Blog Flogger Comments; 3:1 Ratio & Triple Anniversary Roundtable!

Blog Flogger (reader) Comments: MHIndustry, Home Valuation & finance!


Proofing – Spoofing the 3:1 Ratio for Pegging Rental Homesite Rent Rates


The Triple Anniversary Networking Roundtable, 14 – 16 September in TX.


“There is no question, we in the MH World have lost the political, economic and social high ground relative to what authentic ‘affordable housing’ is and ought to be. (And) it’s no longer enough for us to say, ‘We lack clout’ in DC or statehouses. We need to creatively, individually, and collectively engage the media, public and government, demonstrating true affordability relative to our quality, eco – minded ‘green’ homes!” TK

“Between HUD, our national and state organizations, and (corporate) ivory towers, we departed the (affordable housing) market that fed us, and now wonder where we are. Appears foreign competition could easily take over this industry, like so many others, that ‘forgot their customer base’.” NB

Appears landlease communities have a viable ongoing ‘business model’ ensuring their survival. They’ll still need a few (home) manufacturers, but likely can succeed nicely. Those remaining manufacturers will have to relearn ‘success’, by building economically – sized, well – designed and built homes! In the meantime, the remainder will fade and die that ‘death of a thousand cuts’, as you aptly put it. George.”

Some pretty heady words there, from our peers throughout the MHIndustry and LLCommunity asset class, responding to blog posts of the past few weeks. Are any of our elected and salaried executives ‘out there’ listening? How ‘bout that still quiet charismatic, visionary – but – effective leader, who’s yet to step forward to bring us together to plan and effect the rejuvenation of the industry and property type? Hmm? Know what’s interesting about the previous sentence? At the MHCongress in Las Vegas last week, a half dozen attendees talked to me individually about this very matter. Each had his/her idea as to whom I’ve been referring to as ‘our reluctant leader’ – and guess what? All but one of them was ‘right on the money’, so my commentary to date has been Right on Target! But we continue to wait….


Remember the heady, if not heated discussion, of the past few weeks on LinkedIn, that spilled over into this weekly blog posting, on the subject of ‘book value’ versus ‘market comparables’ approaches to valuing HUD code manufactured homes sited within and outside landlease communities? Well, the conversation continues online at that social media site, but here’re a couple commentaries, again from blog floggers, to this blogger:

“I agree 100% with your point on NADA book value. There is indeed, a sad irony behind the question: ‘Do manufactured homes depreciate?’ Of course they do, if loan amounts are based on a depreciation schedule! And, if older homes can’t be financed, then of course there’s no lasting value outside of pennies on the original (purchase) dollar. It’s ridiculous.
And yes, I have a position on the matter. I think the ‘depreciation factor’ is so deeply ingrained in the consumer’s mindset, it’s going to be touch to shake. But it needs to be changed. In my view, the principle is: ‘Do what’s in the best interest of the customer, and long – term, you’ll make out just fine. Abuse them at every turn, and you’re a short – timer, with them and your business interests. And whether my associates in ‘MH land’ agree with me or not, that’s how it works!” PB

And from yet another source: “Real estate appraisers DO know how to appraise manufactured homes ‘on land’ as realty. The problem is, we routinely site these homes in awful locations, ‘miles from civilization’ and the values do come in low. Any time a value comes in low, our industry screams, “They don’t understand manufactured housing”, when, in fact, they don’t understand you can’t place a good home in a horrible location and expect to get top dollar.
Furthermore, it’s true, few real estate appraisers outside FL, AZ & CA are interested, willing, or qualified to do chattel (in LLCommunity) valuations. But the job can indeed be done, when you hire manufactured housing valuation specialists to seek out market ‘comps’ in local housing markets where subject homes are located. DR

Note. How ‘bout the expectation Dodd – Frank regs will make for expensive housing appraisals? Quite likely, for ‘real housing’! Now, this question begs answering: Which camp will we be in, going forward, real housing or manufactured housing – continuing with our very own set(s) of rules, like book valuation, and no secondary housing market? We can no longer afford to have it both ways! What do YOU think?


Here’s an interesting commentary received from a LLCommunity owner/operator who attended the MHShow in Tunica this year. Seems he/she picked up a loan rate sheet from one of the third party chattel lender exhibitors, and figured out the following….

Note that a $35,000 singlesection home transaction, with 10% down payment, and customer with a 650 – 700 credit score (i.e. a premium buyer), would pay 11.99%+0.5% (for an under’ $50,000 loan), or 12.5% plus 2% origination fee. Based on a 15 year loan, that works out to an effective interest rate of 12.88%

Buyer’s monthly payment would then be $388.00. Assuming site rent of $250.00/month, his/her total payment would be $639.00. That same buyer would probably be approved for a 5% site – built loan. His $/her $638/month payment (15 year term) would qualify for a $80,000 loan. What percentage of the eligible home buying prospects do you think would sign up with this lender for a $35,000 singlesection manufactured home in a LLCommunity versus $85,000 site – built home?

The numbers are similar, when manufactured home is put on private property (chattel only). That buyer’s interest rate would be 10.25% + 0.5% = 10.75%, plus 2% origination (effective rate on 15 year loan would be 11.1%). Door # 1 leads to a $35,000 singlesection manufactured home. Door # 2 leads to a $48,000 site – built home.

Bottom line? “Those (typical) terms from that lender suggest their experience financing chattel – only manufactured homes is pretty poor. Probably just the nature of the beast. The spread between manufactured housing and site – built rates is simply too great to ever make the former very attractive to prospective homebuyers.


Are landlease communities pricing themselves, homesite rent rate – wise, out of their local housing markets? Anecdotally, the answer appears to be ‘Yes’, as urban and semi – urban LLCommunities, across the U.S., experience significant declines in physical and economic occupancy rates (i.e. Or, as some say, higher vacancy rates). While this topic deserves more research than I can give it here, an article in the March/April 2011 issue of Multihousing Professional (p.28) titled, ‘Where rents are rising the most, and least’, relative to conventional apartment communities across the U.S. was illustrative. Here’re a half dozen SMSAs (Standard Metropolitan Statistical Area), for which we were able to compare monthly apartment rent rates in the subject article, with adjusted site rent averages in ‘family’ & ‘all adult’ LLCommunities surveyed and published in a recent JLT & Associates report. In the following examples, I used the divisor of 2.5 instead of 3, per the 3:1 Rent Ratio Rule (for comparing LLCommunity & apartment rent rates), since 2.5 is oft recommended for SMSA markets vs. decidedly suburban and rural markets.

SMSA Apt. Rent LLCom. JLT & Associates adjusted rates

Seattle $1094 / 2.5 = $438 model vs. $477 @ family & 526 @ adult

Portland, OR. $877 / 2.5 = $351 model vs. $442 @ family

Tucson, AZ. $683 / 2.5 = $273 model vs. $323 @ family & $379 @ adult

Las Vegas $811 / 2.5 = $324 model vs. $488 @ family & $532 @ adult

Phoenix, AZ. $763 / 2.5 = $305 model vs. $384 @ family & $435 @ adult

A practice that tends to skew published average LLCommunity site rent rates upward in urban markets, relates to the property composition of SMSA survey samples Generally speaking, only larger institutional investment grade LLCommunities are researched and tallied; while the smaller, far more numerous properties, e.g. under 100 sites in size, are oft not included in SMSA survey samples. Result? In a sense, rendering a ‘false positive’ result, i.e. SMSA area average rent is ‘higher’ than would be the case, if all LLCommunities in the SMSA were included in the survey sample. But then, this 85%+/- of the nation’s LLCommunity stock, ‘under 100 sites in size’, are also difficult to track, due to lack of on – site staff to respond to rent surveys. These smaller properties too, frequently have lower site rent rates than larger institutional investment grade ones found in LLCommunity portfolios. Why? Often older with more functionally obsolete rental homesites; owned by Mom & Pop investors who’re frequently emotionally attached to their residents – along with a fear of not being able to replace ‘older, smaller homes’ if they depart.

Point? In the face of declining physical occupancy, a LLCommunity owner/operator must look at every aspect of his/her operation to remedy that situation. Are marketing measures generating sufficient volume of incoming telephone and online inquiries, and on – site visits, to drive conversion percentages needed to more than offset move – outs? How do you know? Is a daily record being made of such inquiries (Including the key question: ‘How did you first learn/hear of this LLCommunity?’), and is this record of inquiries being evaluated at least weekly, by the property owner or a regional or executive property manager? If not, start NOW! And just how sure are YOU, on – site staff is performing the way they were trained (‘They were trained weren’t they?’) to handle telephone and online inquiries, as well as on – site, in person interviews? Only one effective way to know: Have your property (ies) Mystery Shopped regularly and anonymously by professional ‘shoppers’, especially by individuals who clearly understand the MHIndustry & LLCommunity business, to the extent of being sensitive to basics and nuances of our housing product and unique lifestyle, whether ‘family’ or ‘all adult’. When was the last time you had your LLCommunities shopped? Perhaps therein lies the answer to your declining physical occupancy rate. And economic occupancy? Well, that’s another story altogether.


Don’t miss reading next week’s blog posting on this website! We’ll be announcing details of this year’s TRIPLE ANNIVERSARY ROUNDTABLE, scheduled for 14 – 16 September, somewhere in Texas! Triple anniversary? Yep. We’ll be celebrating manufactured housing’s 75th anniversary; International Networking Roundtable’s 20th anniversary; and National Communities Council division of MHI’s 15th anniversary! How can YOU not want to be present for such an historic and gala celebration?

And this year’s two dozen presenters? Wait till you see the list! Can already tell you there’ll be folk there ‘Everyone knows, but rarely see!’ One in particular (might) be the Allen Letter’s ghost columnist MH Ronin (It’s not me!). Others? Well, you’ll just have to wait for the blog posting, then the registration brochure which’ll be enclosed with the June issue of the Allen Letter professional journal. That alone, is a good reason to ensure your subscription is current. Know why? We use only four data bases for this ‘by invitation only event’: Allen Letter subscribers, the exclusive 500+/- name contact list of LLCommunity portfolio owners/operators in North America, 13th National Registry of Realty Mortgage Lenders & Brokers, and last year’s Roundtable registration list. If you’re not on one of those four lists, and desire to attend this year’s TRIPLE ANNIVERSAY ROUNDTABLE, I strongly recommend you subscribe to the Allen Letter professional journal today! (317) 346-7156 or the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. As in years past our maximum capacity is 200 attendees.


George Allen, Realtor®, CPM®Emeritus, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247 (317) 346-7156

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