Home Ownership Structure

Thank you for the opportunity to share a concept which may be entirely new to you. Your housing decision may be one of the largest investment decisions you may ever make; certainly you will agree that it is your desire to make the most wise investment decision all around. Because of your interest in manufactured housing and to complete your investment decision it is important to consider the dynamics of Buying vs Leasing the land your home will be placed upon.

Let us focus upon two home placement options: Manufactured Home Communities (otherwise known as parks where Homeowners' lease their homesite and amenities) and Manufactured Home Subdivisions (communities where Residents own their home, land, and a portion of the amenities). Those who are set on purchasing their land often say "why lease -- the land owners are just going to increase the lease fee each time they have the opportunity". After understanding the details of the "Buying vs Leasing" worksheet you will realize that statement is not true at SongBrook; here is why. At SongBrook, lease fee increases are tied to three items only: the consumer price index; property taxes and other governmental assessments; and lease renewal terms. Additionally, you will learn why, over a 30 year period, leasing your land is undoubtedly the most wise and secure investment decision.

When asked "why should I pay SongBrook an average $425 per month lease fee," among many of the items to consider are the benefits of on-site management and no homeowner fees (which by the way increase in a subdivision). If you purchase your land in a similar development, who maintains the common areas, who is responsible to maintain the community center, clean the pool, scrub the toilets, maintain the streets and all utilities? Then ask yourself who pays the taxes on the community center, who pays the natural gas and electric bills which heat and light the building, swimming pool, and spa? Also, who pays the property and impervious water taxes on the entire facility? The answers to such questions are the Homeowners who live in that "Land/Home" community. When you own your land will your receive bulk discounts averaging nearly $50 per month on expanded basic television and garbage service? You may then want to ask yourself if "paying nearly $55,000 for approximately 5,500 sq. ft. of bare land is really in your best interest"? If those questions are not enough to encourage you to consider the advantages of leasing land please review the "Buying vs Leasing" worksheet.

The calculations on the worksheet have been reviewed, verified, and are supported by the Manufactured Housing Communities of Oregon (MHCO); and a former version has been published in the November 1995 issue of "The Allen Letter," a national newsletter written by George Allen, a renowned manufactured housing consultant. The following are a few highlights and items of importance.

On the first diagram below you will find two different scenarios: Subdivision and Land-Lease. These scenarios are comparing apples with apples; meaning they are two different 55 and over manufactured housing facilities, both providing community centers. Also considered is whether a person finances their home/land and improvement package or pays for their package in full. As you can see, the average total hard cost differentiation between owning your land and leasing your land is over $58,000, a substantial difference -- in favor of leasing.

Now, on the second diagram, view the results of the real number crunching. An important note is the applicable numbers reflect an annual inflation rate of 3% over the 30 year period. Additionally, it is important to review many different items with prospective homeowners who are considering spending $55,000 for a small, bare piece of land including: interest payable and loan fees, real estate taxes vs personal property taxes (which by the way is an average savings of over $50,000 in a 30 year period if you lease your land), the appreciation value of your land if you choose to own it, various tax deduction strategies, and the "biggie" -- interest earned. It is enjoyable pointing out to prospective homeowners that by placing the $55,000 not spent on bare land in a simple tax free municipal bond averaging a 5.5% return, the value would be over $300,000 in 30 years. That amount nearly covers your homesite lease and contributes toward your total savings over those 30 years by making that investment! Again, the $55,000 investment alone does not consider the entire picture, however, the bottom line numbers do. As you can see, taking everything into consideration, if you lease your land and finance your package you might save nearly $23,000 (depending on your tax bracket) over a 30 year period. However, if you lease your land and pay for your package in full you might save over $134,000 over a 30-year period.

The numbers are accurate; you are encouraged to do the same as SongBrook encourages all prospective homeowners, "take this document to your personal accountant and have him or her review the numbers." Furthermore, you are encouraged to knock on the doors of current land lease homeowners, especially those who reside in SongBrook and allow them to share with you their personal advantages. We are confident you will clearly see the advantages of leasing land, "the wise investment decision."

This report should not be considered a contract or promise by SongBrook management.
It does however reflect the best estimate available of current and future trends
Rev 2/1/04

This report should not be considered a contract or promise by SongBrook management. It does however reflect the best estimate available of current and future trendsRev 2/1/04