Renting vs. Selling on Contract

[Matt McCurdy]

I'm seeing some softening of the contract sales market selling mobile homes in my mobile home community.  The town the mobile home community is in has a LARGE percent of tenants vs. home owners (60/40), so I'm wondering if I'm trying to force the issue by selling on contract when the tenants really just want the freedom to rent?

Currently, I have 7 mobile homes sitting vacant, so the idea of getting rent sounds great.  However, the idea of maintenance calls, risk of damage to the property, etc. doesn't excite me.  Any thoughts or ideas to make either model work the best (selling on contract or renting)?

[Rachel H.]

@Matt McCurdy If the majority of residents in the community prefer to rent, it may have more to say about the community than anything else. Most times, it's the community that attracts a certain type of clientele (not the other way around). 

Personally, I've tried to sell on contract in lower-end type communities which attracted a less than desirable type of clientele. Unfortunately, no one met my standards. So, I eventually sold for cash to an investor who moved the home I was selling out of the park and onto their piece of land. 

If you're not in a position to rent, you may want to just sell for cash and get out completely. The other option is to rent but to hire someone to manage your rentals. Though, you may end up managing that person (or company) which I've also done in the past. 

Hope that helps! 

[Matt McCurdy]

Quote from @Rachel H.:

@Matt McCurdy If the majority of residents in the community prefer to rent, it may have more to say about the community than anything else. Most times, it's the community that attracts a certain type of clientele (not the other way around). 

Personally, I've tried to sell on contract in lower-end type communities which attracted a less than desirable type of clientele. Unfortunately, no one met my standards. So, I eventually sold for cash to an investor who moved the home I was selling out of the park and onto their piece of land. 

If you're not in a position to rent, you may want to just sell for cash and get out completely. The other option is to rent but to hire someone to manage your rentals. Though, you may end up managing that person (or company) which I've also done in the past. 

Hope that helps! 

I’ve invested considerably into the community to make it better. New $15k playground, pavilion, new water lines, and storage units. We weren’t having issues selling on contract until late last year (I’ve owned it since 2021). There’s a new manufacturing plant being built less than a mile down the road.

[Roger D Jones]

Matt,

I have both types of parks and certainly the all TOH park is easier to manage but it is our mixed park with 13 POH rentals that really drives the NOI. We are lucky to be in the right market situation with that park. We also have a 24 hr/wk maintanance manager who we pay very well to keep our homes in good shape through preemptive maintenance. Even with the additional maintenance expense we still drive a 66% better NOI than if the entire park was TOH.

POH homes are not ideal but if managed right they can be very profitable.  Sometimes we have to play the hand of cards the market deals us and play the best hand we can.

[Dave Rav]

I think maybe your sample size is too small to consider these summarizations. I would think rent to own or owner financing would work superbly. We posted an RTO in South Carolina last week and received over 2,600 clicks on the ad! We had over 60 messages and easily 20 serious RTO tenant-buyers! Additionally, with it being tax return time, folks have money to execute. Do your thing!

[Matt McCurdy]

Quote from @Dave Rav:

I think maybe your sample size is too small to consider these summarizations. I would think rent to own or owner financing would work superbly. We posted an RTO in South Carolina last week and received over 2,600 clicks on the ad! We had over 60 messages and easily 20 serious RTO tenant-buyers! Additionally, with it being tax return time, folks have money to execute. Do your thing!

Thanks Dave!  That's a valid point.  Maybe it's worth paying for a Facebook ad campaign.  Right now, I've just been using Facebook Marketplace.  When I first bought the community (2021), we had zero vacancies (we couldn't get enough MH's to market), but the back half of 2022 and first part of this year has been slower.  I'm hopeful an early Spring in Iowa coupled with tax refunds will open the flood gates.

[Matt McCurdy]

Quote from @Roger D Jones:

Matt,

I have both types of parks and certainly the all TOH park is easier to manage but it is our mixed park with 13 POH rentals that really drives the NOI. We are lucky to be in the right market situation with that park. We also have a 24 hr/wk maintanance manager who we pay very well to keep our homes in good shape through preemptive maintenance. Even with the additional maintenance expense we still drive a 66% better NOI than if the entire park was TOH.

POH homes are not ideal but if managed right they can be very profitable.  Sometimes we have to play the hand of cards the market deals us and play the best hand we can.

 Thanks Roger for your insight!

[Dave Rav]

@Matt McCurdy - by the way, FB marketplace posting was F-R-E-E.  This is different than FB advertising (which costs, and we've done in the past)

A followup to our RTO unit. So, using FB marketplace we spent $0 on advertising, received over 60 messages and had a tenant buyer placed within 72 hours. They moved in put down $6k and now the property positive cashflows $650/mo.

There's your success story.  Feb 2024