You’re trying to create a mobile home park that’s profitable for you, the owner, and a great place to live for your residents. From the energy you put into selecting your mobile home park management team to the money you’ve laid out to repave the potholed streets to the time you spend analyzing your spreadsheets, you care about the success of your mobile home park. You want to be a constant learner, always growing and improving your park and your processes. That’s why you’re curious about whether you should opt for park owned mobile homes (POH).
You’re trying to do your thinking before you make your decision. You know some parks have them, but if it’s nothing but an awful headache, you’d like to steer clear. Still, if it’s a potential source of good income, well…who wouldn’t want in on that?
Amazing or awful?
So, you’re wondering if having and renting park owned mobile home is a good idea. In short, is it amazing or awful? Well, the answer to that question is: it depends on who you ask.
Some may tell you that the best number of POHs to have in your park is zero, zip, zilch. On the flip side, others may tell you it can be done profitably. So, today why don’t we launch into some pros and cons instead of trying to take sides on this question?
First, though, let’s take a minute to note that for mobile home park management, location matters. And when we say location we actually mean two where questions. First, there’s the question of where you are relative to your mobile home parks. Are you living in a different state or simply a few miles up the street?
Secondly, where is the park located? The market for renting mobile homes (and how much you can make off it) could differ by area.
And, with question one about your location compared to the mobile home park’s location, just keep in mind that how close or far away you are could make things more or less convenient. For example, if you live hundreds or thousands of miles away, fixing a broken light fixture could be a headache. On the other hand, if you’re just up the street it could be a cinch. Now, just to be clear, we are not saying that this makes it not doable. We’re just saying don’t overlook this reality.
One more thing before we talk pros and cons. Remember things like this are relative. Different factors affect different mobile home parks. So, what could work for one park may not work for another. Don’t absolutize any of what we share here.
Instead, do your own analysis of how things would work for you, your park, your residents, and your situation. Now, let’s get down to what you’ve been waiting for: the pros and cons.
Here are some possible pros of park owned mobile homes:
- Cash flow could be higher when dealing with rental income from park owned homes as opposed to only income from lot rent. However, be sure to balance this against the additional expenses you would incur as you rent out the mobile homes (more on expenses below).
- You may be able to avoid an empty (and thus non-money-producing) lot. If it comes down to a choice between a lot you’re having no success renting out and a lot with a park owned home that you could rent out, which would you choose? You might go for the park owned home.
- It could be a successful turnaround for abandoned homes. What about those homes already in your park, taking up space but making no money? Run down and not lived in, they may belong to you, but they’re not exactly doing you any favors. Fixing them up and renting them out may be a way to turn them into a source of revenue.
- Renting out a park owned home may provide ongoing income in a way that simply selling the home would not. Obviously, renting the home may bring in rent payments going forward. On the flip side, if you sell the home, the income from that home could be diminished (new homeowner is now only paying lot rent) or ceases altogether (if the homeowner ends up moving out of the park).
- You may be able to get a significant return on your investment. Depending on how you do it, park owned mobile homes could be profitable for you—which may be exactly what you’re looking for. Just remember that simply having a park owned mobile home doesn’t equal raking in the dough. Give this due diligence with calculations specific to your area. Also, gather information by asking around.
More to think about
- Owner financing could be an option for you and someone interested in your mobile home. Check out Craig Woodman’s Tips on Mobile Home Owner Financing.
- Another thing you may be able to do is to get financing from the mobile home manufacturer then charge more in rent than what you’re paying the manufacturer.
Now that we’ve addressed some possible good scenarios, what are some things that could push you away from park owned mobile homes? Some people advise that you stay away from park owned homes if possible.
- Renters may be less invested in the home than an owner would be. In short, if they don’t care much about the home, they may not care much for the home. Which is bad for you as the homeowner because it could result in devaluation of your property through carelessness or misbehavior. Yet, keep in mind this is a possibility, not a certainty.
- Renters may be less likely to stay than owners. A renter may find it easier to pick up stakes and move on than a homeowner. This could translate to a higher turnover rate for you.
- There will be expenses related to your park owned mobile homes that will offset the revenue you make. Obviously, what you want to avoid are expenses that “eat up” the revenue you make. Expenses could stem from repair bills if you hire someone else to do repairs or the cost of supplies if you do your own. Then, there’s the cost of replacing items like refrigerators and heating systems or renovating homes to get them in rentable condition. And if you have to do major cleanout and repairs because a tenant didn’t properly take care of the home, that will obviously cost money (or time) too.
More cons: time & work
- Time and inconvenience are other factors to keep in mind when considering the downsides of park owned homes. For one thing, there is the possibility of time spent doing repairs (or perhaps coordinating them if you don’t do them yourself). Then there’s the inconvenience of having to evict a tenant if it comes to that. Plus, there may be time spent dealing with other issues that renters encounter.
- Of course, time and inconvenience in themselves don’t necessarily mean you should steer clear. They aren’t de facto deal-breakers. Let us be the first ones to say that hard work is great. However, with your mobile home park, you probably want your work to pay off in some way. So, if the inconvenience and time spent seem to exceed the return you’re getting, it may not be for you.
If you do decide to take the plunge into park owned homes, doing it systematically and thoughtfully may help you do it profitably. Thus, take your time to do your calculations before you head in. As we mentioned previously, your park may have a different situation than another one. So, try to find out what’s relevant to you in your area.
Do the math
As much as you can, try to figure out how much money you’ll have to lay out to get the homes ready to rent. Then, if possible calculate what your expenses would be for each home. When it comes to money and numbers, if this isn’t your forte, rope in someone who is good with numbers and bring them up to speed. At the end of the day, you want what’s profitable for you and good for your tentants—not necessarily what worked for someone else. So, analyze your own situation.
And whatever you do, don’t forget about expenses. While your own situation may differ depending on who pays for what, here are some things that could require you to spend money:
- Garbage pickup
Regarding that last one—maintenance—consider these questions. If you don’t live in the area and won’t be doing the work yourself, how much would you pay a repairman? Will you pay more if he has to work nights or weekends to fix a pressing problem?
At this point, let’s say you’re leaning toward park owned homes despite any disadvantages. Actually, you’re pretty hopeful you can make them work for you. One thing you’re wondering about it where to find these homes. Well, here are a couple of possibilities.
- Via banks that have repossessed them. Check and see if you can find homes that have been repossessed by a bank. Would the bank be interested in unloading them on you?
- A park that is no more (or is soon to be no more). If they’ll no longer want mobile homes, it could be a good fit because you do.
At this point, you may already have the idea that you should educate yourself before you make a decision about park owned homes. Obviously, you can turn to the internet for some of your answers. Plus, think about gleaning information from people in the area your park is in—whether it’s other mobile home park owners or even mobile home renters.
As you do so, here are some questions to consider. How much would you as owner typically earn in lot rent where you are? How much would you typically be able to rent a park owned home for? Are there many used mobile homes available that you could purchase and rehab? If so, how much would you pay to do this?
Ask people who have been there, done that
Additionally, you can try to determine: Have other park managers ever had to evict a tenant? And if they have, what was the process like? How long did it take? And did it turn them off from renting out a park owned home again?
Another idea is to seek information from current park owners when you’re considering buying their park. Ask to see information related to their park owned homes (including how much rent they’re bringing in and related expenses). This may help you determine whether you’ll be able to make the situation work for you.
Furthermore, in all that you do relating to park owned mobile homes, be sure to stay on the right side of the law. For instance, understand what legal restrictions will apply if you ever need to evict a tenant. And consider getting a lawyer’s assistance for things like rental agreements. Plus, be sure to understand what is and isn’t acceptable when it comes to inspecting your property while renters are living there.
In addition, remember, if you’re talking about buying and selling homes to rent out, don’t wing it. Take the time to do your research if necessary, talk to authorities who have answers, and follow the proper procedures for acquiring the property.
As you try to create a better mobile home park, take seriously your role as owner or manager. And don’t just invest in your own capabilities as a manager. Try to invest in those under you in the “chain of command.”
Perhaps you’ll want to schedule continuing education for yourself and/or your team—whether in the form of study specifically related to mobile homes or the study of management generally. You may even want to look for apps that could help you run your business or take free online classes. Plus, take a minute to peruse our article: Establish Mobile Home Park Manager Duties To Avoid Stories Like This.