There’s a huge amount of waste that goes on in some mobile home parks. The moral thing for park owners to do is to end this destruction of precious resources. In this second of our three-part series titled “Mobile Home Park Morality” we’re going to review the various types of waste that go on in many mobile home parks and what the moral owner can do to end these practices. Remember that waste can be both in the physical form – such as water – as well as in missed opportunities. We’re going to cover them all.
Wikipedia defines waste as the use or to expend carelessly, extravagantly, or to no purpose. What does that mean? It means that waste, by definition, is not good. It's not moral. It needs to be solved. In this, our second part of a three-part series called Mobile Home Park Owner Morality, we're going to talk about waste, what it is in a mobile home park and how to end it. We're going to start off with the most obvious form of waste, and that's water and sewer.
I have seen so much wasted water and sewer over the last 20+ years in the mobile home park industry, it's mind-boggling. We bought a park once from a guy who had a $5,000 per month leak in his mobile home park. He knew he had it. The streets had turned green from all the water continuously flowing down them, so it was all green with algae. Why'd he not fix them? He had this urban legend myth in his mind that to fix them would cost more than just letting them run wild at $5,000 a month. Someone once told him, "Oh, to fix that leak, you'll never find it, and if you do, you'll have to rip all your streets out to find it," so he just let it go.
Now, of course, we bought the mobile home park, called out the plumber, and we had it fixed within a couple of days. Didn't have to rip the streets out. Leak was not hard to find, but he let this go on and on and on forever, because he just in his mind was not that worried about waste. That is not the moral course to take.
You see, waste is a terrible thing. Most of America is lacking enough water for everyone to have some, so we need to conserve water sewer. How do you do that as a mobile home park owner? How do you end the waste with water sewer? First, you find out if you have any leaks in your water system. That's solved with a company called typically American Leak Detection. They've got a franchise throughout America. They have their own patented technology. It's like a stethoscope in the ground. It listens for water leaks. When they find the leak, they mark it, and they can even tell you how many gallons are being leaked. That's the first way you can end the waste, is just to stop any leaks in the park's water system.
But then you also had the issue with the residents, and their use, and their waste of water. Now, waste of water with the residents comes in two ways. One, where they are either accidentally or deliberately, because they don't fix it, letting things run which shouldn't. Typically, the number one culprit are leaking toilet flapper valves, but then there are also cases where they can't make the faucets work, so they leave the faucets running 24 hours a day in their sink. That's one way they waste water. Another way they waste water is deliberately. They'll basically go out, turn on the hose in the yard, and just let it run 24 hours a day in the summer. Kids will play in it. They'll figure it's okay to water their lawn eight, 10 hours a day, or perhaps they want to wash their cars three times a day. Again, these are all forms of waste.
Now, while the park owner can fix his water waste simply by going in and fixing those leaks, the residents, the only way we found to fix their water sewer waste is through submetering. When you submeter water sewer, the first thing you'll note in any mobile home park is consumption drops roughly by 30%. That's huge. What does that mean? It means people knew they were wasting that water, but gosh darn it, it was so much fun, but when you finally make them pay their own water sewer, suddenly they get all serious about it. They end the waste.
So if you want to do the moral thing to end water sewer waste in a mobile home park, the only thing you can do to do that is to submeter. It's the only way to make people mindful of their own consumption. You as a park owner have your part of the equation too, because you've got to go out there and make sure you have no mainline leaks, but once you get that resolved, the big issue is making the residents use water successfully themselves. There's no reason to waste water. Water's a precious commodity throughout America.
Bear in mind that when I say water and sewer on the front end, that's because sewer is a component of water. The water that you waste, the water that goes down that drain, you have the further waste compounding, because now you're taking the precious sewer disposal systems of the city and putting it to greater effort for no purpose. It's water that didn't even need to be used. So the first area of mobile home park morality on waste is fixing water sewer.
The next thing as a mobile home park owner to end waste is to bring common areas back to life. I was touring one in a park that we recently purchased, and it was a terrible, terrible waste of what could be, a pool area that's unused, a pool that's not functioning, a clubhouse which hasn't seen any human life, I wouldn't think, for several decades, but it would be so easy to bring it back to life. It doesn't need much. Basically, the decking is all good. You could immediately get chairs and tables, and that clubhouse, all you have to do is put in new flooring, new lights, paint it, and you're opened up for business again, and people can use those spaces. It seems almost cruel, when you've got spaces inside a mobile home park that people could use, to gather, to have fun, to celebrate occasions, to hold a birthday party, and you deny them that right simply because you didn't want to put in the effort to open it up.
You know, gathering spaces in mobile home parks don't have to be indoors. They can also be outdoors. If you've got any open area, and every mobile home park has them, why not help people to utilize those areas? Why not put in some picnic tables and chairs, maybe some cooking stands, something that allows people to gather and enjoy the recreation? Down in Florida, the mobile home parks are much more adept at using their common areas. They've got shuffleboard and all kinds of upper-end amenities, but you don't have to have that for people to have enjoyment. You could take an empty field and turn it into an empty field, or a athletic field, by simply putting in a couple soccer goals. What a giant difference that makes.
So the next form of waste that all mobile home park owners should strive to remove is common area waste. If you've got a grassy area, if you've got a structure, a building of any type, that is not being utilized for some constructive purpose, I think that's probably morally wrong. I think you should be able to step in and bring that back to life, and make that a nice place for people to gather and enjoy themselves again.
Another form of waste you see in mobile home parks are in the mobile homes themselves, older mobile homes that are owned by the mobile home park. These homes might be from the '70s, the '80s, '90s, even newer, but what happens is the mobile home park owner often doesn't step in and renovate those homes. They let them sit idly by, or even worse, they go in and remodel them, but do a very poor job of it. It's a huge wasted opportunity.
Now, if you've ever gone to the mobile home park show there in Louisville or Tunica, you'll note that there's a lot of interesting design ideas that have come up in recent times, on making mobile homes look better than they ever have before. Anyone who goes to those shows will tell you they've never seen the state of the product as high as it is today. A lot of that is thanks, of course, to Warren Buffett's Clayton Homes, who have kind of led the way on bringing modern design elements to the industry. But nevertheless, you can go to those shows and come away with a lot of great ideas, and you can go back to your mobile home park, and go to those mobile homes you have to renovate, and you can institute a lot of what you saw in that old mobile home, to make it look new again.
Maybe you paint an accent wall. Maybe you put in that wood vinyl, where they now make hardwood look in vinyl that's so accurate you can't even tell the difference. You'll get a lot of ideas from those shows. Why not institute them in your mobile homes? It's a terrible waste when you see a 1970s or 1980s home, which could be a really nice place to live, and it's either not have anyone living in it, it's abandoned, or it's not been renovated to a higher standard, because it doesn't take a lot of money. It doesn't take a lot of thought to make those older homes nice again.
You also just have the simple waste of people not living in the homes. How in the world is that not wasteful? At a time when the nation's need for affordable housing has never been higher, how crazy is it that the park owner would allow the home to sit there with no one using that as that affordable housing they need so badly? So, that's another form of waste, and the moral decision from the park owner should be every home you see should be put back in service as quickly as possible, and every home you renovate, you should do as nice a job on it as you can.
I'm not saying that you need to go over the top. You don't need to gild the lily. You don't need to put in expensive Berber carpets. You don't need to go in and put in special orange peel texturing on the wall, like a custom home. However, you should make the home the best it can be. It takes very little additional money, if any. All it takes is a little thought and the desire to make that home the best home it can be. I have some photos of homes from the '70s that look better than the new homes.
If you took that old '70s home and you took it out to the Louisville show, there'd be a crowd around it, saying, "My gosh. That's the best-looking home at the show." And that home is 40 years old. How is it possible? It's because that owner really took the care to really make that home a show piece. You don't have to make every home a show piece, but just remember that the moral thing for any park owner to do is to make the home look as good as they humanly can.
Now, the last form of waste in a mobile home park are those vacant lots sitting there. Why is that? We are a nation that's in dire need of affordable housing. We don't have any. You know, the apartment guys pretend they have affordable housing, but they really don't. It's subsidized. It's only affordable to the resident, but you and I, the American taxpayers, are actually paying the rent. So that's not really affordable housing, when people use the term affordable housing.
The only form of non-subsidized affordable housing, which is the only true form of affordable housing, comes from our industry, the mobile home park industry. And every time you see a vacant lot, that's very, very wasteful. There's no reason to have a vacant lot in most markets. The demand is there to fill every home and every lot, so how do you do that if you're a mobile home park owner? How do I fill my vacant lots? How do I get people back in those homes, having a happy life, utilizing that affordable housing they need? Well, there's several options.
One of the options is to use the cash program that comes from 21st Mortgage, which is part of Warren Buffett's home finance division. That allows you to bring homes into your vacant lots, set them up. They pay everything, 100%. You run the ads. You show the homes. When you have a customer, you send them over to 21st Mortgage, which then papers the transaction, and the customer gets to move into the home. This allows you to basically fill lots effectively for free. Now, the park owner isn't totally out of the loop. You have to guarantee to make the payments on the home if the customer defaults in between that customer and the next, but that's not asking too much, I don't think.
Another option is you can go out and buy old, used homes, bring those into your mobile home park, get those set up, show those, find residents for those, and you can once again go back to 21st Mortgage again. They have a used home finance program, where once again, they'll pay 100% of the cost of the home, and the set, and the skirting, and the stairs, and the whole thing, and give you your money back as soon as you find that customer who qualifies for the mortgage. If, however, your property doesn't have the ability to even do that, you can still buy old mobile homes relatively inexpensively from home wholesalers, different groups, repo homes, bring those in, rehab those, and get those going.
In a lot of parks, you know, there's even dealers these days who are selling homes to customers, particularly in markets like Austin, where they desperately need vacant lots to bring homes into, and you also have the component of all those folks, mostly baby boomers, who are retiring in RVs, and they need places to put those RVs. And what better place than those vacant lots in your property? So there's really no reason to have any vacant lots.
Now, you know, we can't emphasize enough how big the affordable housing crisis is in the US. They estimate there's somewhere around 60 million people needing affordable housing right now. We can't possibly solve it all as park owners. There's simply not enough mobile home lots in all of America to solve the affordable housing crisis, but every single lot you have saves, helps one US household. It's kind of like the guy who was walking down the beach, picking up the starfish and throwing them back in the sea. Someone said to them, "You can't do that much good. You can't solve all the starfish. There's a million of them out there," and the person said, "Yeah, but I can totally change the life of this starfish," as he tossed it back in the ocean.
It's the same situation with your mobile home park. If you've got 10 vacant lots, that is 10 US households that you can save from being totally overwhelmed with your housing costs. You have the only solution out there for that group, so don't let your vacant lots sit vacant. Even if you only have two vacant lots, that's just not moral to let those sit there being vacant right now. You need to get every single vacant lot in your property put back in order.
Now, before you go out there and start slamming homes in those lots, also remember you've got to have full knowledge before you fill those vacant lots. You've got to know that the water, and the sewer, and the power are working. You've got to know the laws of the city that you're in, so you know what you can and cannot bring into those lots. But once you have a mastery of those items, you need to have a sense of urgency to fill the lots. We need the housing in America. The only moral choice from any park owner at this moment is to help households into housing they can afford. You know, the affordable housing shortage in America is one of its greatest problems, but also one of its greatest opportunities, and the moral ground for you as a park owner is to partake of that and to bring housing to those in need.
Hope you enjoyed this, our second part in our three-part series on Mobile Home Park Owner Morality. This is Frank Rolfe. We'll be back next week to discuss noblesse oblige. Talk to you soon.