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Coming Home A Rural Seminar 2012

Coming Home A Rural Seminar 2012. Preserving Manufactured Home Communities: Financial Feasibility. Rural Community Assistance Corporation. Manufactured Home Communities (MHCs). MHCs are Often very affordable Part of the spectrum of housing choices Disappearing in many places

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Coming Home A Rural Seminar 2012

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  1. Coming HomeA Rural Seminar2012 Preserving Manufactured Home Communities: Financial Feasibility Rural Community Assistance Corporation

  2. Manufactured Home Communities (MHCs) • MHCs are • Often very affordable • Part of the spectrum of housing choices • Disappearing in many places • Opportunity to convert to resident ownership or nonprofit ownership • Hybrid of homeownership units and rental spaces

  3. 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 there • Possibly no decrease to rent, just stabilization

  4. Challenges To Using Subsidy • Even if subsidy is only in the MHC, can the homeowners get comfortable with: • Annual income verifications • Restrictions on who they sell to, to meet income targeting • The indirect restriction on price, based on income of the buyer

  5. Challenges To Rent Targeting • Hard to make normal rules apply • homeowners have both house payment and space rent • House payments vary widely within a community. • Better to compare rents to market instead of percentage of income • Argue for the rent limit that best fits

  6. Operating Expenses • Similar to rental housing, except • Maintenance on infrastructure & common areas only • Reserves for infrastructure & common areas only • Septic systems are common • Wells are possible • State MHC fees or inspections possible

  7. Three Ways To Look At Purchase Price • Price per space • Rent multiplier • Capitalization, or cap rates

  8. 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

  9. 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 west Example: $400 rent x 110 = $44,000/space • The closer to 100, the less subsidy or equity needed

  10. Cap Rates • Used to estimate market value • Investors use to measure payback on investment • Also is an indicator of cash available relative to price • Cash can be used to support debt • Higher cap rate = more debt support, less subsidy or equity needed

  11. Cap Rates • Capitalization Rate is annual Net Operating Income (NOI) divided by price • If 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

  12. 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

  13. Thank you! Eileen Piekarz 775/ 323-8882 epiekarz@rcac.org HOME Program Requirements

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