FOREMOST Insurance Rides Again! & Preparatory/Predatory Sins

Blog # 522 @ 24 February; Copyright 2019;
Perspective. ‘Land leases communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’

This blog posting is sole national advocate, official ombudsman, historian, research reporter, education resource & online communication media for North American land lease communities

To input this blog, &/or affiliate with EducateMHC, formerly Community Owners (7 Part) Business Alliance, or COBA7, use Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

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INTRODUCTION: Have you missed studying the periodic Foremost Insurance market research report, profiling manufactured housing’s homeowners? Well, after a six years hiatus it’s back!

I view the widespread lack of preparatory new home sales training, for land lease community owners/operators, as a Sin of Omission, slowing the increase in annual shipment volume!

And I view the widespread reality of predatory rental homesite rate increases as a Sin of Commission, often preventing homebuyer/site lessees from buying the home of their choice!


‘FOREMOST Insurance Rides (researches) Again!’

If you’re new to the manufactured housing industry, and or land lease community real estate asset class, you’re excused for not understanding the point of that headline.

You see, Foremost Market Research, since 1979, and for more than three decades following – through 2012, published, every several years, detailed statistical reports containing actionable insights regarding manufactured housing, the firm could use to advance their marketing and product development efforts. And that information also proved highly valuable to HUD-Code housing manufacturers and owners/operators of land lease communities.

Well, for reasons of their own, Foremost stopped doing this research and reporting six or so years ago, without telling anyone. When I picked up on the omission during 2017, I approached my contact within the firm and coaxed them to reengage. They did so, during 12-26 June 2018, and what follows here is a titillating taste of what will be covered in detail in the March issue of the Allen Letter.

In the meantime, here’re Key Findings from this latest Foremost Insurance Group study of the manufactured housing industry:

• 32% of respondents bought their manufactured home NEW

• 48% of manufactured homes from the survey were of the single wide (sic) variety

• 51% of manufactured homes from the survey were located outside of a traditional subdivision, park or co-op setting (& 41% of homes located in land lease communities)

• 72% of manufactured home owners reported annual household income less than $50K

• 46% reside in a home that was manufactured within the last 22 years

• 54% of responses came from manufactured home residents age 50 or older

• 47% of respondents estimated the value of their manufactured home below $30K

• 32% of mobile home (sic) households also own a recreational vehicle

• 26% have a graduate or post graduate degree

Yes, there’s much more interesting and helpful information in this study. Read the rest of the report in the March 2019 issue of the Allen Letter. To subscribe, visit


Preparatory & Predatory

Sins of Omission & Commission Plague the Land Lease Community Business Model from Coast to Coast!

If you own or operate a land lease community (a.k.a. manufactured home community), do you know HOW to calculate manufactured housing price points that’ll sell in your local housing market; HOW to ‘spec’ (select features) and order a home from your factory of choice; HOW to secure wholesale (i.e. floor plan) financing; HOW to properly install that home on-site; HOW to sell said home; and when need be, HOW to seller-finance or rent the home?

If NOT, then you have been, and continue to be, a victim of the manufactured housing industry’s ‘failure to prepare’ YOU to navigate those six pivotal HOW TOs required in today’s vastly different market environment from the last five ‘go-go’ years of the 20th Century! Some say, this is the manufactured housing industry’s Sin of Omission!

A timely and practical ANSWER to this major education omission? Start doing, nationwide, what the IMHA/RVIC (Indiana) state association has been doing since 2016. Identify the nearest concentration of manufactured housing plants, engage meeting space nearby, then plan Two Days of Plant Tours & Home Sales Seminars, covering HOW TO areas per price points, features selection, product ordering procedures, floorplan financing resources, installation basics, ‘How to Sell – or Rent Effectively’, and what chattel capital funding sources are available.

The way this works, is to offer free plant tours to seminar attendees, on a day different from the seminars, or intermingled in a fashion where attendees ‘pick & choose’ what they prefer to do, from hour to hour. Sure it takes much planning to do this successfully, but here are key points to ensure a successful program:

• Selected presenters must be knowledgeable and experienced relative to their chosen or assigned topic, and highly motivated to share this knowledge and experience! Require each presenter to prepare and distribute a handout covering their topic. Consider binding handouts into a takeaway resource.

• Reserve extra meeting space at the host facility and arrange to have sponsors on hand to support the learning experience and display their products and services. Sponsor fees help underwrite expenses associated with the two day event.

If you’d like to learn more about meeting planning details for this much-needed educational event, contact Ron Breymier via (317) 247-6258 x 11.

The preceding paragraphs cover only half the story needing telling here!

While the manufactured housing industry, including state and national advocates, has been dilatory preparing land lease community owners/operators to fill vacant rental homesites with new home sales and or rental units, (i.e. Sin of Omission), many in the realty asset class itself have been, in this observer’s opinion, guilty of a Sin of Commission.

That’s right. In a word, this is the practice of levying ‘predatory’ rent rates on rental homesites in land lease communities. And let’s be clear, this is NOT a blanket indictment of all land lease communities! But it’s become commonplace enough to spawn this sort of headline in more than one newspaper: “U.S. ‘mobile homes’ affordability slips as corporates move in.”*1

So, what makes for predatory rent rates, and where and why do they occur in some-to-many of today’s local housing markets across the U.S.?

Let’s begin with one land lease community in one local housing market. As a due diligence task pursuant to ‘closing’ a real estate transaction, particularly an income-producing property, it behooves the due diligence team to conduct one or more local housing market surveys, usually including all forms of multifamily rental properties, especially other land lease communities. Not only should the due diligence team demonstrate, for the buying investor, how the subject property’s rental homesite rate compares to other like properties in the local housing market, but how those rent rates relate to other types of multifamily rental housing as well.

One way to do this is to compare the monthly rental rates of 3BR2B-sized apartments with rental homesite rates in the same local housing market. How to do this? Survey all conventional (non-subsidized) apartment communities, targeting 3BR2B or townhouse units – generally closest in size to singlesection or small multisection manufactured homes. Assume the average 3BR2B apartment rent surveys at $900.00/month, plus cost of utilities. A traditional Rule of Thumb, is to divide that amount by three, and arrive at $300.00/month as a target rental homesite rate, in land lease communities, in that local housing market. And this comparison is meant only to be a guide; i.e. is site rent higher or less than $300/month? The answer to that question guides the buyer investor in his/her acquisition decision, and actions after ‘closing’.

But that’s not what has been happening of late – since the turn of the century, when consolidation of communities skyrocketed, e.g. REIT wavelet @ 1994 & 1995, followed by equity plays since then. As property portfolios have grown in size (e.g. REITs alone have exploded from four in 1994 controlling 88,450 rental homesites, to three in 2018, but controlling 300,566 rental homesites! As property portfolios have grown in number (now @ 500+/-) and size*2, profit expectations have increased as well, oft at the behest of Wall Street analysts, and investors from outside the manufactured housing industry ‘wanting in’.

Consequence? Not in all local housing markets, but in many, the traditional 3:1 Rule of Thumb has quietly been supplanted with one akin to 2:1. In other words, local housing market apartment rent average being $900.00/month; now divide by two, not three, and arrive at $450.00/month as a target rental homesite rate for land lease communities in that local housing market. Bottom line consequences of this site rent inflation? Several. Sure, increased profitability for the owner/operator (i.e. mantra: ‘maximize income & minimize expenses’), but also ‘less house purchase capability’ on part of prospective homebuyers/site lessees.

How so? Given an individual or household’s AGI (Annual Gross Income) of $36,000, a 30 percent Housing Expense Factor (‘HEF’), $333/month site rent rate, and 9.5% mortgage rate for 20 years, the homebuyer/site lessee can afford to purchase a $68,000 manufactured home. However if the $333/month site rent rate is increased to $500/month (Keeping in mind the two aforementioned 3:1 & 2:1 ratios), the same homebuyer/site lessee can only afford to purchase a $48,000 manufactured home; i.e. $20,000 ‘less house’ than when rent is/was only $333/month.

And know what? The affordability challenge worsens when one realizes today’s modus operandi is to expect homeowner/site lessees to pay household utility bills in addition to the PITI (principal, interest, taxes, insurance) calculated as being part of the 30 percent HEF – making the transaction ‘risky’. However, when 25 percent of the 30 percent HEF is set aside to pay household utility bills, leaving less residual for paying PITI; well, less house can be bought, but the homebuyer/site lessee is in a far more ‘affordable’ position than before! For example, given same previous ‘givens’, the ‘affordable’ mortgage pencils out this way under the 3:1 & 2:1 ratio scenarios. In the first instance, $36,000 X .3 HEF, then X .75(%) to account for 25% holdback for utility payments, divided by 12 months, deduct $333/month site rent = $342 for mortgage, or $41,000 ‘affordable’ home purchase. Increase site rent to $500/month and end result is a $19,000 manufactured home purchase– less than half the purchase power!

OK, back to the predatory rent rate(s) comment made early in the second half of this ‘Preparatory & Predatory’ treatise. Today, more than ever, we want to see the manufactured housing industry as a whole, and especially the land lease community sector of it, return to say 200,000 new HUD-Code homes shipped annually (We’re at 96,555 year end 2018), and far less than the estimated 250,000 vacant rental homesites nationwide, so must keep home prices and rental homesite rates reasonable and under control! Unfortunately, some, if not all, published regional site rent surveys are skewed, with ‘dollars higher than overall reality’, as market surveyors cherry pick larger, institutional grade land lease communities, characteristically found within the 500+/- property portfolios. The vast majority and numbers of small to mid-sized Mom & Pop communities are rarely included in these surveys. Why? Their site rent rates are generally lower, and they’ve not been consolidated into a property portfolio. Result? Published survey results trend higher and higher year after year, providing cover for properties not worthy of premium site rent rates, but swept up in the supposed prosperity of others, nonetheless.

What to do ‘bout all this? As you can imagine, these are corporate decisions. Either continue to be predatory and enjoy maximum profits in the short term, and let others (future buyers of properties in question) deal with the consequences (i.e. usually increased number of vacant rental homesites) later; OR, be in the business for the long haul, treating present and future homeowners/site lessees as the valuable and valued customers they are!

Preparatory & Predatory. Where do YOU pencil-out relative to these two perspectives? Is someone teaching you the ropes of new home purchase, selling, and seller-finance; or, are you assisting your peers in this area?*3 And how ‘bout the rental homesite rates at your land lease communities? Do they really ‘make sense’, relative to other forms of multifamily rental properties in your local housing market, or are you engaged in predatory practices?

End Notes.

1. Thomson Reuters Foundation, Washington, DC. February 2019.

2. 30th anniversary ALLEN REPORT poll of 100 such portfolios showed an average portfolio size of 43 land lease communities, and average property size of 211 rental homesites. To purchase a copy of this seminal resource document, visit

3. A popular format today involves Four Steps to Selling & Financing New Homes On-site Within Land Lease Communities: Getting Ready! Buying Homes! Selling Homes! Financing Homes! All via the Six Right Ps of Marketing: Right Product, Right Place, Right Price, Right Promotion, Right People, Right Process. If you’d like a FREE 3X5” plastic wallet card featuring these two guidelines, simply request one via or visit

George Allen, CPM, MHM
Official MHIndustry HOTLINE: (877) M

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