The average expense ratio for a land-lease park (i.e. no rentals) and public utilities is about 30%-35%. This is on a cash basis, meaning historical operation with no need for an adjustment for vacancy or collection loss because only revenue received is recognized. A 5% management fee is included in the average expense.
For projection purposes, collection losses are low for land-lease parks, much higher for rental homes. I recommend using the actual rent roll with realistic projected lease-up rather than a 100% occupancy less an arbitrary vacancy rate. Assuming 100% occupancy when it’s not there is just silly.
For analysis and projection, it is helpful to understand the factors that can most affect operating performance.
Parks with private utilities such as well and septic systems typically have OpEx ratios of about 25%, again without rental homes. This is also true of parks in which the utilities are sub-metered and tenant-paid (note: not legal in all states).
Rental homes typically increase OpEx to 50% or more. It is notoriously difficult to pin down the exact numbers, as owners of parks with large percentage of rental homes typically engage in all sorts of “creative” practices. Maintenance cost is much higher, but may be understated because the owner does the work himself, hence no labor charge, or perhaps buy materials and trade the tenant for labor.
Turnover is significantly higher than a land-lease park, and in fact is the major unrealized cost of rental homes. I wrote an article a couple of years ago (Raiders of the Lost Parks) that discusses the effect of rental homes and a turnaround strategy that capitalizes on buying parks with rentals and converting to land-lease.
Shameless plug alert: For more detail than you thought existed about MHP’s and how to acquire, finance, improve and manage them, see my book DealMaker’s Guide to Mobile Home Parks, available in the CRE Online bookstore.