Frank and others,
I have been reading lots of posts on this forum as I seriously considered becoming a mobile home park investor. Certainly the returns touted seemed almost too good to be true. My wife, however, has never been a supporter of this idea, having been a mobile home park tennant in the past. The John Oliver report was harsh, and I have to admit, for me he drove home all of the negative points about mobile home investing which had been of concern to us, as well as some we had not considered, as we have discussed the issue. Here are some of those bothersome issues:
Upgrading the park and passing along the cost (along with the cost of a nice profit bump) to those who live there: Those of you in the industry who tout the improvements they make to the parks they buy never bother to ask the residents if they want your improvements, so let’s all agree this is BS. Those improvements are not being made for the benefit of the residents. They are being made to make the park more attractive to prospective new tennants and to help justify gouging all of those who are trapped and therefore must contend with your higher rents, therefore, all the benefits of the upgrades accrue to the owner, and not to the tennants.
When the rates are raised on those who cannot afford the higher rents, and who you know cannot afford to move their home from the park, because they are held hostage by the cost of moving the home, you know what the result will be: some people will lose their life savings, in the form of equity in their homes, when you either evict them for non-payment of the rent, or they give up and move out before you evict them. Then you get to seize their “abandoned” property and convert it to your asset. Never have I ever seen such a blatantly immoral set of practices condoned, and even recommended, by leaders of an industry. If ever there should be an illegal activity, this one tops my list.
Frankly, the activities I see being so casually discussed in this forum with not even the slightest hint of empathy for the poor you are knowingly screwing, disgust me.
If you all want to be able to hold your heads up while doing business in this industry, I have a few suggestions for the beginning of a code of conduct:
- Any rent increase must be announced a minimum of one year in advance of it being raised to the new level, with annual increases limited to twice the rate of CPI inflation. This would give tennants an opportunity to make other arrangements for where they live, or to prepare for the higher rents.
- Any mobile home that is abandoned through eviction or coercion to move, in the face of any rent increase, must be sold, with the proceeds, net of any mortgage payoff and/or reasonable cost of sale, being transferred back to the previous owner of the home.
- When a park changes ownership, all existing tennant rents are to be immediately subject to the first rule, with the first increase to become effective no sooner than one year after change of ownership. Vacant and newly created lots may be rented at any price the market will bear.
- Conversion of POHs to TOHs must include a complete and clear explanation of the implications of this change, delivered at least 7 days prior to the buyer’s signing the purchase agreement. Tennants cannot be expected to know in advance of such a deal that they will now be required to pay for all maintenance costs, their insurance will go up (from renter’s to homeowner’s.) They need to be informed as to what the actuarial value of the home they are now buying will be in 5 years via a third party appraisal, and what it is going to cost them in payments, however they may be disguised, to buy the home.
- Conversion from community to lot level utility metering, must be made revenue-neutral at the time implemented, with the lot rent adjusted so as to maintain the same total cost to the tennant, and that cost must remain fixed, other than adjustments for changes in the utility rates that may be implemented by the city during this period, for one year from the date of conversion, at which time rule one shall apply.
I am confident that your industry could actually become what so many of you now claim to be; champions of the poor, providing low cost housing for those who need it. To achieve that level of respectability, though, you must cast aside the pall that has settled over you all, whether deserved or not, that you are a bunch of money-grubbing, abusive, exploitative, opportunistic, slum landlords, who make outsized returns by taking advantage of the poor who failed to see you coming when they decided to rent a space in their MHP.
Be well…and do the right thing.
Me? I am out.