What Is a Good Expense Ratio for a Manufactured Housing Park?

I was on a call with a manufactured housing operator last year. They managed about 4,200 lots across twenty six communities. Good team, disciplined leadership, solid occupancy. They were reviewing their year-end numbers and everything looked fine – until they pulled their expense ratios by community and put them side by side.

One park was running at 38%. Another was at 61%. Same region. Similar vintage. Similar lot rents.

They had no idea the gap was that wide. Nobody had been looking at it that way.

That is usually how this conversation starts. 

One thing to note: all discussion about expense ratios is theoretical unless you have designed your chart of accounts to capture true operating expenses and not intermingle them with capital expenses.

What is an expense ratio?

The expense ratio – also called the Operating Expense Ratio or OER – is the percentage of your gross revenue that goes toward operating expenses. It does not include debt service, capital expenditures, or reserves. Just the day-to-day cost of running the property.

Expense Ratio = Total Operating Expenses ÷ Gross Revenue

Example: A community with $800,000 in annual revenue and $320,000 in operating expenses has an expense ratio of 40%.

A lower number is generally better. More of each dollar in revenue flows through to NOI. But what counts as a good number depends heavily on where you are in your operating strategy, what your infrastructure looks like, and whether you are running park owned homes alongside tenant owned homes.

What is a good expense ratio for an MH community?

There is no single right answer – and that is the point. The ranges below are starting points. What they mean depends on your strategy, your asset type, and your portfolio composition.

A value-add operator in the first 12 to 18 months post-acquisition will often run above 55% – sometimes well above it. That is not a distress signal. It is the cost of deferred maintenance catch-up, infrastructure repair, and occupancy-building activity. The question for a value-add operator is not whether the ratio is high today but whether it is trending in the right direction quarter over quarter.

An exit prep operator sitting at 52% with a refinance or sale on the horizon has a different problem. The ratio may be explainable, but it will be scrutinized. A buyer or lender will want to understand every line item driving it, and anything that looks like misclassification or expense creep will get recasted.

Stabilized communities in rent growth mode should generally be holding their ratio flat or improving it slightly as rents increase. If the ratio is rising in a stabilized asset, that is where the investigation starts.

POH communities run differently – adjust your benchmark accordingly

If your community includes park owned homes, your expense ratio will structurally run higher than a pure tenant owned home community – and that is not a performance problem. It is a business model difference.

In a TOH community, the resident owns the home. Your maintenance responsibility stops at the lot line. In a POH community, you own the home and carry unit-level maintenance, turnover costs, and home-specific repairs. Those expenses are real operating costs, and they belong in your OER. A community running 60% POH will almost never benchmark cleanly against a 100% TOH community in the same region.

This matters most when you are comparing communities across your portfolio. If one park is 80% TOH and another is 60% POH, their expense ratios are not directly comparable without adjusting for the home ownership mix. Benchmarking them against each other without that adjustment is one of the fastest ways to draw the wrong conclusion from your own data.

What drives a high expense ratio?

When an operator tells me their expenses are high, the cause is almost always one of five things.

Utility ownership without cost recovery

If you own the water or sewer infrastructure and residents pay you a flat fee that does not track actual usage, you are subsidizing consumption. Submetering and billing back to actual usage is the single most common lever operators pull to reduce their OER.

Deferred maintenance catching up

Parks that were undermanaged for years tend to have lumpy maintenance expense – quiet periods followed by large repair bills. This is especially common in value-add acquisitions where the previous owner deferred work for years before selling. If your ratio spikes without a clear capital event, deferred maintenance is usually the explanation. In a value-add context this is expected. In a stabilized community it is a warning sign.

Management fees out of alignment

Third-party management fees of 6 to 10% of revenue are normal. But if the fee structure has not been renegotiated in years, or if the scope of what is included has crept without a corresponding adjustment, that line item deserves a closer look.

Insurance cost increases

Insurance premiums on MH communities have risen significantly in catastrophe-exposed markets. An expense ratio that was 43% two years ago might be 49% today with no change in operations – just insurance renewals. Isolate this line before drawing conclusions about operational efficiency.

Staffing misaligned with portfolio size

A 200-lot community rarely needs full-time on-site staff. A 600-lot community often does. When staffing levels are not right-sized for the asset, payroll becomes a disproportionate share of expenses. This is also where POH adds complexity – a community running a meaningful POH program needs more maintenance capacity than a comparable TOH community, and that cost should be expected, not flagged as inefficiency.

Why you should look at each community separately

Portfolio-level expense ratios are nearly useless for operational decision-making. They hide too much.

A portfolio average of 46% could mean every community is running between 43% and 49% – that is a healthy, tightly managed portfolio. Or it could mean two communities are at 38% and one is at 62%, dragging the average to a number that feels acceptable when it is not.

The operator on that call I mentioned earlier? Once they broke it down by community, they found the 61% park had a water line issue that had been generating small but consistent repair costs for two years. Nobody had flagged it because no one was looking at that community in isolation.

They fixed the line. Expense ratio dropped to 47% the following year.

One more reason to look at communities separately: POH and TOH mix varies by property. If your portfolio includes communities at different points on that spectrum, a single portfolio OER will blend two structurally different cost bases into one number. That blend tells you almost nothing about what is actually happening at each asset.

How to actually use this number

The expense ratio is most useful as a trend line, not a single data point. Looking at it once a year tells you where you are. Tracking it quarterly tells you where you are going.

The questions worth asking on a regular cadence:

• Is the ratio moving in the right direction over the last four quarters?
• Are there outlier communities pulling the average up?
• Which expense categories are driving the movement – utilities, maintenance, or payroll?
• Is the ratio rising because revenue is flat, or because actual expenses are growing?
• For communities with POH, is the unit-level maintenance cost trending in the right direction as homes age or turn over?

That last question matters more than most people realize. An expense ratio can increase even if your costs are flat – if revenue drops due to an occupancy dip, concessions, or slower rent growth. Always look at both sides of the fraction before deciding where the problem is.

A note on what the expense ratio does not tell you: a 40% expense ratio with heavy debt service and no CapEx reserves is not a healthy park – it just looks like one on this single metric. The expense ratio measures operational efficiency. It does not measure capital health or cash flow adequacy. Use it alongside NOI, debt service coverage, and a reserve schedule.

A practical starting point

If you have never benchmarked your expense ratio by community, start there. Pull revenue and operating expenses for each asset for the last four quarters. Calculate the ratio. Put the numbers side by side.

Note the POH and TOH mix at each community before you compare them. A high ratio at a POH-heavy community may be entirely appropriate. A high ratio at a pure TOH community with stable occupancy deserves a harder look.

You will almost certainly find that your best-performing assets are not necessarily the ones with the lowest expenses – they are the ones where the expense ratio has been consistent, the trend is flat or declining, and the mix of home types is accounted for in how you read the number.

That consistency is what you are managing toward.

RentViewer tracks expense ratio by community as a standard dashboard metric – broken out by expense category and by home type where your property management system captures that distinction – so you can see exactly which line items are moving and why.

About You …

What does your spread look like right now – and when you pull expense ratios across your communities, are you adjusting for POH and TOH mix before you draw any conclusions?