Hi all, just wanted to get a general consensus from the other owner’s on here on the age-old question of keeping park owned homes vs. selling, and if so, how do you value them. I know the merits of selling them off (no repairs and maintenance, etc) but the other side of the coin is that holding that trailer is still a potential asset of value where you can continue renting at a high rate vs. just the lot rent. But I wanted to hear what others think about this currently and how your experience led you to that conclusion?
Also, if you plan to sell your mobile home, how do you value it? I know Frank in his training valued the mobile homes by era, at least when I took it years ago:
1960-70s - 1k - 4k
1980s - 5k - 9k
1990s - 10k -15k
Early to mid 2000’s - 16k - 25k
Are these still real world numbers or have they shifted upward? I have someone interested in buying a trailer in my park, its a 1991 3/2 in fair condition. He’s saying 16k…should it be more? Appreciate your guidance!
Those numbers look about right from the perspective of where my parks are located at… but as in baseball you’re only worth what someone is willing to pay for you so every situation is probably different. We have a dozen or so POHs in a park we own in very very tight rental market. We take very good care of the homes and get high rents. Even with the maintenance our bottom line is 50% better than if they were TOHs- so we keep them. But again we ‘fell’ into a good situation with this park and not everything falls like that.
As for your trailer… it is situational but sounds like a fair enough offer but it depends on your park’s situation.
Appreciate the wisdom in this. I also struggle with the park vs. tenant-owned. I have a friend who swears by park-owned homes, similar to the reason you stated. Most of my trailers are 80-90’s homes, not in the greatest of condition but definitely fair. For me personally, while ideally I would like to maximize the purchase price, I’m good with a solid price if I can get a quality tenant/lonnie dealer in there.
It is important to remember that there is a pervasive bias on this forum against parks with POHs. Unfortunately as they have in mass scooped up a vast majority of all TOH parks many new investors are left working on deals with POHs. If managed correctly these parks can be very lucrative- much more so than TOH parks.
There’s no bias toward TOH — it’s simply what the numbers show. I recently acquired a small 23-space park where 19 homes were POH. The seller had been spending about $30,000 per year on average to repair and rehab older homes after tenant move-outs. Unlike apartments, these homes generally aren’t as durable and require more ongoing capital.
I purchased the park at a good basis and began converting the POHs to TOHs. So far, the results are tracking exactly as expected, my repair and maintenance costs are dropping quickly. At the time of purchase, the park’s NOI was about $55,000. With the conversions and rent increases, I expect NOI to exceed $100,000. In addition, I have three other parks that are all TOHs and I have no real issues. At the new park, its constant calls about the mini split not working, the stairs are wobbly, my sink isn’t flowing, etc.
That’s a nice NOI move. Does that NOI include profit from the sale of homes? Or is are you raising lot rents by $180 a month? How many do you expect to sell a year? How do you plan to sell them with notes, then sell the notes? Or rent to own?
There is no doubt that TOH parks are easier to run for as investments than certainly mixed parks with POHs involved. But it is naive to state that this forum is not replete with a bias against parks with POHs. It is how Frank, Dave and every other private equity investor wants it. Unfortunately POHs are a part of this industry and as PE groups large and small throughout the country gobble up TOH parks of all sizes- mixed parks available to invest in are becoming some of the only parks left to purchase.
It takes a lot of knowledge and experience in purchasing parks with POHs involved. You really have to have your ‘stuff’ together. And no doubt that many of these available parks are not wise investments either through rental market conditions or park/home conditions. It is understandable why PE investors who prefer to treat their parks as investments and not businesses.
We treat all our parks as businesses and our one park with POHs generates exponentially greater NOI than any of our other TOH or LTRV parks.
No profit from the sales. The NOI increase is ongoing with improvements each month. While I’m not at $100K NOI, I’m on track by middle of next year. The increase is primarily from the elimination of the repair and maintenance expense, 5% rent increase and new tenants with higher, market lot rents. No matter what anyone says, POH don’t make money especially if you have 1960s and 1970s homes.
Our experience in the Midwest has been that when we convert the POH to TOH the tenant does not take care of the home. They end up abandoning them when the roof is leaking, the floors are all soft, the HVAC no longer works, the plumbing has froze and busted, the list could go on and on. We used to do “rent to own” deals and have found this seems to be what happens 75% of the time. We say they take all the goodie. I know there are some who put a clause in the contract that allows you to go in and fix major issues and add it to the payment over time, but we find it just does not work. Our end game will be to sell when we are ready to retire and let the next owner decide what is best for their business model.
jsrm2022 You are absolutely right here. All of our homes would pass an inspection and we do take housing vouchers with an approved application; background etc. TOH can very much bring down the quality of a park. We actually will eventually evict a home if we can not get the owner to clean up and maintain their home. They end abandoning them and we have to pay for them to be removed and disposed of, but it is better than having the TOH pull down the quality of the park. That effects the quality of tenant you can draw.
Well said. Our portfolio is diverse and includes 1 MHC. In the MHC we rehabbed 1/3 ALL > 10yr olds homes, Briught in 1/3 used homes < 10yrs 1/6 new & 1/6 TOH. The 1/3 rehabbed had all been abandoned by rent to own tenants or we accepted them from owners. Kept a dozen ‘88 and newer, scrapped a dozen <88. Quality rehabs make them look new inside and they are done right. They, the used and new units rent very well. We have a waiting list of approved applicants. Rents ~ $1.45 sqft and <1% of costs. Include lawn/landscape care and pest control for ALL homes. The rest of the portfolio is sfr’s and duplexes. Maintenance per unit is nearly identical for them all. We use same materials, same teams in rehabs and maintenance for all. Toh & rent to own has lead to bottom feeders trapping folks in substandard housing.
If Codes were enforced how many MHC would shut down?