Posted by Jacque - WA on February 04, 2002 at 14:19:56:
Sorry, forgot to finish that last thought.
P.S. I would hope that there won?t be many new MH?s moved into parks ? leaves more room for my homes : )
Jacque
Broker’s comments on MH Parks…Agree/Disagree? - Posted by Marc in Portland
Posted by Marc in Portland on February 04, 2002 at 12:01:17:
[simultaneously posted in the Commercial RE group]
I recently had a conversation with a broker of 100+ -unit Mobile Home Parks here on the West Coast and thought I would post his comments for the group’s review. To paraphrase:
"While MH Parks will probably continue to be good 15-20-year investment opportunities, they may not be appreciating much in the next 3-5 years. This is because owners increased rents fairly dramatically in the last 5 years, so there is temporarily little upside. Particularly in the NW, where income is stagnant and unemployment is high.
“If you’re interested in buying one, don’t forecast ANY rent increases for at least 3 years unless you have really shopped around and KNOW it to be under-rented.” [We can use the HUD fair market space rents table to assist in this evaluation.–MC] “Also, vacancies are growing and may continue to grow. This is because Conseco, which used to finance 70% of Mobile Home purchases has dramatically tightened their lending practices due to a 20% foreclosure rate under their old lending standards. Consequently, it’s hard to get a MH financed right now, and financing a used one is impossible.” [Except via the seller–MC]. "When they do get financed, it’s at steep interest rates/high payments. Coupled with high space rent, that makes MH’s less affordable than they have been for years. Particularly new ones. The flat income increases here in the NW forecast for the next few years contributes to the problem.
“Therefore, there won’t be many new MH’s sold and moved to parks. In addition, due to the large number of foreclosures, there are increasing vacancies and for sale signs.” [Seems perfect for more Lonnie deals, though—MC]
So, Gang, what do you think? Is this guy right on? Do you think it applies to smaller parks as well as larger?
Marc
Re: Broker’s comments on MH Parks - Posted by Jacque - WA
Posted by Jacque - WA on February 04, 2002 at 14:18:24:
Hi Marc,
I don?t have a lot of time here ? I?m in a hurry, but I have to tell you that I live near Seattle and I disagree with his comments - totally disagree ? regarding the parks and rent increases. While his comments may be indicative for newer mobiles I do not believe in my experience here that it represents the traditional ?Lonnie deal? ? if nothing else this creates the opportunity to turn more lemons into lemonade.
Especially with regards to financing since such lenders as Conseco, Greenpoint and now CIT are no longer involved (this part of his comments is right on) in mobile home financing. Again, this simply creates more of a win-win scenario for investors.
Coupling space rent with payments on these homes still comes out well below the national averages for those simply looking for a cheap place to live ? such as an apartment or other rental unit ? at least it does around my area.
I can?t say that I spend much time forecasting the rents, ?what if? scenarios when purchasing a park (I like the numbers as they sit right now) ? it does not effect my purchase price offer, however, with the increase of rentals from apartments to houses, to mobile homes again I beg to differ that the majority of mobile home parks are tapped at their full lot rent potential.
Sorry, gotta run.
Jacque ? WA
P.S. I would hope that there won?t be many new MH?
Re: Broker’s comments on MH Parks - Posted by Chuck (AZ)
Posted by Chuck (AZ) on February 04, 2002 at 13:02:00:
I’d totally agree with his comments regarding lending/financing. I started hitting various MH dealers a month ago, with the offer to arrange private financing/factoring for them.
The response has been very good… and I expect it to get better as more institutional lenders bail out.
I think his comments regarding MHP’s however will vary depending up the region and market. The southern/southeastern/southwestern states for the most part (there will be exceptions) will stay strong, while the midwest/northeast/northwestern states will go soft.
The extrememly large number of parks for sale in NY and TX would seem to bear this out.
It’s definately a MHP buyer’s market… and as you may have noticed, I’ve shifted gears to stay in synch with it.