I have 16 lots to fill in the new park. 8 new homes are coming in August. There is high demand from buyers and renters. The plan is to fill 8 lots this year and 8 next year (or faster if things work out that way)
Like most others I do not want park owned homes and currently I have none but at what point do you make the sacrifice to rent a POH in favor of filling lots up faster? My experience has been that there are usually more renters than buyers. Just curious what the best practice is here. Thanks
To get the best and highest quality residents you need to find buyers otherwise you deminish the value of the community for yourself and the rest of the home owners. Hold out for a sale for as long as you possibly can.
Once you go down the path of renting it is very difficult to go back and the community suffers.
That was basically what I always thought too. Wasn’t sure if there was some mathematical way of looking at it where at a certain point you just cave and rent the home out. I was listening to a podcast and they were trying to get like 2 sales or rentals per week. I know the objective is to get money coming in so I thought there might be a cut off date like 3 months or 6 months etc. where at that point you take a renter instead of a buyer.
If I absolutely had to rent, I would only rent to people that I though had a decent likelihood of becoming buyers in the near term (like less than a year). Sometimes people come to a new area and are unfamiliar with it so aren’t ready to buy right off the bat. Those have a decent chance to be converted to buyers, for example.
And I would only do a rent credit, never a straight rental. I would remind them quarterly how much they’ve already saved up in rent credits towards a purchase. I’ve done this before and converted about half.
I bought my first park with infill upside. I drank the hell out of Frank’s kool-aide and thought it would be much easier than it actually is. (No disrespect to Frank)
The park came with 2 brand new homes, and one that was in like new condition. I sold the like-new and the new, but the last new one I’ve had for almost a year. I’ve concluded that new homes do not work well for my park’s tenant base and will stick to bringing in used homes. Almost all of my applicants are rejected based on income and DTI.
I get a tremendous amount of people who want to rent, but I’ve been holding out against renting a brand-new home. I can’t “re-new” the home if a renter trashes it… so I’m just playing the waiting game.
You might consider (as I am) reducing the price of the new homes. You might end up taking a loss on the sale, but the park valuation and the lot rent should make up for the difference over time. You can put a stake in the ground and say “I’m ok with a 2 year payback on the loss”. 24 months * lot rate profit and you’ll get a reduction amount. It sucks… but it might be better than large vacancies.
Have I practiced this at all? Absolutely not, at least not yet (although I’m getting closer). Food for thought though!
@Guyanthalas If it comes to that I’ll definitely reduce the prices. The 21st Mortgage CASH program (which I used heavily in the past at my first park) doesn’t really allow much markup and it all pretty much goes to them if it takes more than a few months to sell a home. Then add in the advertising, realtor commission, and the other stuff they don’t allow to be built in the price and you’re taking a loss on every home.
This time, I’m using my own line of credit to pay for these 8 new homes so I’m going to set the price to where I make a healthy profit like all the other retailers in my area. I didn’t know if there was a point where if the home doesn’t sell where the carrying costs outweigh the pains of renting. I’m sure some of the REITs and big operators have some sort of formula to calculate this. And I’m sure I can make my own if I really wanted to.