We don’t do the triple-net lease thing but it’s an interesting idea and we may start thinking about it.
But I wanted to address the 30-40% expense ratio. We try to operate our parks at a 30% expense ratio (we’re on city utilities) but in the “homes” business we just try to break even. Our income and expenses are broken out by “park-related” and “home-related” and we evaluate parks to buy based on the assumption that the homes part of the operation will not make money.
As far as tenant turnover, we definitely have higher turnover with rental tenants. The pain of a repo is partially eased by the down-payment that we’ve collected up front, even if the home is left in poor condition. (So far we have always gotten the defaulting homeowner to sign a “voluntary rescission” contract which avoids the cost, delay, and uncertainty of foreclosure.)
Rental tenants sometimes leave the home pristine, but sometimes there is a significant amount of damage, which is frustrating. We feel we are always playing catch-up with the repairs. And we definitely see rental tenants move out far more frequently at the end of their initial lease than homeowners default on their mortgage. Every turnover is bad for us, but we have so far not found a great way to screen for “stickiness” on our rental tenants.
Because of that, we’re trying to move to all sales and zero rentals, but it will take a while. (Yes, we have all our proper licenses). We encourage our current tenants to purchase the homes they’re in, and when others move out, we try to sell the homes rather than rent them (but we do still rent if we can’t make the sale happen).
In the end, we don’t want to be in the “apartment business” but we find that we have to be for now, at least until we reduce our inventory.
And I’m going to post about this in another thread – unlike some of the posters here, we have a full-time staff of rehab / maintenance people and while it’s not ideal (expensive and a lot of management overhead), we find it works infinitely better than the alternative (contract rehab) which we have not ever had work out.