Selling your community to the residents?

hether you refer to it as a trailer park, mobile home park, manufactured home park, or LLCommunity, today's manufactured housing land lease community is widely sought after by sophisticated real estate income property investors. However, in today's market their pricing guidelines can often be less than seller's expectations. And, it may be difficult to sell communities which are not "investment grade", or those which are large enough with sufficient income to provide for expensive full time on-site management, maintenance reserves, and external management fees; all of which are typical underwriting requirements by many lenders.

What is an "investment grade community"?

As a result, community owners are finding that their pricing can be substantially higher than these investment oriented income property firms are willing to sell.

In addition, as you know, many LLCommunity owners have to continually deal with issues such as: regular increases in monthly lease payments to cover expenses, increases in costs of financing, and overall capital improvements to their communities. Some describe these as:

Residents of course, don't like these increases, and can often see them as "gouging".

Trying to get resident's compliance with the communities strict home and residents standards can also be an on-going hassle for management. Holding down speeds on narrow streets, and keeping children and their toys out of the way of traffic is time consuming. And most of all, trying to be a kind of "cop" in enforcing loud parties, illegal parking, and residents who don't keep their homes and homesites kept up to community standards takes up a lot of management's time. And the regular screening of new residents who have purchased used and repo homes can be very time consuming.

How about selling it to the residents?

There are lots of advantages to consider: residents will often pay more than an income property investment firm will because they may not have to meet all the strict underwriting standards a commercial may have. Their operating costs may actually be lower because of the possibility of in-community management. Residents may wish to contact Paul Bradley at ROCUSA. Once a legal entity has been formed for the purpose of acquiring and managing the community,

and the financing has been arranged for, the transition can be somewhat seamless since all parties are fully informed as to the quality and condition of the community.

Using lower interest, high loan to value loan programs like the FHA207m program which can often take 6 months or longer, may not be an obstacle for residents who may be happy to wait for approvals. Or in some cases, various state agencies have some good financing options available.

It can be a win-win for all involved: the community owner can often get a higher price from a sale to the residents, and smaller less than "investment grade" communities can be sold at larger community price levels. The residents can take back direct control of their community, and more directly manage their expenses, using those more adapted to resident management and control. George Allen, at Community Investors may be able to help you.
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Often residents believe they can share in the community management responsibilities, lowering operating costs, and provide for much better community security than can an impartial investment company.

Investors, community owners, community residents: come to our seminar in Louisville Jan 13th on the subject of private financing for community purchases.
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