What is the the future of independent Manufactured Home Communities?
A question brought up by an individual at a real estate investment group meeting in Tacoma, WA did not get answered at that time so thought I would attempt to put my perspective on it and then get feedback as to other people’s opinion.
The question: Where do you think the MHP industry (a.k.a. Manufactured Home Park, Manufactured Home Community, Land Lease Community) is headed?
To start, I will explain some of the chatter on the internet on this subject.
Many are under the impression that within 5-7 years the MHPs will fade into history. Manufacturers are not listening to MHP Owners and are not building the types of manufactured homes needed to fill the lots available in the older MHPs.
The MH Retailers have such a high markup from the factory price that the end users cannot afford their homes.
Banks & Mortgage Companies are not interested in financing a “mobile home” that is not attached to land.
So MHP Owners have had to step in and do the financing for the individuals looking to buy. Politicians are trying to over-regulate the industry by passing new laws dealing with financing, rent control, maintenance issues. Their interference with the free market is killing the industry overall.
On paper in WA (lip service?) some politicians have made efforts to extended benefits to help Owners maintain and develop MHPs as the last form of affordable housing. Yet they did not provide funding to support their magnanimous ruling on paper.
On top of all this the taxes keep going up – calculated as a commercial operation according to the Pierce County Assessor’s Office instead of as multifamily residential. That is where it stands. In order to bring some relief to the overall picture all parties need to get together and work out a solution.
There are numerous summits and all of the above are represented, except there are no representatives from Mobile Home Park Owners that count. The ones who have 500 -1000 units are there, but they do not represent the ‘mom and pop’ MHP Owners as a whole. Community Owners need to get their input into these meetings in some way.
Another problem that will arise is that many Owners are from out of state and depend on a mismanagement company to run their operations. They do not have an office on site – their office is 5-10 miles down the road or more. These MHPs fall into a state of disrepair and then the city officials step in and close them down.
The tax base from the personal property taxes are not very much. By closing the MHPs down, then they can build a new car dealership or motel that brings in more taxes for the city. Watch over the next 3-7 years to see how many MHPs are closed by city officials and not a developer Buyer.
As for the smaller operations – business will continue as usual. A home is abandoned – take it over, rehab it or have a Lonnie Dealer do it for you with you providing concessions for them. Sell the homes and finance it with a note. Same with those that are selling their homes: Buy it at a discount, rehab it, sell it on a note – never RENT a MH. If repo homes come available in another MHP – the Owner of that MHP should jump on the opportunity of keeping the home in their MHP. If they do not and it is available, you need to buy it, relocate it to your MHP and get it occupied.
Several of the trainers for the Washington State Mobile Home Community Owners Association have provided classes explaining to all in attendance that for each home that comes into your MHP you increase the overall value of your MHP.
For example if lot rent is $400/month and you bring in a home to fill a vacancy. The rent for one year is increased by $4800 (12 X $400). Dividing this by 0.10 (10 CAP) the value of your MHP just increased by $48,000.00. As long as you have the frame in your MHP, the mobile home can be rebuilt and your income stream will continue to flow in.
One MHP can be considered a pretty decent retirement plan. Most people who get involved in the industry are not satisfied with just one and may have more. Just be careful not to get overextended. Why? The scuttlebutt on the internet is that the commercial loans will have the same problems as the residential loans. One cause is that loans are not being made. The financial institutions are saving their funds for when interest rates climb to 11-12%. (A rumor was started that this was supposed to happen in November 2009). The main cause will be that the banks and mortgage companies will be sticking their noses up in the air and looking down on financing or refinancing of MHPs. Many MHP Owners have 3-5-7 or 10 year balloons that will be coming due soon.
Last year at the convention I brought this up and one of the instructors stated that one of his clients was in this type of predicament. One solution is for the use of Private Money to bail out fellow MHP Owners. The elimination of the banks and mortgage companies would be a great relief to many. Yet, who has deep enough pockets to take them out of the picture?
Email me your thoughts as to where you see the MHP industry going in the future. The above is my own personal observation of where things are going. # #
Owner of 1 MHP in CO and 2 in WA.