I am looking for some opinions, particularly from MHP owners with parks in the south east.
It seems MHP's has some serious competition from low SFR rental prices and a generally aging of HM's in parks making the entire proposition less enticing given the options available for those seeking housing. I look at many of the parks for sale and many times they are heavily loaded with POH's and/or they have many vacant lots.
I am wondering is this situation because of the dynamics of the rental market in the SE, due to owner mismanagement, a combination of the two?? Functional obsolescence of MHP's? We know new MH sales have been suffering for some time.
I am trying to decide if MHP's in the SE is still a stable investment over the next 20 years or is SFR a better, though lower cash on cash invesent path. I have owned properties at distances before, but like to keep properties within a weekend trip distance. I will be relocated to the Atlanta area for my mainstay occupation, but I am trying to get a feel for this aspect of the MHP investing arena.
Any feedback and thoughts are welcome and appreciated.
Hi Tony, I recommend you go to or buy the recorded version of the MHP boot camp from mobilehomeuniversity.com . These guys run 120+ parks and run the best training in parks. Your questions will all be answered.
I read between the lines that you don't really know what's going on demographically and how a park runs at it's highest profit. I can't squeeze a boot camp into one answer.
Parks that make the most money are very old homes. 70's and 80's. What you'd learn in boot camp is that parks that have newer homes actully have alot more vacancy even when it's 100% occupied owned... Because newer homes all have alot debt and folks just can't afford the debt service and high lot rent. A park owner is much better off with occupant owned homes that are debt free (old).
Parks have their main competition from near by apartments, never SFR. You're waaay off on this one. Renters will pick a park over apartments any day. Why? Well do you like to choose what style and when you listen to music or someone's party? No one really LIKEs low end apartments. For the same price they flock in droves to parks.
Park owned, vs occupied owned? Smart operators go occupant owned but it's a hold out and just don't want to change so there's alot of POH out there. Some owners are good operators and can manage the tenants with a heavy hand and the turn over and damage doesn';t happen in their POH park. So their expense ratio is less than the 50-60% in a standard evaluation formula. 30% to expenses in occupant owned and 50-60% expenses in a POH park. use these numbers for making the offer. Ignore their info sheet of expenses, it's always a lie and low.
I'm looking to buy parks. That's my answer to your general strategic question. I have 20 rentals / rent to owns and I know how to make great money in GA doing rent to own, yet I want parks.
Tony, I can't speak knowingly about the current and/or future market conditions in Georgia. However, in North Carolina MHPs are very good long-term hold assets provided the right market attributes - a growing population, stable employment and a restrictive land use code (high entry barrier for new MHPs). SFR housing doesn't compete for the same tenant we want because of higher rental rates. Parks with a large percentage of park owned homes (POH) can be converted to pad rental communities over time by several means. And the POH we typically encounter (in 25-50 pad parks) were mfd in the 1990s to early 2000s; occasionally we'll come across an older model.
I'm going to have to disagree with @Curt Smith in that I would not say that mobile homes "never" compete with SFHs. There are swaths of the country where they do. And I think the OP has a reasonable point in that chunks of the Southeast (save the "New South") suffer from low housing prices not to mention murky economic prospects.
In areas with very low single family home prices mobile homes face steep competition. When you can pick up a little 3/2 bungalow for 40-60 grand your mortgage will be lower than a rent-to-own mobile and that's a big negative for a park. Of course, in an area with very low SFH prices rent prices will also tend be lower which hurts as well even amongst those who lack credit to buy a SFH. The average person will take a SFH over a MH any day so when the prices are comparable a MH is going to lose big. Personally, I wouldn't buy a mobile home park (or a mobile home) in an area where SFH prices in decent working class areas weren't at least within striking distance of close to six figures.
The best place for a park to be is in a high cost of living area with high SFH prices, high rents, and limited affordable housing options.
Disagreement is good, even great. Thanks. You are definately right about higher priced areas which are up "north" where lot rent can be $400++ or home rent $800++ and park owners do very well. Folks up North tend to be much better payers and don't damage homes like they do in the South.
The only states where a search for $60k and under for SFR are probably SC, AL, MS. Not here in GA. Big price appreciation in 2 yrs. Very very few SFRs (that you actually would want) that cheap. This may be where you are slipping up. Also it doesn't mater if the home is $30k if no bank will lend to you because most of your income is SS disability or military retirement / disability you are forced to look at low end appartments and MHPs. I feel this is where are making the biggest mistake. Folks who want parks can't buy no mater what so comparing cost of mortgage to rent (anywhere) doesn't make sense.
Plus banks have minimum loan size of $50k+ some higher meaning the least they'll lend on is $64k on up,,, then these low end folks could never qualify.
This discussion ended up comparing apples and oranges. LOL I suggest you go walk a few MHPs and low end apartments you'll realize after you learn where their income comes from that no bank will lend to these folks. They work for cash, 1099, min wage, alot of SS and SS disability and alot of left the military and those forms of payments. No one is lendable.
Curt, I own a park and low end apartments so I've walked them. There are even major mid-western metros with very low SFH prices in the 40-60K range (Indianapolis, Milwaukee etc.) and I know you can pick them up all over the South, even GA (outside of ATL). I would put much of the south even below the Midwestern metros. And in the south, especially deep south, you will find that lot rents can be insanely low. I'm not saying it doesn't work but I'm saying there are large swaths where it doesn't.
We're going to have to agree to disagree but I will say that Frank Rolfe also points out that two killers for Mobile Home Parks are readily available land mobile homes and low SFH prices. One reason why he doesn't invest in, say, southern Illinois.
I mentioned it above, sure, most of our tenants are not financeable. Though a not insignificant amount in my park are. There's a difference between a tenant base that turns to a MHP in an area where SFH prices start in 150s and one where they can't even swing 50K. But more than that the price of SFH in a market also paints a picture about the overall housing climate and economy there. Where my park is nothing exists in the SFH world under six figures. In fact, you will often find mobiles on land on the MLS well over 6 figures. As a result apartment rents are pushed up by lower-mid income people priced out of SFH. As a result of that lower income people are priced out of apartments creating an even higher demand for mobiles. This is a constant upward pressure on lot rent. Bottom line is the higher the SFH price the better it is for a park there. And personally I prefer to buy in vibrant markets where there is high housing demand and limited options for affordable housing.
Also, not to nitpick but most veterans I know have been quite successful after leaving the military, I don't know that I would label them as an entire class of low income tenant though numerically speaking I know there are many who fit the bill. But any who have made it to actual retirement have a decent little pension and experience commensurate with a rank required for retirement. Of course, there are lots of single/short termers who blow out and get on some kind of disability etc. Just a little close to home there, ha.
This is exactly the discussion I was trying to get at. I had read where Frank Rolfe had spoken about the problem of MPH ownership in areas where SFR values, and rents were correspondingly low, thus putting downward pressure on lot rents and occupancy in MHP's. Seems he said he avoids the Southeast parks.
The reason I brought this up was because I was noticing that many, if not most, of the MHP's for sales in the Southeast were in areas of decreasing population and/or areas with a declining general outlook with regards to jobs, industry, population growth, etc. These parks appear to be characterized by a high proportion of POH's and/or a low occupancy rates.
Just an observation, but it seems like the rural areas it may be better to invest in SFR pigs if you are after cash flow but stick to the more urban areas for MHP's. I speaking about the Southeast.
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