So I just bought 7 homes in my park from an old lady who has owned them for years and she has been paying me space rent on them all since I’ve owned the property and I didn’t want to lose them from the park. Most of them are currently vacant but in decent shape. I got a good deal on the package. What’s my gameplan? Selling each outright obviously preferred but not likely, correct? What about lease to own and what would reasonable and likely terms be? Thanks for any insights.
Unless you want to become SAFE Act licensed (and who would at this point?), you have two options: either sell them for cash or rent them out. If the price is more than $2,000 cash (in most markets), then the cash sale is probably not going to happen. So that leaves you with renting the homes. First stop is what the laws are in your state on “minimum habitability”. This tells you how good a condition you need to bring the home up to in order to legally rent it. There may also be local ordinances. Don’t be a slumlord, deliver a great product, so you have high customer retention and stay clear of any city inspector problems. You can choose the rent level after careful research of your market, in which you become the world’s expert at what homes are renting for in all of your competitor’s parks (and your own, if people are renting homes there, too). Price is $5 less than market (if the market it $700 per month, then go $695) and run your ads in the largest metro newspaper, Craigslist and MHBay, and let the phone ring. See what happens. If priced properly, you should get one showing for every three calls, and one rental for every three showings (quick math: you should rent one home for every nine calls). You might also give customers a retention bonus in the form of a “rent credit” which is like greenstamps that they can save up and use as cash to buy the home (or not, if they don’t want to). You can also, based on state and local laws, minimize repair costs by setting a level under which the customer has to pay their own repairs (like $100 if you want). We also do not provide or warranty appliances – except in new homes and, even then, we don’t warranty them – as that eliminates 99% of repair calls.
The demand for affordable housing is huge so, unless you are in the middle of the Sahara Desert, you should be fine.
Awesome feedback, Frank. Thank you. So then am I understanding that lease to own is not possible? I thought LTO would be the best plan with the main benefit being, getting the ongoing repairs and maintenance off my plate and onto the buyer’s as well getting return on and return of my investment over the long haul (if they ever actually stayed long enough to own it.) I was going to propose $240 space rent and LTO payments of $150 to $350 per month (depenidng on unit) with 8% to 10% interest for however many years. So when you bring in new homes in a park that you purchase through Legacy for example, you are only renting them?
If you ever do that, keep the interest rate lower but raise the price of the home so you get a good return on your capital, so as not to get into usury trouble. Most buyers will be more interested in the monthly payment than they will the total price paid.