Making a Year 2020 Case for Rental Manufactured Homes on Rental Homesites Within Land Lease Communities

Blog # 576 @ 13 March 2020; Copyright 2020;

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’

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INTRODUCTION: Two things this time around. Part I, when you get right down to it, contains not only some unrecorded 1970s & 80s’ history of mobile home & mobile home park rentals, but also ‘splains’ how we got back into the business of selling and leasing new HUD-Code homes on-site in land lease communities, circa 2000-2010 & beyond! AND, how the REITs execute this business model well. Part II contains timely loan origination information, provided by Art Tuverson of Berkadia Commercial, in the event you need acquisition financing or refinancing of existing land lease community debt. By the way, the 22nd annual National Registry of ALL Lenders, one of 12 special Resource Documents available only from EducateMHC, will be distributed next week with the premier March issue of The Allen Confidential business newsletter. Frankly, if you’re one of the 25 realty-secured banks and loan brokers listed therein (along with their contacts and contact information), you will want this document, as it among other things, clearly describes the lending market during 2019 and moving forward into 2020 – supplied by originators at Wells Fargo. To get a copy, visit or phone me via Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.


Making a Year 2020 Case for Rental Manufactured Homes on Rental Homesites Within Land Lease Communities

Funny how sometimes ‘history repeats itself’, i.e. the leasing of manufactured homes on-site within land lease communities – surprising ‘old timers’ that anyone would ‘do that again’. At the same time, new ‘players’ to the land lease community investment and management scene might well view said leasing of new homes to otherwise-qualified-but-cash- shy ‘prospective residents’ as one smart business move! How’d all this come about in the past, and what’s today’s stake in this still emerging trend in the national rental housing market?

First a little history. During the mid-1970s, when the infamous HUD-Code building code regs appeared on our business scene, amidst the most aggressive development of raw land into ‘mobile home parks’ in our history, an abrupt disruption of new home shipments (Plummeting from 579,940 new mobile homes in 1973 to only 246,120 during year 1976!), saw tens of thousands of vacant rental homesites begging for homes! One strategy? Go out and buy as many used (resale) mobile homes as possible, move them on-site, and rent them to anyone who could fog a mirror!

Did this strategy work? Sure, for a while; and as well or poorly as property management policies and procedures, put in place to control tenant screening, rent collection, rules enforcement, and resident relations, were enforced. My first property portfolio was comprised of four (then) mobile home parks in the Midwest, having 1200 rental homesites with 350 reconditioned rental mobile homes in place, with half of these configured as duplex units – yes, two families living in the same 14X70 manufactured home. As I took over responsibility for the properties, chaos reigned. Only after I replaced all four on-site managers, tightened tenant screening, and changed from monthly to weekly rent collection (where rental units were concerned), did operational turnaround occur, resulting in vastly improved rent collection efficiency, taking the properties, altogether, from a net loss position to positive cash flow!*1

Now, between 1980 and the REIT wavelet of 1994 & 1995 (including the Resolution Trust Corporation or RTC era of 1989-1995), it was common practice to convert rentals (i.e. park-owned homes) into contract sales, before marketing land lease communities ‘for sale’.*2 As a result, there were far fewer rental units, per se, to be found on-site then, and through the first decade of the new millennium.

However, by the time year 2009 arrived, new manufactured homes shipments again plummeted, this time from 372,943+/- in 1998, to an historic nadir of only 49,789+/- new manufactured homes! This time it was the loss of easy access to chattel capital for home-only loans that crippled new manufactured home production and shipments. What happened to address this serious matter? At least three things:

• 2/28/2009 at the RV/MH Hall of Fame in Elkhart, IN. 100+ HUD-Code manufacturers and land lease community owners/operators convened, and agreed on a new home design favorable to rental homesite installation, and featuring durability-enhancing cabinetry and plumbing, to speed ‘make ready’ between renters and contract purchasers. Hence the Community Series Home, as consultant Don Westphal labeled it later that year.

• Given the lack of even reasonable access to chattel capital for home-only loans, land lease community owners/operators toyed with a variety of home finance measures (e.g. contract sale, lease option, ‘captive finance’ and more) to sell and seller-finance new homes on-site (given disappearance of 10,000+/- independent-street-MHRetailers). However, these finance measures were oft offset by unexpected appearance of the S.A.F.E. Act, then Consumer Finance Protection Bureau or CFPB regulations.

• Return of rental homes to rental homesites within land lease communities – only this time around, with an emphasis on new manufactured homes instead of used units. YES! Communities was one of the first major property portfolio firms to embrace this old-but-new strategy; and for a time – maybe even to this day, enjoyed success as long as they carefully screened prospective home renters, and visited said rentals on a regular basis, under the guise of changing filters and exterminating vermin.

Today, all three real estate investment trusts, and a host of other property portfolio firms, engage in the rental of new manufactured homes on-site within their land lease communities. Every Fall the ALLEN REPORT surveys 500+/- land lease community portfolio firms, and enjoys a healthy 20 percent return of survey questionnaires. Here’s the definitive statement, about presence of rental units, featured in the 31st annual ALLEN REPORT distributed during January 2020:

“44 of 100 ALLEN REPORT respondents, in 2019, confirmed presence of rental homes on-site within their communities. Unadulterated total of rental units = 47,542 or 1,081 per community. These totals are down from 53,931 and 1,100 reported during 2018. Furthermore, when 25,530 rental units among just three mega portfolios, in 2019, are subtracted out, it leaves an average of 541 rental units in each of the remaining portfolios.” NOTE. It is nigh impossible, given the wide range in property sizes within portfolios, to accurately extrapolate the total number of rental units that might be afield among all 500+/- portfolios nationwide and in Canada. 200,000+ anyone? And the slightly reduced total number of rental units has more to do with which portfolio firms responded with usable data and which ones simply chose not to share information this time around. GFA

So, what are the economics behind a successful rental program? Besides the policy and procedure measures recommended earlier, product selection, financing of new homes as rentals, estimating rental rates, and more, all play important roles. What follows from here are some casual observations and recommendations from portfolio owners/operators ‘all in’ the rental home scene.

• Vacant rental homesites earn $-0-. What’s it cost to install a new singlesection or multisection home, and is it possible to gross a 20% ‘return‘ on that? If so, you should be able to net 10% unleveraged. Finance the home, and one’s ‘return’ depends on interest expense. For example, a $50,000 cost new home, with 80% financeable, will cost $2,800+/- per year. Rent-wise, the home should gross $10,000/year (i.e. $800/month rent) and net $5,000. Subtract out the $2,800+/- interest cost and realize $2,200/year as a return on the value of the rental homesite.

• We recommend rental customers staying three years or less, rent our homes. This increases occupancy for us, by making it easier for them to qualify and move into the community, and it makes it easier for them to leave when the time comes, because they don’t have to worry about reselling the house.

• Renting simplifies matters greatly for us. A resident needs but one month rent, plus one month security deposit or $1,600, as opposed to homebuyers/site lessees who need 10% down payment plus one month rent, generally about $8,000. The difficulty getting prospects financed these days, results in us renting eight homes for every one we sell. And we maintain 95% rental home occupancy! Our total maintenance cost for a rental unit is only $600+/- per unit per year.

So, are rental units in land lease communities ‘here to stay’? Your guess is as good as mine. They’re certainly filling the affordable housing need right now, especially in the face of tightened financial regulations and lack of reasonable access to chattel capital for home-only loans. But, like the last decade or two of the 20th century, unforeseen circumstances might, once again, make it advantageous to convert rental units into contract sales – especially before marketing land lease communities ‘for sale’.

End Notes.

1. For the complete story of this saga, and how it played out a decade later, read the short story ‘An Error to Die For’ in SWAN SONG, available via

2. Why convert rental units to contract sales during the period 1980 thru 2009? Reconditioned manufactured homes used as rental units were an expensive proposition, where basic repairs and ‘make ready’ maintenance were concerned. Furthermore, land lease community ‘buyers’ oft aggressively negotiated the value of rental units ‘down’ from their capitalized income value to minimal replacement values. And, at the time, most lenders, as well as the GSEs until they dropped out of the manufactured housing market, eschewed financing and guaranteeing ‘park-owned’ home loans.

Part II.

$ Market Updates for Land Lease & RV Communities…

Record Low: US Treasury rates dropped to record lows, with the entire yield curve below 1% for the first time in history; and the 10-year US Treasury hit a record low of 0.32% on March 9.

Record Flow: Fannie Mae & Freddie Mac are being inundated with new loan requests, submissions are at $9 billion a week for each lender, triple their normal pace! (Expect GSEs to be cautious about guaranteeing loans with firms who might plan to greatly increase rental homesite rents soon after deal ‘closings’, adding to discontent already fanning the flames of landlord-tenant legislation. GFA)

Agency Response. Agencies continue to provide loan quotes injecting liquidity into the market during times of high volatility; and their response to record inflows and the low Treasury rates has been to increase spreads and institute tight floor rates – currently financing rates around 3.0%.

Agency Forecast: If new submissions maintain at the current pace, expect spreads to increase and credit tighten throughout the year, as agency lenders manage their 2020 volume caps.

Other Lenders. Life companies actively quoting financing rates in the low 3.05 range, and conduit lenders on ‘standby’ until the market provides price clarity.

Thanks, again, to Art Tuverson for supplying the gist of this information for blog floggers (readers). And, no kidding, YOU DO WANT your personal copy of the 22nd annual National Registry of ALL Lenders Serving Land Lease Communities & the Manufactured Housing Industry!

George Allen, CPM™Emeritus, MHM™Master

Postscript. I rarely do postscripts, but in the event YOU are interested in writing MH & LLCommunity trade-related articles for one or more of three trade publications, know I’m planning a day long Writers’ Seminar at the RV/MH Hall of Fame in Elkhart, IN., on 3 August, roughly from 9AM-3PM (lunch together). Attendance must be limited, so if seriously interested, respond NOW to this invitation, via email: or the phone number listed above. Minimum fee to cover handouts and necessary meeting expenses.

Also know, EducateMHC, the same day is hosting its day long, and very popular, Manufactured Housing Manager professional property management training & certification program at the RV/MH Hall of Fame. Today, nearly 1,500 MHMs own/operate land lease communities throughout North America! To register, visit

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