The National Communities Council (an affiliation of park owners through MHI) is having their event this month in Chicago. We were shocked to see that six hours of the speeches were from the Ritz Carlton on how to achieve a high level of customer service and satisfaction. While we used to mock such apparent off-base commentary on an industry that thrives on folks who classify Taco Bell as fine dining (although we have to admit the Loco Taco is a wonderful item), you will find us taking such novel industry conversation much more seriously these days. We have determined that the most important step to hitting maximum park values – as important as pushing rents and filling lots – is to have the industry become accepted as mainstream real estate. If you look at the self-storage industry, for example, you will find that, although it is not any older than our industry, they have succeeded in convincing Wall Street that they are a fine investment option and pushed cap rates down to 6% in many markets (similar to office, retail and apartments). So how do we get mobile home park cap rates lower when we go to sell our parks? Well, doing a better job of convincing the investment community that mobile home parks are not about hillbillies and beer would be a great start. So, while we don’t personally think that trying to emulate the Ritz Carlton is our goal as mobile home park managers, simply linking the industry with a 5-star hotel chain is not bad P.R. Watch the November newsletter for feedback on the NCC event, in case you don’t have a chance to go.
Memo From Frank & Dave
Revisiting The New York Times Article And Its Effect
It’s been about six months since the article on us came out in the New York Times. While we received a lot of commentary about the article and the affordable housing shortage in the U.S., we have also seen some positive results from the article on the industry.
It’s OK to now say “mobile home park” in public
We received enormous criticism of our continual use of the words “mobile home park” instead of “manufactured home community” throughout the article. The reason we talk that way is simple: it’s the way our customers talk and it seems pointless to use a more elaborate term for the product. All of our signs say “manufactured home community” on them, but it’s like wearing a tuxedo – it’s not really appropriate for everyday use. We have noticed that since we used the informal name in front of millions of people, other industry professionals have also decided to stop the pretense of “manufactured home community” in everyday talking. There have been a number of articles since the New York Times came out, and they have also used “mobile home park”. So, in that sense, I think we were groundbreakers. It’s also important to note that the internet supports our position, as there are around 13,000 searches per month on Google for “mobile home park” while there are only around 100 for “manufactured home community”.
More knowledge of affordable housing and it’s win/win nature
We have had a large number of people approach us after the article came out, wanting to know more about the industry. This includes a number of individuals from outside the industry, who were fascinated by its simple business model. The overwhelming comment on the article was that our customers seemed incredibly happy with our product while we seemed to be completely focused on maximizing the income. It is rare that both goals can have a mutually happy ending. However, I often tell people that the same was said about the early days of Southwest Airlines (cheap fares = nothing but peanuts and no reserved seats) and the Dollar Store (low price = cheap quality and poor selection), yet the consumer dearly loves both because they have made that conscious choice. We offer affordable housing – a nice, safe, clean place to live at a low cost. If you want to pay Ritz Carlton prices, you can stay there, but many folks are looking for Motel 6.
More media exposure for the industry
Our article in the New York Times paved the way for a number of companion pieces including Bloomberg, and about 20 other newspapers. In addition, we received coverage on Al Jazeera TV, CBS, and even received calls from TV production companies. Since the New York Times is a large publication with one of the largest readerships in the U.S., the simple act of getting the article in the newspaper spurred on a number of other groups. This exposure is important for the industry to break down the stigma and eventually achieve acceptance as a mainstream real estate sector.
We think the New York Times article did a lot of great things for the affordable housing industry. If you missed the article, here’s the link:
Things You Won't Hear At Mobile Insurance
Kurt Kelley and his staff share various different sound bites you won't ever hear at their office. If you're looking for an insurance agent for your property, make sure to call Kurt's office at 800-458-4320.
Why We Are All Programmed To Be Bad Landlords,
And How To Overcome That
Why is being a landlord such an unnatural act? It just never feels right until you get used to it. We think that there are simple reasons for this, and if you can unlock that code you can re-program yourself to be the landlord you need to be.
We all have a need to be liked
From childhood on, we are always looking for friendship and love. This is perfectly natural, and is part of our human nature. We learn to try to be friendly in order to make others like us back. Eventually, by the time we graduate from high school, we are human “friend making” machines. But the problem is that being a landlord requires you to disconnect that need for friendship. Indeed, being a “friend” with our tenants only makes us weak on the important business items of collecting and enforcing rules. It’s great to be a “people person” but you have to learn to suspend that desire when you put your “landlord” hat on.
We all want to believe that the customer is always right
In school, we try to always please our parents, teachers and coaches. We strive to believe that we have failed if the customer is not satisfied. While that’s a great personality trait, it’s a terrible attribute in being a good landlord. The problem is that the very nature of our business creates the inability to give the tenant what they really want: free housing with no rules. You can never please the tenant 100% because you are charging them money and telling them what they can’t do. If you strive to please the tenant, you will go bankrupt in short order, because what they want more than anything is not to pay you.
We all have an innate sense of kindness and compassion
What’s great about humans is that we are all, deep down, really nice people. However, this can cause real problems when you do misdirect these feelings towards your job as landlord. You are supposed to teach people the adult system or providing shelter for themselves and their families. Unfortunately, many tenants view compassion as weakness, and will use this trait as a weapon to avoid paying rent and living by the rules. You have to realize that your “kindness and compassion” should be in the form of helping people to live productive lives and that they must be forced to pay rent and abide by rules for the good of society. If you let them not pay rent or follow rules, they will be a danger to both themselves and the community at large.
You can be a great landlord and still be a great human being. You just have to realize that everything you’ve been taught in life is not applicable to the task of landlording. You must teach yourself that, during business hours, you have to become a different person with a different set of goals and philosophies. You must abstain from your need for friendship until you get home and are surrounded by regular friends and family. You must realize that you can’t please the tenant and, instead, only worry about pleasing you and your investors. And you must realize that your compassion for people is, as a landlord, found in helping them make the right choices of paying rent and abiding by the rules.
New Parks for Sale on MobileHomeParkStore.com
More Fun From The 1955 Book
“How To Build And Operate A Mobile Home Park”
As a testament to the difference in mobile home park ownership in 1955 and today – about 60 years later – comes this chart of proposed park activities, rated to help you now which you should provide your tenants. We’re not certain that any of our tenants engage in any of these other than gossip. You will note the absence of drinking, smoking, watching TV, and collecting NASCAR memorabilia. It would be interesting to see what the authors would think of the industry today. Maybe we could re-program our tenants with more square dancing …
Renz And Associates Is Our Official Phase 1 Expert
We have used many different Phase I providers over the years. But some recent events have changed our opinion on who the best Phase I provider is, and we want to spotlight some “beyond the call of duty assignments” that have saved the day on some deals recently. One of the most important occurred on a property we were buying in Indiana. The park already had a Phase I that had been done when the owner purchased it and financed it with a well-known bank. However, at the final hours when the deal was to close and be financed by a new lender, a Phase I issue popped up that we had never seen before. A disgruntled former manager of the park had called the EPA and claimed that the park was operating an illegal landfill, in which entire trailers were demolished and buried near a barn. Although the report was suspicious, it had to be substantiated before the deal could close. So Mike Renz immediately went to the subject area and, using a device that he developed, was able to do immediate boring and testing to prove that the claim was a lie. There’s probably no other Phase I provider in America who could do that work, or do it that fast, or do such a good job of it. As a result, we are now using Renz and Associates as our exclusive Phase I provider, and we suggest you look into using them, as well. You can contact Renz at (614) 538-0451.
How The Craziest Deal Of All Time Just Keeps Getting Better And Better
When we bought our park in Kankakee, Illinois, it had just posted a ($38,000) net income in the prior year. Under our ownership, we boosted that to +$267,000 in NOI. How did we do that? The former owner had allowed the park salaries to exceed $250,000 to the managers and maintenance men, while we operate it with a $30,000 manager. We also increased the lot rent and filled some vacant homes. That got us a 20% cap rate in the first year. But what’s equally amazing is what happened the year after that. When we bought the park, it was in a semi-rural setting with a Love’s Truck Stop down the road. Now there’s a brand new Super WalMart, a convention center, a hotel, fast-food restaurants, an ALDI store and a new junior college within walking distance from the park. Is this our best deal of all time? Too early to say, but it definitely is heading in the right direction.
Filling Your Vacant Lots Just Got Easier With The Legacy Park Finance Program
Most mobile home park operators have vacant lots to fill in their parks. They know they have the demand to fill the homes, and they know that they can get enough in rent to cover the costs. But the problem is financing – nobody carries the paper on the homes so you have to come out of pocket 100%, right? Well, that’s not the case anymore. Legacy Homes has brought out a new Park Finance Program that allows you to buy homes to fill your lots directly from Legacy, and they’ll finance 70% of the cost of the home including installation. We think that this will be a game changer for many operators, as they have been dreaming of a dependable financing source for their home purchases. And the Legacy product is outstanding as a home – nice floor plans, attractive colors, and great low pricing. We have been customers of this program from day one, and are excited that Legacy is now offering this program to all park owners, large and small. If you are interested in it, call Mark Ledet at Legacy at (786) 785- 9827, or contact us for a reference. We’re one of their largest customers.
Security Mortgage Group Is Our Banking VIP
We did a lot of conduit loans -- and regular bank loans -- in 2013. A common feature of those loans was Security Mortgage Group. If you are buying or financing a mobile home park, let Security Mortgage Group get you the loan. They'll get you better terms than you'll ever be able to find on your own. That's why the win the industry mortgage broker award virtually every year from MHI. If you have any loans you need help on, you can reach Anthony or Gerry at (585) 423-0230.
Report From The National Low Income Housing Coalition Shows The Weak Spot In Affordable Housing In The U.S.
A recent report from the National Low Income Housing Coalition, named “Out of Reach 2014”, demonstrates the problems with housing affordability in the U.S. Using the median household income levels for each state, the report using standard metrics of affordability (30% of gross), and finds that you have to earn around $14 per hour to afford the average 2 bedroom apartment. In some states, such as California, you have to earn $26 per hour to pay for an apartment. The lowest cost state in the study – Kentucky – required $12.69 an hour. So what’s the problem? The minimum wage in the U.S. is only $7.25 per hour, and that’s roughly half of the amount needed to afford shelter. The report pretty reflects what we’ve been saying for a few years; that only mobile home parks can meet the demand of the minimum wage earner. And with 60% of all jobs created since 2007 paying minimum wage, this is going to be a hot topic in the years ahead.
To read the National Low Income Housing Coalition report, go to:
To read the government report on minimum wage in the U.S. go to:
The Market Report
Equity Lifestyle Properties - 81.87
Sun Communities - 84.68
UMH Properties - 15.65