Post on 31-Dec-2015
Coming HomeA Rural Seminar
2012
Preserving Manufactured Home Communities:Financial Feasibility
Rural Community Assistance Corporation
Manufactured Home Communities (MHCs)
MHCs areOften very affordablePart of the spectrum of housing choicesDisappearing in many placesOpportunity to convert to resident
ownership or nonprofit ownershipHybrid of homeownership units and rental
spaces
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MHC Financial Feasibility
Challenges To Using Subsidy
Even if subsidy is only in the MHC (land and infrastructure), can the funder get comfortable with:Restricting space rents and NOT home
resale prices?Inspecting the MHC and NOT the homes?Mixed income based on whoever is therePossibly no decrease to rent, just
stabilization
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MHC Financial Feasibility
Challenges To Using Subsidy
Even if subsidy is only in the MHC, can the homeowners get comfortable with:Annual income verificationsRestrictions on who they sell to, to meet
income targetingThe indirect restriction on price, based on
income of the buyer
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MHC Financial Feasibility
Challenges To Rent Targeting
Hard to make normal rules applyhomeowners have both house payment
and space rentHouse payments vary widely within a
community.Better to compare rents to market
instead of percentage of incomeArgue for the rent limit that best fits
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MHC Financial Feasibility
Operating Expenses
Similar to rental housing, exceptMaintenance on infrastructure & common
areas onlyReserves for infrastructure & common
areas onlySeptic systems are commonWells are possibleState MHC fees or inspections possible
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MHC Financial Feasibility
Three Ways To Look At Purchase Price
Price per space
Rent multiplier
Capitalization, or cap rates
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MHC Financial Feasibility
Price Per Space
Big, urban, amenitized MHC’s are priced as high as $100,000 per space in CA
Small, rural, basic MHC’s are often priced at $35,000 to $50,000 per space in the west
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MHC Financial Feasibility
Rent Multiplier Rule of Thumb
Ideally, price per space should be a multiplier of the space rent
100 in some parts of the US 110 - 120 is common pricing in the rural
westExample: $400 rent x 110 = $44,000/space
The closer to 100, the less subsidy or equity needed
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MHC Financial Feasibility
Cap Rates
Used to estimate market valueInvestors use to measure payback on
investmentAlso is an indicator of cash available
relative to priceCash can be used to support debtHigher cap rate = more debt support,
less subsidy or equity needed
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MHC Financial Feasibility
Cap Rates
Capitalization Rate is annual Net Operating Income (NOI) divided by priceIf NOI is $100,000 then• At a price of $1M the cap rate is 10%• At a price of $1.4M the cap rate is 7.14%
Or if the price is $1.4M• If the cap is 10%, then the NOI is $140,000
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MHC Financial Feasibility
Cap Rates
Big, urban, amenitized MHC’s are priced at caps as low as 5%- 6% in CA
Small, rural, basic MHC’s are priced at caps from 7% to 9% in the west.
High caps may have deferred maintenance or infrastructure issues
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Eileen Piekarz775/ 323-8882
epiekarz@rcac.org
Thank you!
HOME Program Requirements 13