Issue link: https://read.dmtmag.com/i/60637
DEVELOPMENT MARKETING Ask Eddie BY ED HICKS After over 30 years, my partners and I are experiencing unexpected loss of residents, al- though we take good care of our community, and the monthly rents are actually below those of neighboring communities. Our issues include: obsolete homesites, loss of older res- idents, and older home resales by residents, which compete with our new home sales. James C., Homestead, FL In the case of obsolete homesites, solutions in- clude: for obsolete narrow sites, for adjacent homesites, you can combine three into two, or you may be able to install a 20' wide home on a site which originally held a 12' or 14' wide home depending on local setback requirements. Sev- eral years ago, it wasn't possible to purchase a new narrow home from manufacturers, but sev- eral now offer narrower 20' homes. There are also several lines of "front loaders" available for which the front porch is included in the home at the factory. These "neo traditional" home de- signs can greatly improve the street scene in mar- kets where there are lot of singles and shorter doubles. For the obsolete shorter homesites, without changing the rear lot lines or shortening the front setbacks, there is notmuch, whichmay be done. The problem of dealing with the loss of older residents, can be daunting, since today's rela- tively poor terms for chattel financing of homes for new residents can making attracting new, younger residents difficult not withstanding prob- lematic "social" issues. Typically, the best fi- nancing available on single section homes is a 15-year term/amortization with 5.0% down and an interest rate, which is typically 1.5 to 3.5% higher than the rates for site built homes. Multi section homes may be financed for up to 20 years without the land or 25 years if the land is involved (FHATitle I). Or for real property transactions, the home-land combination may qualify for a 30 year term/amortized loan at rates which are only 1.0% to 1.5% higher than for site built homes in the same market (FHA203b or equivalent). In these cases it is important for your homes to be APRIL 2012 20 THE JOURNAL sold on the basis of a combination of monthly lot rent and home payment which is at least 20% under that of new homemonthly expenses ant nor more than area apartment rents with the same ap- proximate sq.ft. and features. As your lot rents have (presumably) increased over the years, and the landlord's right (in most jurisdictions) to chargemarket rents. As these rents increase, the remaining amount after subtracting it from the monthly housing cost for entry level home hous- ing budgets and area apartment rents, usually de- creases the amount available for financing the home. Without a good home financing option, and a properly priced home package, attracting new residents can be difficult. Marketing homes in a land lease community to new, younger residents will also require focusing on many of their typical concerns: perceptions of depreciation, home construction quality, fear of high windstorm damage, perceived dangers of higher risk from fires, and a poor social image. Although each of these issues may be accurately dealt with, it is important to remember, "percep- tion is reality" when it comes to housing choices. Lower home pricing, low down payments, price advantages, and lowermonthly housing costs can offsetmany of these concerns. If your community has been around for more than 30 years, you probably have a pretty good location, as the sur- rounding community has grown up around you, with a wide range of educational,medical, shop- ping and other desirable community services. It is not unusual when an older, long time res- ident leaves the community, for their heirs to ig- nore the existence of the home, not often being equipped to sell or continue themonthly rent pay- ments, and will "give" back the home to the com- munity. These communities will often offer them for rent or sale at greatly reduced prices, however in many markets, these new residents may be family residents which may jeopardize a commu- nities age 55+ seniors only status. And, as the community grows with rental homes, there is often a general degradation of home upkeep, parking issues, and it is not unusual for several families to occupy the home, unbeknownst to the management. Whenever possible, if the site isn't too obsolete, you should consider bringing in a new home, and offering premium financing op- tions for new residents. And, you may want to consider some rent concessions for the new resi- dent. For those communities, which have vacant homesites either which were never filled, or a part of a later expansion of the community, today's new home pricesmay not be competitive with the resale of older resident's homes. Unless you can either purchase lower quality/cost homes from a factory, or decrease the home options and stan- dards as were provided in the original commit- ment to earlier residents, you are going to have to rely on newer home features, warranties, and the possibility of better financing terms. Or you can rely on lower pricing through smaller margins Remember every homesite leased above your cur- rent occupancy "falls almost 100% to the bottom line" and based on market cap rates, can sub- stantially, incrementally increase themarket cap- italized value of the community. This is one of the reasons for larger communities with higher priced/quality homes as may be found in age 55+ seniors communities, it is important to accelerate the fill rates in the early stages of marketing, to eliminate any long term, residual, vacant home- sites. The higher "present value" of lower priced home sales in the overall pre-tax cash flow in the initial stages of filling the community will usually make up for any loss of profit margins. T J Edward Hicks, is a FL Lic Mortgage and RE Broker, located in the Tampa area. He has been in the m/h industry for over 48 years, as a retailer, manufacturer and developer. You can contact Ed at 813 661-5901 or Easteddie@aol.com.