Mobile Home Park Mastery: Episode 121

Old Homes Never Die – Or Should They?

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Some people equate mobile homes with automobiles, with an attitude that you just trade them in for a newer model periodically. But does that make any financial sense? In this episode of the Mobile Home Park Mastery podcast, we’re going to explore the truth about old homes, their life expectancy, how to prolong it, and when to decide if an old home should be scrapped. As you’ll see, there’s much more to consider than you might expect.

Episode 121: Old Homes Never Die – Or Should They? Transcript

Mobile homes are built to last whether you realize it or not. When you take lumber and resins and then you cover that in a metal skin, you build a product that can last a long, long time. But maybe some of those mobile homes you should not bring them back to life but simply let them go and be replaced with new ones. This is Frank Rolfe of the Mobile Home Park Mastery Podcast series. We're going to be talking about old homes and when you need to pull the plug and give up the thought of remodeling them and when you should push forward and go ahead and remodel them as a better solution than a new home. So there's basically five things to think about when you have an old mobile home in your mobile home park that's in now in your parks inventory.

The first one is the condition of the home and how much repair it needs. There are some issues with older mobile homes you really don't want to address. For example, if the home has had a serious leak and has developed mold, you probably don't want to tangle with that. Too much liability, too much risk, and too much expense to do it. Additionally, if it's been through a fire or some other issue like that, you may say, well, you know what, it probably was a fine old home, but it needs so much work. So much particular work, so much expensive work. I just don't want to do that. So if we're talking here about older homes and need mostly cosmetics, maybe some plumbing work, replacement of the fixtures in the kitchen, in the bathrooms, that's one time of project. But if you're talking about a home where the whole ceiling has caved in because a giant tree branch hit it, that's a whole nother matter.

So the first issue of course, would be the condition of what you have. Now, the next one is going to be the obsolescence of the floor plan. Here's the deal. The homeless from the about the eighties on all share, very similar floor plans. The room sizes are about the same. The general flow of the home is about the same, but if you go back into the 60s in the 70s it's a whole nother picture. You have homes in that era where the rooms are particularly small. The rooms are particularly chopped up often whereas you have the one large room of living room and kitchen in the 80s to newer homes, than the 60s in the 70s you have giant barriers separating the living room from the kitchen, giving you a much more condensed feel. It just doesn't feel roomy like you can really move around in there very effectively and it really the killer is those bedroom sizes. Most of our customers demand a king size bed and they deserve a king size bed, but I can't deliver a King size bed and most of the older home stocks are the stuff that's built from the 60s in the 70s pre HUD homes. They simply do not have a master bedroom that can deliver on the American dream of having a large king size bed.

The next item is the demand level. What are the single family homes going for? What are the apartments going for? Where do you fit into that spectrum? If you have a park where the single family home prices that are in the surrounding area are low and sort of the apartment rents, then you may need to stick with those older used homes and not trying to import newer ones in because simply the customers cannot afford it, the demand is not there. So what's going on around you with housing values is another important characteristic of whether or not you're going to remodel that old home or replace it with a new one.

Next are the demographics of your customers. What kind of credit do they have? What kind of down payment can they afford? If they can't afford to buy a new home, then what are you doing bringing in a new home, you've got to deliver a product the customer can afford. Many parts of America where it's all about affordable housing, they don't need, they cannot afford those brand new homes. A brand new home today in most mobile home parks, you're talking about a 30 to $40,000 home. That's going to require in many areas a three to $4,000 or more down payment. It may simply beyond the money ability of your customers to do that. So you've got to figure out and know your customer well. If your customer has the credit and the required down payment and for new homes, fine and dandy, but if they don't, then the worst thing you could do would be to force feed them new homes by tearing down your older ones.

Finally, what's the difficulty in filling a lot in your mobile home park? Is your park one in which you have actual physical barriers to moving homes in? We have some parks like with lots of topography, lots of mature trees that have grown over time. It would be very, very difficult to bring new homes onto those lots and I don't really want to give up some of those things. I don't really want to tear down my beautiful large trees just to go ahead and make room for a new home when the old home might just fit the bill perfectly.

Also in some states you have HUD requirements of lot preparation and it's only true on new homes, but not the older homes. If I go with my old home and remodel it, I don't have that cost at all. So in some cases where the lot preparation costs might be the construction of Crete slab for $10,000 I'm a lot better off just going with the old home and not having to do that.

Also in some mobile home parks you had the city attitude that's very negative on replacing the older homes with new ones. So once again, if you feel that's going to be a problem, a conflict, maybe you say, I don't want to really fight that battle and I'm not going to do it.

So let's summarize the key issues you need to think about. Number one, these are the reasons that we might let that old home die structurally. Number one. If it is eight to 10 feet wide, those size homes, the early homes, simply are not big enough in width to allow for reasonably sized rooms. And even your 12 footers, once again may just not be large enough to give you that attractive floor plan that people want. So to for sure keep an older home, you'd want it to be probably four 14 feet in width. So if you've got a 14 foot wide, well then it's probably a keeper structurally, but an eight through a 12 maybe not so much.

Also, if the cost to remodel that home is significant. If it's got some real serious problems, if we're not just talking flooring and painting and fixing some cabinets, then again, possibly it should go. What would that price point be? Well, the average older home that you're going to remodel a full restoration on an older eighties home would rarely exceed $10,000 and we typically more be in the range of 5,000. But if you have a home that has extreme structural problems that need lots of work and it's going to exceed $10,000 then I probably wouldn't let the old home die. I don't think I would probably be pouring more money than that. And it's hard to even rationalize putting more money than that in it simply because at that price point you can buy an old nineties repo, which shouldn't be a much better looking home both inside and out with much better room flow and much larger rooms. And then you have a newer home for the customer. So it's going to be over 10,000 for sure. And even if it's over 5,000 you have to think once or twice about it.

Also, if your customers have not great credit and not a lot of down payment, then you're probably better off keeping the older home. But if they do have the money required doing a new home and if they do have the kind of credit required to get a mortgage on a new home, then I probably will let the old home die. Because if the customer can afford that new home and they want that new home, well why hold them back? On the new home, you can get that finance on the front end through companies such as 21st mortgage. I don't have to do any remodeling at all. No capital out of pocket. So sometimes if the customers can afford it, the numbers would point to the fact that the new home might be the better choice.

Also, what's your demand for the newer homes? Is your demand high? Are you in a market where the single family homes are expensive and the apartment rents are also very high? Those kinds of markets we have such high home prices yield tremendous amounts of demand for affordable housing and when you have a tremendous amount of demand, then that gives you much more feeling of confidence in destroying that older home and bringing in the new one.

Finally, if there are no barriers to bringing in new homes, if the city says no problem, we'd love to have the new home come in. There's no physical barriers such as trees or topography that would stop you from doing it. Then once again, it might be time to let the old home die and bring the new one in.

Now let me give you some secrets about these old homes. They can renovate really, really well. We have some 1980s homes that we have fully renovated from top to bottom and that home on the inside looks so much like a new home that it's scary and that's because they use pretty much the same room sizes and floor plan from the 80s all the way to current. So there's not a big difference to many customers. If I replaced the carpeting and repaint all the walls, change out all the kitchen fixtures and appliances and the same in the bathroom. Some customers would not even know the difference on the inside. Now on the outside, yes they would. The outside is not going to look the same. You're not going to have the pitched roof. It's not going to look quite as modern, but from the inside it's not bad. So we can really renovate these homes to a very high standard today.

Don't forget as well that people have gotten a lot smarter as far as homes and appearances and the things you can buy at Home Depot and Lowe's today. So your cost of renovating is not quite as high and the quality of what you're doing in the end is very, very good. So it's not like you need to go ahead and let the old home die to bring up something of a good quality. You can build a good quality product that the customer will be proud to live in even from those older homes. So don't let that be the chief driver to bring in the new and letting the old home die. It's something much, much more. It's much more tangible.

It's more of a scientific strategy decision based on numbers, demands, housing prices, many, many variables. But you can definitely take some of these older homes, bring them back to life with a little hard work, a little paid a little appliances, and build things that you can be proud of and customers can be proud of. In many cases, that's the right decision.

So whether you should let the old homes die and bring the new or not, it's entirely up to you. But don't do it just off the seat of your pants. Don't do it in a subjective ways. You can see there's many objective thoughts to think about and consideration of making that decision. This is Frank Rolfe the Mobile Home Park Mastery Podcast. Hope you enjoy this and talk to you again next week.