Three reads in, I finally understand why lot rent is the whole business
Still not buying anything. Reading. But something clicked and I want to check whether I've actually got it or just think I have.
The thing I kept getting stuck on was why anyone would want to own a mobile home park instead of an apartment building. Same tenant income bracket, worse reputation, weird asset. Then I actually understood the land-lease part.
In an apartment building I own the walls, the roof, the furnace, the fridge, and the tenant's turnover is my repaint. In a park I own the ground, the road, the water and sewer lines, and the tenant owns the actual house. So the whole category of expense that eats apartment returns, unit renovations and roofs and HVAC, isn't mine. The chapter puts the operating expense ratio at roughly 35 to 45 percent for parks against 50 to 65 percent for apartments, and I finally see where the difference physically comes from. It's not clever. The expenses just aren't there because the buildings aren't mine.
And the turnover thing. An apartment tenant leaves with a U-Haul and a security deposit dispute. A park resident who wants to leave has to move a house, which is thousands of dollars and often the home can't survive the move at all. So they stay. That's why retention is so high, and it's a slightly uncomfortable reason when you sit with it.
What I still don't have a feel for: the infrastructure I do own is expensive and invisible. Water mains, sewer lines, roads. I read a thread here where a main replacement bid came in at $210k. So the expenses are lower until one day they are enormous and all at once.
Is that the actual trade? Low steady expenses with a big lumpy tail risk under the ground?