Hi All- we are looking at getting a mobile home park. From what I have read on the topic, investors don't seem to like park owned homes, they want to just rent the lot. We are used to leasiing houses/rooms, so I am wondering..the rent with the trailer is twice the rate for just the lot, I don't think monthly repairs could run the total rental amount for each home, so why is this a bad thing?
I also met a fella in texas who'should model was to only have park homes so he could control the niceness of the park.
For those of you who do MHPs, do you prefer park owned or tenant owned trailers?
If tenant owned home- what if you need to evict a tenant and they leave the trailer and you don't own it? you must pay to have it removed? to where if tenant disappears?
Wow, is that a loaded question. I own a small park and have to say I lean in the direction of NOT owning the homes. That said, they can be a good way to help pay for your park.
As a landlord, you are surely aware of some of the wacky calls you can get from tenants. MH tenants are certainly no different. So first, expect all those calls if you own the homes.
Now as you know, if you own the homes, you must maintain them. Heating, cooling, cooking, windows, roofs, doors, floors, toilets, showers...all of these things go bad...and they seem to go bad, or are destroyed, more often in mobile homes. If the homes are new, and bright, and shiny, you probably have a few years before things start going, similar to SFH and Apartments.
Here is my current model for my park (and looking for another).
*I want to own as many 2000 or newer homes as I can on the park (assuming they are in at least average shape) when I buy the park. I will rent these out for 4-7 years, and put up with the headaches, and plow the extra money back into my park Mortgage and pay the park off in 7 years instead of 12 or 15. (since I bought it on lot income only). There are depreciation advantages to this as well. In 5 years, give or take, and depending on tenant status, I will sell these homes.
*If the homes are older than 2000, I will sell them as quickly as I can outright, or on Owner carry notes, and rid myself of the maintenance headaches. Owner carry helps with the cash flow as above AND can rid you of the maintenance headaches.
*Older homes that are in disrepair, find someone to salvage them for free and get them out of your park (unless there are GREAT paying tenants in them that want to stay in them). They look bad, they are bad, and they are NOT worth rehabbing unless you are just applying a band aid to get them rented (I made that mistake). You can infill with newer, more attractive homes that don't look like a blight in your park for about the same money as a serious rehab.
I haven't owned my park long enough to pay it off but I have owned it long enough to learn a bit.
I would love to hear about your deal...
thanks so much for the reply Sam!
I very much appreciate the answers. That seems to be the consensus, to not own the homes.. There is a nlass of business that just owns homes, not parks, have you any experience with that type of business? Since it is such a bad investment, those folks work really hard for their $ I'm guessing...Anyone who has done this I'd love to hear from!
Have you had to evict a person who left the home there, they just walked away? If so, how does that work since the home isn't the park's to re-let or haul off?
All counties have a procedure to take possession and title of abandoned personal property on your land. Check out the state website for the body overseeing mobile home titles - usually the DMV or Housing & Community Affairs depending on the state.
The mobile home repair business is time intensive and generally adds ~ +/-15% to your expense ratio depending on the size of your Park and if you have a full time maintenance person, etc. Keep that in mind if you start to see dollar bills because you get more revenue.
I have had to evict a tenant that owned their home in my park. She would not pay me lot rent. I gave her a two months of "working" on it....where she eventually, after much harassment, paid me. After the third month, I gave her notice that she and her home were no longer welcome in my park (month to month lease) and that she had 60 days to vacate (gave her an extra 30). She called me and said that she was struggling to pay rent, how was she supposed to pay to have her home moved?
I told her if she didn't want to move it, I would give her a fair price for it, to which we agreed. It was a 1999 2 bed, 1 1/2 bath in pretty good condition so she and I agreed to a price. ($2,000) She took the money, I spent about $7k on a nice rehab and sold it on an Owner Finance deal for $18k. It is an older trailer, at the limit of what I would want to own, but it was/is well maintained so I bought it. I could have spent substantially less on the rehab and rented it for about the same monthly money, but now I don't have to worry about maintenance.
To Note: When I bought the park I was warned about her; that she was difficult to get rent from. My business model does not include long-term dealings with difficult tenants; not how I want to spend my time. I had a meeting with, and sent notices to, all my tenants stating exactly what was going to happen under the new Ownership. She chose to ignore the messages. She DID have a place to go as she stayed with her mother locally most of the time since she didn't want me to catch her at the park. She is fairly young, maintained her property well, had a nice car, spent money etc, just didn't think lot rent was important. I did not kick a helpless, old woman out into the street.
Not so sure that first statement is entirely true. I think a lot depends on the location and demographics of the park and the tenants ability to pay the rent just like any RE rental investment. I personally own a number of MH's in MHP's but not the entire park. I've had very few problems with my tenants. But they're all in a beach community where everyone wants to live so folks don't mess around with not paying rent or reasonable taking care of the MH.