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Hello Everyone,

I know there have been several threads on the topic of new homes (I have read them all I believe).

I really enjoyed reading this months newsletter and had no idea that there was this alternate and ludicrous lifestyle choice business model. I have read a few threads where I have come to understand that most of you are having to gear towards newer or new homes to fill lots due to the lack of repo inventory. Correct me if I am wrong.

As the park is geared towards low income, how are you overcoming the challenge of having to bring a new home with the cost of 30K and a low income renter/possible owner? For example I looked at a park and searched for homes near it that were for sale (used). Even the used homes were going for 30K.

Is it becoming that you are buying new or am I just not seasoned in finding the less than new homes for cheaper? How do you park owners evaluate the situation of having to bring in a brand new home and the prospect of finding tenants to actually qualify for that new home? I know you all have strayed from carrying paper because of the SAFE Act, but even in the instance of rent credits and new homes, do you find it harder to qualify and fill new homes?

I apologize if this post is somewhat jumbled as my mind has a million questions and thoughts while I am in this learning process.


That’s a great question, as we are all entering into new territory thanks to the SAFE Act and the decline of low-priced repo inventory. First of all, when you buy new homes from Legacy or another manufacturer, there needs to be a higher purpose than just filling lots. You need to use those new homes to increase the appearance and, therefore, the value of the property. Any appraiser or banker that pulls into a park and sees some new homes at the key visibility spots (entrance, corners, etc.) are going to accept a lower cap rate on the property and have have a higher first impression. That’s where the real money in the new homes is. Our customers are basically seeking shelter that’s not too offensive. In many parks, new homes are gilding the lilly – however, the net impact on the overall value is the key, and we are trying to impress appraisers and bankers and not tenants. We are not trying to make any money on the homes (new or used) so we can survive at small deltas between lot rent and home rent, and still come out OK.

We find that the new homes do attract a “better” quality of affordable housing customer – slightly more demanding people who would not live in a used home but like the fact that they are “new”. We don’t have a long enough history of these folks yet to see if they perform better than the standard affordable housing tenant. And, of course, the way the tenants behave is more based on geography than the age of the home.

I think it’s important to point out that, whether you are thinking new or repo homes to fill lots,the days of the “big fill” projects are over. We would never look at deals today that require bringing in a ton of homes (like buying a 30% occupied park and trying to fill it with 100 homes). Between the SAFE Act, new Dodd-Frank legislation, the rising cost of homes, and the rising lot rents that have narrowed the spread between lot rent and home rent, the writing is on the wall that the “big fill” era is ending. Who will get hurt with this evolution are parks with high levels of vacancy, as well as the American consumer, who will be losing their only shot at home ownership in those parks.

Thank you for the response Frank, that put it into much better prospective.

You say that you are not out to make money on the homes from potential owners, as they will bring in the money where it counts, in terms of with the bank etc. So if you have to bring in a new home and the prospects would like to be homeowners, based on the rent credit model, do you set the price of the home at what you bought it for, or do you lessen the price and eat the rest and focus on getting someone in the home?

Totally depends on the market. If I have a vacant lot at an entrance, I’m going to put a new home on it and consider it part of the entry design (just like the new sign). If I have to lose money on it, so be it. I’ll make it back on the overall value of the park. There’s no way we’re ever going to let a home sit vacant for long, so we’ll have to conform to the realities of the market.

Definitely makes sense Frank. Thanks again for the great response.

I love this forum!

Can anyone share experiences or know the feasibility with large parks with high vacancy of parceling off vacant lots thereby making the park smaller to increase the occupancy percentage? Would this tactic along with the need to fill fewer lots be acceptable to banks or conduit players who require stabile operations of 80% occupancy? Just an idea.

Thanks again for the great information.


Yes, I’ve done that. The strategy is to rent all vacant lots to the neighboring park resident – maybe give them the lot next door for $50 per month. That will knock out a ton of lots, which will then show on the rent roll as occupied double lots. You can also re-classify groups of lots for such amenities as playgrounds or overflow parking. In extreme cases, you can even have the occupancy permit amended to reflect a smaller amount of legal lots. All of these methods focus around improving occupancy without having to physically fill lots, which is capital intensive.

Whether or not this is acceptable to your bank will depend entirely on the bank. Since the property is underwritten based on occupied lots and rent, then the impact of how you count negative lots is completely superficial. the entire concept of “stabilization” is an arbitrary theory, as a park that has maintained a certain level of occupancy for years is certainly “stabilized”, regardless of what the occupancy level is.

However, since any good mobile home park investor thinks “exit strategy” first, you do not want to be a pioneer in occupancy concepts. 80% occupancy is considered the standard of the industry to obtain loans and buyers. So stick with that goal, and don’t get into situations where 80% is a million miles, and a million dollars in homes, away.