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Buying a Home in a California Mobile Home Park

Fri, Jan 12, 2024 – If you are planning on purchasing a home in one of California’s 5,231 mobile/manufactured home and RV parks, here are your basic options in order of Best to Worst Case Scenarios.

  1. Option 1 – Buy the Home, Buy the Land/Lot (HOA Fee), Resident Owned Community (ROC)
  2. Option 2 – Buy the Home, Lease the Land/Lot (Space Rent), Rent Stabilization Ordinance (RSO), Private
  3. Option 3 – Buy the Home, Lease the Land/Lot (Space Rent), RSO, Corporate
  4. Option 4 – Buy the Home, Lease the Land/Lot (Space Rent), No RSO, Private
  5. Option 5 – Buy the Home, Lease the Land/Lot (Space Rent), No RSO, Corporate

Note: Labels: Private = Privately Owned, Corporate = Corporate Owned

Mobile Homes: Last Week Tonight with John Oliver (HBO)

Before reviewing your options below for purchasing a mobile/manufactured home, please watch this 15-minute segment from “Last Week Tonight with John Oliver” about Mobile Homes which was published on Sunday, April 7, 2019 and currently has over 9.7 million views.

Mobile homes may seem like an affordable housing option, but large investment companies are making them less and less so.

Note: Heading Labels: Private = Privately Owned, Corporate = Corporate Owned

Option 1 – Buy the Home, Buy the Land, ROC

Option 1 is by far the best option when purchasing a mobile/manufactured home. There are approximately Resident Owned Communities in the State of California. You will pay more for the mobile/manufactured home but you now own the lot that the home sits on and your HOA Fees are typically significantly less than space rents.

Your home’s equity is protected in an ROC.

Option 2 – Buy the Home, Lease the Land, RSO, Private

Option 2 is the second best option depending on the conditions of the Rent Stabilization Ordinance (RSO). Some RSOs are NO longer in the resident’s best interests due to 100% CPI annual increases with no caps. There are approximately 100 cities/counties in California that have a Mobilehome Park Rent Stabilization Ordinance. Of those, it appears that 15 of them have a 100% CPI increase with no cap.

Your home’s equity is somewhat protected when an RSO is present.

Important Note: Do NOT sign a long-term lease if you are protected by an RSO.

Option 3 – Buy the Home, Lease the Land, RSO, Corporate

Option 3 is the third best option depending on the conditions of the RSO. Be wary of any mobile home park owned by a corporation/investor. Some mobile/manufactured home park owners have challenged, and continue to challenge RSOs. You MUST perform due diligence prior to making any home purchase in a corporate owned mobile home park.

Your home’s equity is somewhat protected when an RSO is present.

Important Note: Do NOT sign a long-term lease if you are protected by an RSO.

Option 4 – Buy the Home, Lease the Land, No RSO, Private

Option 4 may be a viable option for many. Usually, privately owned (family owned) parks are of a higher caliber with good neighbor owners. You can expect space rents to remain at a reasonable rate during the time the family owns it.

But, you are now in a community that may end up selling unexpectedly. You may awaken one morning to find that the mobile home park is now owned by a corporate entity and your space rent is increasing by 20-40%. This increase is usually justified by an increase in property taxes that the new corporate owner has to pay along with an attempt to bring space rents up to inflated market rates.

Your home’s equity is somewhat protected when privately owned (good neighbor owners). This may not be the case in all mobile home parks that are privately owned.

Option 5 – Buy the Home, Lease the Land, No RSO, Corporate

Option 5 is NOT a viable option for many. Usually within 3-5 years after purchase, the space rent has increased to a point where it is no longer affordable. Typically the homeowner ends up selling their mobile/manufactured home for less than what it is worth due to the space rent increases. The general industry rule of thumb is that for every $10 per month space rent increase, you lose $1,000 in mobile home equity.

Your home’s equity is usually NOT protected when in a corporate owned mobile home park. In many instances, corporate owned MHPs have space rents well above market rates. The higher the space rent, the more likely the equity in your home suffers. We’ve witnessed this happening in many of California’s corporate owned mobile home parks e.g. the review of 5,000+ mobile home for sale listings.

Mobile home values normally plummet immediately after a corporate MHP purchase. This occurs through a space rent increase for new buyers that is usually significantly more than it was prior to the purchase e.g. from $1,445 to $2,195. If we use the industry rule of thumb, this increase of $750 per month may have caused a loss of $75,000 in equity. Based on mobile home sales being tracked in the park, the equity loss is noticeable.