What does "lot rent only" actually mean when a fund says it owns 4,000 pads?

A pad and a lot are the same thing. It's the numbered piece of ground with utility hookups where one home sits. Some operators say site. If a park has 200 pads and 180 are occupied, that's 90% occupancy, and the vacancy is empty dirt rather than an empty building.

Lot rent is the rent for the ground and the infrastructure. Say it's $400 a month. The resident owns the home itself, so when the water heater dies or the roof leaks, that's their problem. That's the whole reason expense ratios in this sector run lower than apartments, roughly 35 to 45 percent of income versus 50 to 65.

A park-owned home is one the park bought or repossessed and now rents out like an apartment. The rent is higher, maybe $850 all in, but you've just signed up to be a landlord on a depreciating structure with appliances, and you're renting to someone who can leave at the end of the month with no moving cost. Lot-rent tenants face thousands of dollars to move a home, which is why they stay for years. So the fund isn't giving up income when it sells homes to residents. It's swapping a higher, more expensive, more mobile income stream for a lower, cheaper, stickier one, and buyers pay more for the second kind.

One thing to look for in those decks: how much of the occupancy is on rent-to-own contracts rather than outright resident ownership. Those sit in a gray area between the two categories and the paperwork varies a lot by state.