Selling Manufactured Home Communities to Residents Preferred by Investors
Most commercial real estate investments are sold to another investor and properties are managed in such a way to maximize the return for when the property eventually sells. For manufactured housing investors, however, a new avenue for exit has opened in the form of resident-owned communities, according to an analysis by Multi-Housing News.
Commercial property tenants do not usually provide an exit opportunity, but manufactured home park residents are a different breed of occupier. The average multifamily resident is under 40 years old and will stay at a multifamily property for just over 24 months. Conversely, the average manufactured home park resident is over 55 years old and will live at that park for an average of 14 years, or in many cases, for the rest of their lives.
Park residents aren’t renters — they are homeowners with a ground lease. Therefore, residents have an emotional connection to the property and an interest in its future that is not seen in other residential assets.
WHY RESIDENTS WANT TO OWN THEIR PARKS – ROC USA is a nonprofit organization that works with over 270 resident-owned communities. According to Mike Bullard, the company’s communications and marketing manager, the parks ROC works with sees an average annual rent increase of less than 1 percent. This is considerably less than the 3.5 percent annual site rent increase, as reported by the Manufactured Housing Institute (MHI).
Manufactured home park residents have “lived for a long time with this nagging sort of concern in the back of their heads that someday they will come home and find there’s a notice in their mailbox that says the community is for sale or has been sold and either the rent’s going up considerably or the new owner wants to redevelop this land, and you have 60, 90 or 120 days to get out and take your house with you.” Ballard said.
The prospect of being forced to move is far worse for manufactured home park residents than with multifamily residents as the cost of relocating a manufactured home starts at $5,000 and can be significantly higher in many cases, or there is not a location available in which to relocate the home, or because age of home and/or attachments, the home cannot be physically relocated.
According to Fannie Mae, the median household income for manufactured homeowners is about $35,000. Many of them cannot afford a large rent increase and certainly can’t afford to move their house. Buying their own park gives residents more control over the future of the park. They democratically elect management, decide on park improvements, and can determine what their own rent will be.
A DIFFERENT KIND OF BUYER – Resident-owned communities aren’t interested in buying anything other than their park. They aren’t looking at future yield or past performance and have no interest in taking their capital elsewhere. This puts them in a stronger position to offer bids than a savvy investor would be willing to offer. They are also able to finance at favorable rates from non-profit organizations and take advantage of state government grants to help them raise capital.
There are over 43,000 manufactured home land-lease manufactured home communities nationwide, with only a few hundred of these parks being resident-owned
