy is to raise the rent to something higher than what a mortgage would be. Then you can entice them to apply for a mortgage, get title now (encumbered), and perhaps save $100 per month. For that to work, your rent obviously has to be higher than the combined note payment and lot rent.
It is a struggle. Some people don’t want to own. Some are afraid of the word “mortgage.” Worst case is you keep raising rent until they leave, then find a buyer.
FYI, this form is Pre-Safe Act. Use it at your discretion.
Park Letter head.
Re: Buying the home you are renting. We Finance for you!!
Dear ______________________,
The management of the community has concluded to sell all the rental homes in the community to the current occupant. This includes the home you are now living in. We will be financing this purchase for you on a contract sales agreement. Your monthly total payment will stay the same. We will require a small down payment for new purchasers but as you are valued resident we will provide you with a credit voucher so that you will start with equity in the home but at no out of pocket cost to you.
Part of your payment each month will go to lower the balance that you owe on the home the other portion goes to your lot rent.
Just like a traditional home buyer you will have the opportunity to build equity each month as you make payments. If you decide to move in the future whether it is in two months or two years you can try to sell your home and we will also help you locate a buyer. We will then upon our approval of your new buyer, finance your then current balance for them. Any equity (the difference between what you owe and what you sell the home for) the buyer can pay directly pay to you,.
We are doing this so all of our residents will have a new sense of pride of ownership in their home and a greater community spirit. This of course is sometimes referred to “Rent To Own”.
So, again there is no disadvantage to you to be a home owner and potentially build equity.
Note:
We will only sell you and finance the current home you are now living.
We will warranty for the first 3 months the electrical, heating and or cooling system and hot water tank.
If you move out and you cannot find a buyer your contract will terminate and you will have no further obligation except for up to your move out date.
You must agree to this opportunity now (within one week). Remember your payment stays the same and we will be giving you a voucher for your down payment. If you decide not to take advantage of this offer then we will be putting a for sale sign up and begin finding someone that wants the opportunity of home equity building. Your lease will terminate once we have found a buyer for the home.
Please sign the box below indicating that you want us to prepare your contract and bring by that and your down payment credit voucher. We hope you are a excited to have this ownership opportunity as we are to offer it to you. ------------------------Please sign below and return this letter the Office ---------------------------------------------
Please SIGN me up to purchase my home! _______
Name (s)_________________________________________________________________________________
This letter came from a Management system I use. The gentleman from whom I bought the system created it, and I assume it’s effective. We avoid POHs. I have had less than 5, over 25 years.
