‘We’ve Got A Problem!’
Blog # 503; Copyright @ 16 September 2018; community-investor.com
Perspective. ‘Land lease communities, previously manufactured home communities, & ‘mobile home parks’, comprise the real estate component of manufactured housing.’
This blog posting is the sole national advocate, voice, official ombudsman, historian, research reporter & online communication media for all North American LLCommunities
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INTRODUCTION: What follows, ‘Says a Lot’ & ‘Does Little’, beyond expressing angst & frustration concerning the state of land lease community investment in the U.S. today.
We’ve Got A Problem!
Consolidation of Land Lease Communities into Property Portfolios,
While a Mature Trend For This Unique Income-producing Property Type – Since Syndication Days of the Late 1970s – Appears to Now Be Out of Control & Reason
The problem? Often, but not always, ‘outside money’ (i.e. foreign investors, hedge funds) coming into this realty asset class,
1) Willing & able to pay ‘whatever it takes’ (i.e. inflated value) to corral one or more ground lease communities from the limited and stagnant national supply;
2) Almost always increasing rental home site rates out of proportion with other forms of rental housing in the same local housing market;
3) Then buying new HUD-Code homes they have no idea or experience ‘how to sell’, let alone ‘how to finance’ – leaving them vacant or pressed into service as desperation rentals.
Consequences? In general, sell-out to next fool willing to part with his/her money;
OR, divide the property portfolio up among disgruntled limited partners;
OR, ‘continue to march’ as if nothing untoward has happened, hoping for some degree of capital recovery upon disposition of the property or properties.
All three consequences are occurring simultaneously, in different regions of the country.
All the while, do these ‘Johnny come lately’ property portfolio builders, including those who’ve been around for awhile (i.e. decades) take active and or leadership roles in state manufactured housing association matters, lobbying, education, and networking? Not usually – unless there’s a landlord/tenant legislation challenge, or threat of regulatory action (e.g. rent control), that directly affects them..
Also (almost) gone are the days when sole proprietors developed raw land into land lease communities! Local regulatory barriers to all forms of affordable housing (Recall the deadly zoning triad: NIMBY, her sister LULU; and of course, BANANA!*1) continue to prevail throughout the U.S., despite federal efforts to the contrary. And have you tried to find development capital of late? Good luck with that. Consequently, land lease communities continue to be a scarce investment opportunities – whether ‘under development’ or as acquisition trophies.
Did you know? There is a published list of the ’10 Good Reasons to Own a Land Lease Community’. It’s Appendix II (page # 151) in the second edition of SWAN SONG, ‘George Allen’s History of the LLCommunity Real Estate Asset Class’ & ‘Official Record of MH Shipments (1955-present day)’; COBA7, Indianapolis, IN. 2018. Available for only $24.95 (post paid) via the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.
In any event, relative scarcity of the property type is ‘reason # 1’. This followed by 2) low annual turnover @ 5-10 percent per annum; 3) stable, competitive rent (usually, in the past); 4) lower operating expense ratio or OER @ 20-40 percent, compared to conventional apartments @ 50+%.; 5) economy of scale; 6) affordable home ownership & equity; 7) recession proof; 8) more opportunities to ‘add value’ (Think ‘Alternative Income To Rent’ measures proposed by RE consultant Allen Cymrot); 9) more versatility (Contemporary presence of modular homes, Park Model RVs, Vs for a season, ADUs*2 & more…); 10) opportunity to serve society – as low cost housing and prime source of ‘affordable housing’.
So, as a realty asset class, or unique income-producing property type, ‘We have a problem!’. What can be done about it? Not much, unfortunately. This is a Free Enterprise economy, and folk are certainly free to be profligate with their money if they desire to do so – and as we all know, ‘Fools continue to be born every minute’, where buying into the use of OPM (‘Other Peoples Money’) is concerned!
The only hope I see for salvation here; resolving this problem, is for the asset class to ‘grow a resident-focused conscience’ and implement principles of professional property management into all properties, small and large, from top to bottom! Will these two measures occur? Not likely.
It’s just that, after four decades in this business, seeing the same and similar mistakes made time and again, I truly desire to step in ‘more than as a freelance turnaround specialist’; but rather, as a ‘homeowner/site lessee advocate’, to ensure fairness and reasonableness for our customers, clients, residents! Unfortunately, the present day land lease community business model is not structured to function, and self-govern, in such an altruistic (‘benevolent’) fashion.
Bottom line? As long as land lease communities are plagued with profiteering taking priority over resident relations, we’ll not MAKE MANUFACTURED HOUSING GREAT AGAIN! anytime soon.
1. NIMBY = Not in My Back Yard; LULU = Locally Unwanted Land Use; &, BANANA = ‘Build Absolutely Nothing Anywhere Near Anyone!’
2. ADU = Accessory Dwelling Units, a.k.a. Granny Flats
George Allen, CPM, MHM
COBA7, a division of GFA Management, Inc., dba PMN Publishing
Box # 47024,
Indianapolis, IN. 46247