Is it better to have tenant owned homes or parked owned homes? Is it always a good idea to convert pohs to tohs given that the pohs are generating great cash flow currently?
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I used to think that it was better to have park owned homes. I’m one of the managers and asked the owner why he wants to sell so many homes. He said that the park is responsible to maintaining insurance on them, as well as paying the taxes and upkeep on the homes. Plus, almost every time someone moves out we have to either renovate or clean it up big time.
The homeowner would be responsible to all those things, and we’d still be getting the lot rent without anything coming out of it to pay for things. Out of 44 spaces (4 of which are rv spots), 16 are lot rents and 9 are rent to owns.
We did end up getting several of them back when we evicted people. One just left it and the other sold it back to us for a small amount because it was trashed.
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It is entirely up to what kind of business you want to run. POHs can generate more money, but will require more maintenance and, more importantly, time. You or your manager will need to spend time finding new tenants and showing off homes, as well as handling maintenance calls with a community of POHs. TOHs will bring in lot rent in a “set it and forget it” kind of way. Also, TOHs usually bring more pride to the exterior of the home e.g. yard, flowers, porch, etc.
Personally, I lean towards TOHs. TOHs are what make MHPs superior to apartment complexes.
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I prefer TOHs. Even if you have good cash flow from POH, they will eventually bite you. We are finding in one of our markets, that the issue with POH is that we cannot find plumbers and electricians willing to fix problems. Some of the tenants are so dirty that nobody wants to enter their homes, yet we are responsible for repair. The contractors are ok to do the outside work or to fix vacant homes, but they don’t want to step foot inside. The issue is that if it is a POH, you are obligated by law in many states to keep certain systems in working order.
In one instance back in January, we had a bad tenant keep breaking the thermostat. We sent 3 contractors to fix it in 3 days. On the last attempt, when the contractor was late, the tenant called the free legal aid and reported that we were withholding heat when it was 20 degrees outside. The lawyer threatened to file a court order for us to fix the home before nightfall, or put the tenant into a hotel until the thermostat was fixed. It is very stressful when you only have hours to comply and contractors don’t want to enter and tenants sabotage the repairs. This goes away completely for TOH.
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This is it.
Reminds me when a tenant had a cockroach issue so bad, that it took many bug spray people to find the one who would step inside. Yet the landlord is the one to blame…
Practically speaking, you lose money with park owned homes almost all the time, unless you are in a very affluent market where the clientele is upscale.
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Over the years, I’ve seen that many people say TOH is better. It DOES make the park easier to finance and easier to sell. BUT, depending on the space rents versus the home rents, POH can be MUCH better. Here’s a real life example: A rent controlled park is allowed by the local rent control law to rent spaces for $360/month rent, but a 3BR/2BA POH in that park rents for $1,795.
I have all POH in Texas. I would not have it any other way. I have total control over yards and all aspects of the property. If they break something it is their responsibility to fix it. If normal wear and tear then I will gladly do it. I have operated like this for 30 years and has been the best way for me and some of my tenants have been around for over 15 years.