Issue link: https://read.dmtmag.com/i/320565
JUNE 2014 24 THE JOURNAL When developing a new manufactured housing community what are some of the major differences between non-age restricted and 55+ seniors communities. Paul C., At- lanta GA. In markets where there is sufficient need for low and medium cost housing which fit the manufac- tured home product, the first distinction which should be considered is: the method of conveyance of access to the homesite, to wit: the community could be a sub-division where the homesites are deeded to the residents as platted lots or with spe- cific boundaries and a legal description, or the homesites may be leased and the resident pays a monthly rent for use, or it may be a cooperative in which the residents have the option to purchase a share of stock in the community ownership at a re- duced monthly rent, or simply lease their home- site, or it could be a land condominium where the homesites (only) are maintained by the associa- tion. In general, non-age restricted communities prefer locations which have easy access to per- ceived "good schools". For sub-divisions, with larger homesites, good neighbor policies may be implemented with a homeowners association if possible. Proximity to major employment centers, or public transportation is important. Most of the homes will be purchased using available chattel (security agreement) type of financing, with shorter terms, and higher interest rates than for area housing, so it is important to price the homes intelligently. Often where are low apartment rents or lower entry level housing with available 30 year financing, single or smaller double wide homes are indicated. Non age restricted communities, which are properly structured tend to fill at a relative rate to other forms of housing as the overall population grows, if there is adequate financing available. When creating an economic model, other than adjusting pricing the land for location, the most important considerations are: area apartment rents and available home financing. Structure the home "product", including but not limited to the home, foundation, accessories, landscaping, parking structure, etc. such that the combination of the monthly homesite lease payment and the re- sulting, home payment for the qualified "target" home buyer with minimum down payments, is less than or equal to area apartment rents. Amenities do not have to be the equivalent, and usually you can provide more sq.ft. in the home than is pro- vided for in area apartments. Especially when of- fering 3 and 4 bedroom homes, which are not as common in apartments. On the other hand, the better locations for seniors or age 55+ age restricted communities tend to be away from schools, and not necessarily close to employment centers. But Seniorslike to have access to centers of higher education, and major shopping malls, as well as to regional airports or at least one which has indirect access to most major areas of the US. Since many are on fixed incomes, access to Seniors jobs in businesses such as Costco, Sams Club, Wal Mart, etc, can be advantageous. Home pricing strategies in com- pared to apartment rents is not as important a consideration, since often up to 80% of Seniors home buyers will either pay in cash, or will have substantial down payments, and their credit rat- ings are generally better than those of the non age restricted home buyer. Historically, many Sr. 55+ communities have been located in "resort" areas: Florida, Arizona, Carolinas, etc. However in recent years there has been a trend to building them near major popula- tion centers, even if they are in a Northern clime. The most important factor for these communities is that they be located with 1 to 1 1/2 hrs from their earlier residence. Major sub-urban areas near Seattle, Philadelphia, Los Angeles, San Jose, Phoenix, Miami, Tampa, Chicago, and others have been popular with seniors. Age 55+ seniors communities generally require some kind of natural or in community amenities. This can sometimes be difficult if a slow fill rate is anticipated, since the "up front" capital costs of amenities can drive up the "per homesite" costs disproportionately to the eventual built out com- munity. And, since most seniors currently own a home, it is necessary for it to be disposed of prior to purchasing a home in a new community. The recent drop in home values in most areas has greatly slowed down their home sales, and since they don't have to move, they tend to "sit" on their home to get their price, before they move into a new community. So these kind of commu- nities tend to fill more slowly in the early phases of development. I know of one very high quality large seniors community in the North East US which took over two years to lease the first 50 homes, but eventually sold out all 450 in only 5 years. If the developer hadn't planned on an ini- tial slow fill rate, it might have lost control to the lender relatively early in the marketing. And, now my caveat: few markets are exactly the same. Before purchasing an existing commu- nity or committing large amounts of equity or debt in the construction of a community, you should first have a market and economic feasibility study performed. Although such a study will not guar- antee your success a property written analysis should assist you in structuring your community in terms of: adult or family, lot sizes, amenities, home configuration, home pricing, lease or homesite pricing, etc., all in the context of tar- get investment parameters, equity and debt re- quirements, available home financing options, point of sales, etc. Edward Hicks, Principal Consultant of CRG, Inc., has specialized in working with retailers, developers, commu- nity owners, and investors for the past 45 years, nation- ally, in the structuring, marketing, and financing of their land lease communities. He has a monthly featured col- umn "Ask Eddie" in the Journal of Manufactured Hous- ing. His websites are: www.mobilehomepark.com, www.factorybuilthome.com, and www.fha207m.com. He may be reached at 813 300-6150 and his e-mail is easteddie@aol.com Ask Eddie BY ED HICKS DEVELOPMENT MARKETING T J