I’ve been reading this forum for some time now. It is my impression that until recently, the concensus was that it was better to sell off the POH’s asap, due in no small part to the high maintenance costs associated with renting. However, if I understand what I have been reading lately, it seems there may be a trend back towards renting for a variety of reasons, including the SAFE Act & long foreclosure times. Is this accurate.
Also, I would be grateful if one of you more experienced park owners would be willing to share a mobile home rental agreement, that includes language that clearly establishes the maintenance that the tenant is to do vs that which the owner is to do. From what I am seeing, it appears the tenant would be responsible for all maintenance, but the larger items.
My personal opinion is that mobile homes are a major PITA to maintain. I sold my rental properties to invest in parks for the specific reason that I was tired of maintaining homes. I do own one home in my park, it came with the park purchase, but I am in the process of replacing it with a new home that will be sold.
The main reason for me to own a park is less work and less stress. Renting homes does not accomplish that goal.
In addition the individuals that rent mobile homes are generally on the lowest rung of the renter latter and therefor the highest risk/highest maintenance. Not worth the hastle in my opinion.
We are dealing with this very subject as we speak. Our Michigan park has had quite a few foreclosures in the past 3 years. Out of the 47 homes in our park, we now own 20. When any home got foreclosed, we were given a choice. Buy the home from the bank, or let it get moved out by the new buyer. We never wanted to be in the home rental business but the idea of all those houses leaving was even worse.
So, now we have a bunch of rentals, and tenants who can not get financed by any bank. What do we do?
We realize all those rentals will eventually eat us alive, and no potential buyer wants all those rentals and the hassles they will eventually cause.
We have kicked around the idea of getting SAFE Act certifications for originating and servicing mortgages so we can sell them on land contract. Anyone else in the same boat, and any other ideas?
Why can’t you just get a mortgage broker to do the loan for you and you to supply the capital. I have been a hard money lender for years and have never originated a trust deed myself – I always work with a loan broker.
There are companies that handle all the loan servicing and issuance for you (with your capital). They typically charge something in the area of $1,000 or so per loan. The advantage is that it keeps you out of potential liability issues associated with Dodd-Frank and the SAFE Act. Currently, there are very few enforcement groups in place monitoring small business operators with regard to these laws. The costs to do so are simply very high. However, that doesn’t mean that some enterprising lawyer won’t jump into the fray seeking civil fines / legal fees in the future.
At an industry event, I heard a community owners explain that he was writing Lease agreements with an option to buy in order to “not be in the rental business and not be making loans in violation of Dodd-Frank/ SAFE Act.” The idea involved a down payment, monthly payments, and then a balloon payment at the end of the transaction (usually $4k or more). The balloon payment could be an unsecured loan at that point and forgiven if the park owner opted for such. Anyway, that’s not much detail and I know there’s more to the story, but his solution was along that line.
From a risk / insurance standpoint, losses are fewer and premiums are lower with parks that don’t own rental houses.