Issue link: https://read.dmtmag.com/i/100911
COMMUNITY CONSULTANT New Ideas To Fill Vacant Lots In Your Manufactured Home Community BY FRANK ROLFE It���s the New Year, and time for those reso- By changing the model to 10 year or less obliga- any other real estate segment. lutions. One of our top resolutions is filling the tions, and homes that cost $20,000 to $30,000 You can use the whole pie, remaining vacant lots in the over 70 manufac- instead of $40,000 to $60,000, the evils of the not just a piece tured home communities we own. Why not? chattel collapse have been conquered. This Once aspect that smart operators have keyed The demand is through the roof, and the num- changes have now been seasoned with almost a on recently is the ability to allocate not just the bers work all day long. But all community own- decade of success by smart community opera- home piece of rent (that portion left over after ers face the same hurdle: how do you pay for it? tors who immediately saw the errors of the late subtracting the lot rent from the gross rent) but It costs us an average of $20,000 to fill a va- 1990s. the entire rent towards the home until it is paid cant lot with a home ��� even more in some marThe decline of the U.S. has placed our in full. For example, if a home rents for $500 kets ��� so how can you find this capital? We industry on the radar screen per month, why not use that entire $500 to rethink it���s going to get easier in the New Year; Back when giant custom homes with bath- tire the debt fast? Most operators only think of but not in the old-fashioned using the amount left after lot ways you are used to. rent. But there���s no reason The numbers are finally you cannot use the entire rent starting to It costs us an average of $20,000 to fill a vacant to give the loan a faster amormake sense tization and greater security. lot with a home ��� even more in some markets If the lot���s vacant, how much Back in the 1990���s, community owners could not rent do you get, anyway? ��� so how can you find this capital? We think it���s We���d rather fill lots. buy direct from the factory, and there were virtually no It���s all about timing going to get easier in the New Year; but not in repo homes to be had. In When you bring in manuaddition, apartments were a factured homes into vacant the old-fashioned ways you are used to. little cheaper and singlelots in a community, the family homes a bit more value of every lot your fill ��� modest, and the numbers assuming a 10% cap rate ��� just weren���t that compelling. Today, you can rooms the size of bedrooms were all the rage ��� normally ranges from $20,000 to $30,000. But buy homes factory direct, there are a ton of repo prior to 2008 ��� it seemed like the only segment if you turn right around and sell or refinance the homes you can buy, and the rents are higher. of housing worth writing about was the upper community the next day, you haven���t accomThe basic math is homes about 30% less, and end. Why not? With zero down, no income plished a whole lot because the cost of the house rents about 30% higher = a concept that makes documentation loans in abundance, it seemed basically equates to the value of the occupied complete sense. like every American family could expect a Bel- lot. So to bring in homes in a big way, you The chattel collapse lessons have Air mansion regardless of their circumstances. have to make a commitment to keep that propbeen learned Now that reality has set in ��� and America has erty until the homes are paid off. That means When the chattel financing market blew slipped into a steep decline ��� affordable housing that 10 year loans are essential to making filling apart in 2000, there were some terrible struc- has become hot. With over 10,000 baby lots a no-brainer. And the return to conduit tural assumptions that had created the crisis, boomers retiring per day into modest social se- debt and 10-year loan terms has made this including 30-year amortizations and homes curity incomes, and minimum wage jobs re- strategy a clear winner. heaped with debt due to enormous dealer mark- placing well-paid union work, the market forces Big yields are easy up and lack of thrifty designs by manufacturers. for affordable housing are becoming larger than When you combine $20,000 homes and JANUARY 2013 20 THE JOURNAL