Two Schools of Thoughts

Two schools of thought divide the mobile home park (MHP) industry.

One is to own only pads or, in other words, the tenants own their home. The MHP owner doesn’t pay home R&M. The downside is that rent is much lower.

The second is to own the homes called park-owned homes (POHs). This is essentially a horizontal apartment complex, since the MHP owner is responsible for home R&M and turnover. The increased rent should cover elevated expenses.

Both schools will ardently defend their model and claim more profitability than the other. I think the answer is more nuanced. Time may change my analysis. If you want massive scale, lot rent is easier to finance and manage. Also, the buyer pool is larger and deeper. In certain markets, lot rent is woefully behind apartment rents leaving a sizable delta between rents. In these cases, POHs seem to make a lot of sense. Age and upkeep of units will drastically sway expense ratios. HVAC costs alone can erase cash flow. Certain demographics make POHs easier to manage partially because number of tenants, leading to less wear and tear. Seniors seem to be a great tenant base for this.

For my vision, I gravitate towards a lot rental model but several local players find success in the POHs.