Issue link: https://read.dmtmag.com/i/67690
DEVELOPMENT MARKETING Ask Eddie BY ED HICKS With the increasing potential now, for new, all age, manufactured home land lease community development, largely in part to the relatively rapid filling of vacant apartments across many markets, it occurs to me that many potential investor/de- velopers may like to have a brief primer on pre- liminary market analysis. Some of the items listed are admittedly obvi- ous, but some are not. So, after over 45 years as- sisting clients with community development, here are the 10most important items (not necessarily in order of importance) on my checklist: 1.Land: Property which is fully entitled (zoned, with an approved site plan, and access to or permits for water and sewer) is generally prefer- able. Its rare, but there are a few municipalities out there which actually encourage development, but in most cases, it will be more expensive and time consuming to go through the "iffy" entitle- ment process. 2.Location: Look for locations which are in preferable school districts, within reasonable driv- ing distance of major employment areas, shop- ping,medical services, and transportation routes. Areas which may negatively affect the project in- clude those with: high crime, nearby heavy indus- trial businesses, 3.Project Size/Structure: Ideally, those com- munities which are large enough at stabilized oc- cupancy to generate sufficient income from homesite leases only, to support a full time pro- fessional manager are considered the most desir- able as investments. Consider which amenities are most important for your target buyer. Some fea- tures such as swimming poolsmay significantly in- crease expenses, including liability insurance. Many amenities may be important when filling a new community, but may become problematic after stabilized occupancy. Homesites dimensions should be large enough to accommodate today's larger popular home sizes. Mixing singles and doubles on the same street can also be problem- atic. Water distribution and waste water collec- tion may be less expensive if placed in the rear of the homesite. And, in many locations, the so called electrical "pedestal" may be eliminated by having the homemanufacturer build ameter panel on each home at the factory before shipping. JUNE 2012 28 THE JOURNAL 4.Utilities:Municipal potable water and waste- water treatment which are located off-site the community are generally preferable. Tap fees and/or impact fees which may be levied for hookupsmust be added to the overall property ac- quisition costs, and in some cases, may make them too high. Storm-water disposal on-site and off-site is also an important part of the analysis of a specific site. 5.Market Analysis:Aquick survey of area sim- ilar communities will provide you with a range of market rents, services offered, size, and stabilized occupancies. It will also give you a good ides of homesite sizes, types of homes (singles or multi- section), and price ranges for new and/or used home sales, sales sources (in-community or local retailers), and major employment centers. 6.Home Financing Options: It is very impor- tant when planning your project to understand: down payment, loan amortization, interest rates, qualifying credit scoring, and payment to income ratios which are available from stable lending sources. Self financing and lease to own strategies may be more difficult to make work than you think, especially because of recent Federal legislation in- cluding but not limited to the SAFE Act and im- plementation of the Dodd-Frank legislation. The recently enacted improvements to the FHA Title I program may be the best available, since it also provides for home resale financing. 7.Price Point: In most markets it is safest to structure for the combination of home site lease payment (rent), and home payment (using avail- able, stable, lending sources) to be equal to or less than those of nearby apartments. It is also prefer- able if the homes being sold are larger and have more features than the comparable area apart- ments. It can also help if you can include a park- ing structure and/or a covered patio adjacent to the home. A comparison of the total housing expense for those buying an "entry level' site built home with 30 year financing should also be compared to those of your "target" home buyer, which should in- clude: home payment, HOA fees if any, property taxes, insurance, and utility costs. 8.Sales Point: If you are planning on operat- ing an in-community sales operation, consider: zoning, additional capital and credit requirements (floor plan), finding qualified sales staff, covert hostility by area retailers, availability of product frommanufacturers, implication of sales profits on income taxes, cost of advertising, service/war- ranty issues, 9.Demographics: A quick analysis of the area's median household income, income distri- bution for your target buyers, projected household growth rate, and average drive time to employ- ment will help with your planning. It is also worthwhile reviewing the total number of apart- ments and single family homes in any given mar- ket. 10.Social Interaction: In some market areas, theremay be overt hostility by area residents, and public officials towards land lease communities. This can often occur because of their ignorance of: more modern well managed communities, posi- tive impact on taxes and municipal services, im- pact of school age children on local schools, quality and responsibility of community residents, home valuation effects on adjacent property own- ers, actual crime statistics, positive community management, overall appearance, and positive effects on the local community. Other factors which should be taken into ac- count include: quality of other similar communi- ties, proximity to municipal services, on-site natural amenities, location of golf courses, resort area characteristics, environmental negatives, ease of access to/from the community, high off- site capital costs, local/state laws including rent control, residents first rights of refusal to pur- chase, etc. Note: Not all of these items will necessarily apply to senior age 55+ age restricted communi- ties. T J Edward Hicks, Principal Consultant, Lic.Mortgage Broker, Lic. RE Broker, Consultants Resource Group, Inc. Box 2795, Brandon, FL 33509. 813 661-5901 45 years as re- tailer, HUD Code/Modular manufacturer, community de- veloper, specializing in manufactured and modular homes. www.mobilehomepark.com, www.factorybuilthome.com, www.fha207m.com