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The morality of owning mobile home parks
Let’s deep dive on this, I really want to hear both sides of this. Let’s keep it positive and may this be a start of a conversation.
What is the morality of owning a mobile home park, specifically to those of a lower income?
Is it right to sell the dream of owning a depreciating asset to those that aren’t truly educated on the subject?
Once again, let’s keep this civil and start an ongoing conversation.
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I see absolutely nothing wrong with owning a mobile/manufactured home park/community. A lot of people can't afford "stick built" housing, especially in the current market. Mobile/manufactured homes (yes, there is a difference between the two) are perfectly acceptable options for many.
It seems that many think mobile/manufactured homes are automatically depreciating assets. The truth is there is a market for them and it rises and falls just like any other. There is also a stigma against them because people automatically seem to think of "trailer trash". This couldn't be further from the case. Yes, there are nasty parks with extremely old coaches in them that are in bad shape, surrounded by chain link fences with a barking dog in a yard full of feces, but most mobile home parks are run by investors who care about them more than just the cash flow. These parks are well run, and the home owners do need to keep their homes in good repair per park rules.
Owning a mobile home park allows the investor to make very good cash flow while helping people who may have lower incomes. The home owners receive the pride of owning their own home even if they don't own the land. Even if they finance (which is available for almost any mobile/manufactured home) the PITI and space rent is often less than renting an apartment. They can do what they want with the inside of the coach, while having to maintain the exterior to the park standards. It is very similar to living in an HOA in that regard. A wealthy real estate investor once told me "in order to become wealthy you have to help a lot of people". Owning a mobile home park fits that bill perfectly.
As for owning a mobile/manufactured home, like I said there is a market for them. They are not automatically depreciating assets. A homeowner can purchase the home and built equity in the unit which they may eventually sell and invest the proceeds into a small stick built home. In an other scenario the coach is purchased by seniors who are downsizing and have sold their family home. In this case the proceeds of the sale of their stick built home often allows them to live independently for a longer period of time and not force them to rely on living with their children or other family members.
So when you ask "Is it right to sell the dream of owning a depreciating asset to those that aren’t truly educated on the subject?" My answer is "Yes. It is right to sell them the dream of owning a home they can afford". I also have to ask in return "Are you truly educated on the subject?"
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The odd thing to me about this is no one asks whether it is right to sell a person a car that isn't truly educated on the subject. Virtually all cars are depreciating assets and yet I don't remember hearing about too much cry and hue about not selling a car to someone.
First and foremost, a primary residence is a place to live. Whether or not it appreciates is not the primary function of the purchase. Lots of people in this country, even in an expanding RE market, lose money on their primary residence - especially if *all* costs have been accounted for, which usually doesn't happen when people are trying to figure out if they made any money on their home. They figure they bought it for $100k and sold it for $150k, they must have made money - but they forgot about the $30k in improvements and repairs they made while they were living in it, not to mention interest paid on the mortgage and the lost opportunity costs.
So turn this to mobile homes. Some people might argue that it's *more* moral to sell someone the least expensive, clean, safe place they can live in as a primary residence, the same way you might consider it more "moral" to sell a low income person a $5k reliable used car rather than a $50k Suburban with a monster payment.
Just because some - maybe a lot - of mobile home parks are run poorly and look like crap doesn't make the park itself any more or less inherently good. I can drive to a lot of places where stick-built housing is downright scary, because slumlords own it and the city doesn't care to do anything about requiring basic levels of maintenance. In fact, in my own city, the projects that are owned by the local housing authority are cleaner and better maintained than the privately-owned low income housing in the same area, which often looks junked up, failing siding, failing roofs, etc.
Another thing - a mobile home park where the individual owns the mobile home gives people pride of ownership, which is no different to me than if you live in a house in a neighborhood. You can say "Yeah, but they're paying rent on the lot" - but so is everyone that owns a house. If I don't pay my property tax - which is state/county "rent" on my land - they foreclose on my property. If there's a homeowner's association and I don't pay my dues - the same thing. How is that any different than paying rent on a MH spot?
A mobile home park can be run well or can be run like a dump. There are mobile home parks in Florida on the ocean & intercoastal waterways that cost more than my 2300 sf home.
I think getting down on mobile homes and parks is an elitist attitude. I wouldn't want to live in one, but not because I think they are good or bad, the same way I wouldn't want to live in a condo or a townhouse because I want space from my neighbors. Lots of people feel differently. You couldn't pay me to live in a Manhattan penthouse, yet people pay 7+ figures to buy some of them.
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@Don Alder-LaRue Great answer and very well thought out response.
To answer your question, no. I don’t think I am fully educated on the subject, but I am in the process of learning all I can. I always appreciate different sides of the coin.
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@JD Martin I loved what you said about comparing "renting the lot" to "paying property taxes". That is very true. As well as failing to pay your HOA dues.
This may be a stupid question but, are there property taxes on mobile homes, if they are leasing the lot but own the mobile/manufactured home?
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Originally posted by @Jess White:@JD Martin I loved what you said about comparing "renting the lot" to "paying property taxes". That is very true. As well as failing to pay your HOA dues.
This may be a stupid question but, are there property taxes on mobile homes, if they are leasing the lot but own the mobile/manufactured home?
The only taxes will be if your area charges a "personal property" tax, and in that case there would be some kind of tax due to the county/city/state like there would be for a vehicle. Beyond that, the MHP owner pays the property tax on the entire park and (hopefully) accounts for this cost in the lot rent. So in my state there's no personal property tax, but there is in North Carolina & South Carolina.
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@Jess White I believe that mobile homes are actually seen as vehicles in the eyes of the state. You pay property taxes on a Parcel of land and it's value.
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Originally posted by @JD Martin:The odd thing to me about this is no one asks whether it is right to sell a person a car that isn't truly educated on the subject. Virtually all cars are depreciating assets and yet I don't remember hearing about too much cry and hue about not selling a car to someone.
First and foremost, a primary residence is a place to live. Whether or not it appreciates is not the primary function of the purchase. Lots of people in this country, even in an expanding RE market, lose money on their primary residence - especially if *all* costs have been accounted for, which usually doesn't happen when people are trying to figure out if they made any money on their home. They figure they bought it for $100k and sold it for $150k, they must have made money - but they forgot about the $30k in improvements and repairs they made while they were living in it, not to mention interest paid on the mortgage and the lost opportunity costs.
So turn this to mobile homes. Some people might argue that it's *more* moral to sell someone the least expensive, clean, safe place they can live in as a primary residence, the same way you might consider it more "moral" to sell a low income person a $5k reliable used car rather than a $50k Suburban with a monster payment.
Just because some - maybe a lot - of mobile home parks are run poorly and look like crap doesn't make the park itself any more or less inherently good. I can drive to a lot of places where stick-built housing is downright scary, because slumlords own it and the city doesn't care to do anything about requiring basic levels of maintenance. In fact, in my own city, the projects that are owned by the local housing authority are cleaner and better maintained than the privately-owned low income housing in the same area, which often looks junked up, failing siding, failing roofs, etc.
Another thing - a mobile home park where the individual owns the mobile home gives people pride of ownership, which is no different to me than if you live in a house in a neighborhood. You can say "Yeah, but they're paying rent on the lot" - but so is everyone that owns a house. If I don't pay my property tax - which is state/county "rent" on my land - they foreclose on my property. If there's a homeowner's association and I don't pay my dues - the same thing. How is that any different than paying rent on a MH spot?
A mobile home park can be run well or can be run like a dump. There are mobile home parks in Florida on the ocean & intercoastal waterways that cost more than my 2300 sf home.
I think getting down on mobile homes and parks is an elitist attitude. I wouldn't want to live in one, but not because I think they are good or bad, the same way I wouldn't want to live in a condo or a townhouse because I want space from my neighbors. Lots of people feel differently. You couldn't pay me to live in a Manhattan penthouse, yet people pay 7+ figures to buy some of them.
depends on where the MH is located like all real estate its location location location.. poor or poor locations no doubt a new coach will fall in value.. But when your driving down the PCH from Huntington beach to the south like your heading over to Irvine there is a MHP right across the street from the ocean.. I think those MH's sell for 500k to 1 mil.. and space rent who knows how much probably well over 2k a month.. Parks of course sell based on Cap rates... not value of the homes generally. big difference.. And a MH on small acreage can appreciate nicely as well as a package.. we just did one for one of our vendors ( financed it for him) and that was in FLA on an Acre used Double wide and it sold for 185k..
There's no moral issue with owning any type of real estate in the same way there's no issue with whether I turn a light switch on or off - it's morally neutral. The moral issue is involved with you as the owner - how will you treat your tenants? Will you respect them and follow through with your responsibilities as a landlord? Regarding the idea of selling them the prospect of owning a (even depreciating) unit, the choice is theirs - they have the freedom to determine whether they should or should not. No matter what socio-economic level, I think people can make the best decisions for themselves. This is one of the virtues of a free market. You're offering to sell them a place to live, not crystal meth.
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you missed the real moral of the story.
there are groups now that realize that older parks in areas of no rent control can really hammer the tenants with rent increases as they know the tenants cant move the coach.. no place to take it no money to move it.. so they are squeezing many who are already on super tight budgets and now may not be able to buy their medication because rent went up.
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Not everyone can afford a more expe sive stick built house and everyone needs a place to love.
As long as no one is gouging someone on the rent or purchase price then it is a good thing to provide clean affordable housing for all price ranges.
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@Jay Hinrichs Very true, there are some landlords that do take advantage of lower income families. It’s a very split issue for sure.
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@Jess White In California a mobile home can be taxed in two separate ways. It can be registered with the Department of Housing and Community Development and you pay a low tax. (I own a coach and it costs me a whopping $72/year), but it can also be on the local tax rolls which will run approximately 1.25% of the homes value. I sell a lot of these (I'm a Realtor but also a licensed Mobile/Manufactured home salesperson...2 separate licenses) and those who are on the local tax rolls hate it. Their bills are about 3X the DHCD bills. The woman who owns the coach next to mine got a tax bill for over $1,000, and her coach was built in 1972!
@Tyler Gibson In California they are not considered vehicles. They were taken out of the DMV's control back in the 1950s.
@Jay Hinrichs here in the Coachella Valley most mobile home parks are under rent control. However most people don't realize that the western end of the valley (Palm Springs, Cathedral City, and Rancho Mirage) are also partly on Indian Reservation land, even though they are developed and there are a large number of homes on the indian land (leased land at a maximum of 65 years), including some mobile home parks. Since the Cahuilla Indians are their own sovereign nation the rent control ordinances do not apply. Your comment about hiking the rents up so people cannot afford the space rent truly applies to these parks. It's unfortunate for those who cannot afford the space rent and they end up moving into low income apartments BUT this also creates a money making opportunity. I just purchased and immediately (I mean 2 hours later) sold a single wide from a man who could not afford the space rent. He had inherited the coach when his sister died, and was only ONE MONTH behind on the rent (actually only a few days) and the park posted a 3 day notice. The neighbor knew he could not pay, and the park is very open about considering the coach abandoned property. I made him an offer so he could get something out of the deal. I paid him $3,000 for the coach, caught up the rent and paid the next month's rent, and sold the coach the same day for $18,000. My total cost was only $4500. Mind you, this was an old single-wide in less than stellar condition but it's in a nice park. Fixed up will bring mid $20s. There are opportunities everywhere if you keep your eyes open.
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@Jess White
They say mobile homes are tiny tin boxes that spit 💰. I wouldn't hesitate owning some 8f the situation was right. Ppl should stop listening to everything they hear & get a few more opinions on things.
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@Don Alder-LaRue in the Parks I have owned over the years.. I have had many a relative simply deed me the coach if it was paid for.. some folks get goofed up trying to flip coachs though.. when the park owner has to be part of the approval process of the new tenant.. I have seen that screw people up big time.
and U can hammer lenders too.. I on our 700 tree farm out of Willamina Oregon. I let our care taker move a nice double wide on hook it all up and such.. he lived on the property for free in exchange for keeping fences mended and poachers out.. cleaning culverts and general ranch duties..
He just decided to move and tried to sell the coach on the open market.. ( to be moved we did not want another tenant)
he could not sell it.. abandoned it. and stopped paying the bank tried to post it and I got ahold of the post.. called the bank they owned 54k on it.. long story short I told the bank to come and get their coach or we could evict and then charge them storage.. etc.. long story short they took 6600 for it.. and then we kept it.. ended up being another care taker situation and it gave us some value when we sold the ranch a few years ago to Stimson lumber.
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Everyone needs a home! Some have made life choices to put them in the position they are in. I prefer section 8 tenants for stability. A lot of people have varying opinions about it. I look at this as a business and every business needs customers/cash flow. I personally just purchased my very first investment mobile home on Tuesday. You are just providing a solution to those who can’t afford more.
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In NC, they are titled and taxed like vehicles. If the axles are removed and the mobile is placed on a permanent foundation on its own parcel of land they are appraised with the land like a traditional house. In western NC where there is limited affordable housing a nice doublewide will often appreciate just like a stick built home. There are plenty of tired run down parks around here(the kind that give MHP owners a bad name), but there are also quite a few that are well maintained and the rents are very desirable places to live. No different than apartment complexes or other multi family unit/landlord situations in my opinion.
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The morality of it lol ? Seems like a silly backwards argument. Offering someone with low income a safe comfortable place to live helps the community and keeps them from being homeless forced to move or left to live in some dangerous public housing facility . I’d argue that’s even more morally correct than renting out a sfh in many cases
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This is a really good question to ask and I love the conversation that came of it. Some of these responses covered my thoughts on the matter but to put it simply, low income folks need a place to live.
The moral part I believe doesn’t come from the park itself. Its how the owner goes about treating the residents.
Sure you can legally raise the rents to maximum the market supports and pocket all the difference (while putting none of it back into the park). That would be the extreme on the non moral side.
You can raise rents to market and put most our all of that money into the park to improve the quality of life for the residents. (Would this be considered a gray area?)
You can raise rents just a little . (Just in order to support the debt service and the necessary expenses). But then you have a park that just breaks even and people wouldn’t want to buy parks in that case. The park may not be able to sustain itself in the long run.
Also, while the mobile home is a depreciating assets, the sheer savings on the costs of the home compared to stick built housing is the balance that makes up for it. What someone doesn’t get in appreciation, they get in pure savings which equals money in their pocket.
Just my .02.
Thanks for the topic.
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I'm betting LA (both the town and the people) wished they had more mobile home parks right now lol.
IMO, the only people that think MHP are immoral, aside from the uneducated, are people who prefer socialism to capitalism.
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Originally posted by @Account Closed:There's no moral issue with owning any type of real estate in the same way there's no issue with whether I turn a light switch on or off - it's morally neutral. The moral issue is involved with you as the owner - how will you treat your tenants? Will you respect them and follow through with your responsibilities as a landlord? Regarding the idea of selling them the prospect of owning a (even depreciating) unit, the choice is theirs - they have the freedom to determine whether they should or should not. No matter what socio-economic level, I think people can make the best decisions for themselves. This is one of the virtues of a free market. You're offering to sell them a place to live, not crystal meth.
I agree with Jonny. You can be a greedy, sleaze-ball and trick a certain demographic into buying a mobile home with empty promises of glory and wealth, and then hammering them with high cost later. Or you can be a decent owner and let them decide intelligently. The owning of a mobile home park is not in itself a bad thing.
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There is only one undeniable market condition discussed on these forums and that is the lack of affordable housing in the country...it's so severe that it may not be solved in my lifetime. The low income housing wait lists in some markets are years long. We need more MHPs, not less.
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@Jess White
Baby boomers are retiring on average with less than 100k in retirement funds. They need affordable housing. Change my mind.
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I own an acre of land that I have considered splitting into 3 or 4 mobile home lots, but my fear is that if the tenant owns the mobile home and stops paying lot rent, how difficult would it be to evict them? It costs several thousand dollars to move a mobile home around here (if they can even find a place to move it), and if they can’t pay the lot rent they surely won’t be able to afford that. It just seems pretty complicated to me.
Here is another point on the question of morality of selling a depreciating asset. Very seldom are new park owners that take over old parks selling new trailers back to tenants. These units are fully depreciated. They can only go up in value if they are taken care of. Here in Maine, used homes, 80s and early 90s, have almost doubled in value over the past 10 years. HUD homes from the 70s have tripled. I just bought a 1995 Marlette 14 x 80 for $2000, granted that is a wholesale price. It is in need of major rehab. I will have $10,000 in it by the time it is set up in my park and it will be arguably better than new because we use stick built quality materials when rehabbing them. So someone will be able to buy a 3 bedroom, 2 bath, with a little over 1000 sq / ft of living space for around $25000. They will have a yard and private parking. If they take care of their home, it will always be worth at least $25000.
For me as an investor, I will sell in on payments and collect lot payments on what was an empty lot. I will get $800 a month for several years until it is paid off. My $10,000 investment will pay me $9600 per year and then about $4000 a year once it is paid.
I feel good about the “morality” on both sides.
Briefly on the other side, $400 a month lot rent to live in a dump, hardly fit for habitation is terrible. But if you take that condition that they were paying $200 for, and remember that current tenant greatly contributed to the dump in most cases, clean it up which may mean getting a new tenant, and now you charge $400 for it, where is there a morality issue.
It is very unfortunate that many people lack the self respect and self dignity to live as they do. This is not income dependent. Years ago I spent some time in Venezuela where people lived on a few bucks a day. They had nothing materially but there little shacks were very clean and they were proud of them.
The fact that many choose to live in conditions worse than animals in SFHs, mobile home parks, or apartments is a personal moral issue that, as a landlord, you try to solve will only lead to frustration and a loss of a lot of money.