Mobile Home Park Mastery: Episode 56

Mobile Home Park Noblesse Oblige

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Noblesse oblige is a French term that translates to “those who have substantial resources have a responsibility to help those that have less”. So how can mobile home park owners put this very moral theory into practice? In this third and final installment in our three-part series titled “Mobile Home Park Morality” we’re going to discuss taking the right path to helping to protect and support residents. The mobile home park industry is a win/win business, in which it is truly possible for everyone to succeed.

Episode Transcript

Noblesse oblige is a French term, that means it is the responsibility of financially privileged people to act responsibly and to help those who are less privileged. So how does that relate to a mobile home park?

Well in this our third and final segment on mobile home park owner morality, we're going to talk about noblesse oblige or at least the theme of noblesse oblige, which means taking care of others who are not as fortunate as you.

Now I'm going to assume if you own the mobile home park you must be doing okay financially. 70 percent of American's do not even have $1000 to their name. And I'm betting if you own that mobile home park, that you have more than $1000 so you're definitely ahead of 70 percent of all US households.

So how do you as a privileged owner of that mobile home park, take care of the people who live in that mobile home park? Well the first thing you do is don't gauge the rents. Now you may think that's an odd statement from me because I talk all the time about the fact that mobile home park rents need to be higher.

Now I don't say that for no reason. Recently an economist from Duke University named Charles Becker did a study of mobile home park lot rents in America, where they're at and where they should be. And he found the same thing that I had been talking about now for a decade.

What he found is that mobile home park lot rents are roughly 30 to 40 percent below where they're supposed to be. Now, that's based on all other forms of housing. And it's also based on what people can afford.

So what does it mean? It means that mom-and-pop when they built the park, typically back in the 60s the lot rent was $50 a month. If you inflation adjust that to today, that's a $500 a month rent. Yet our national average rent is roughly $280 a month.

So what happened? Mom and pop did not keep the rents up with inflation. We call it mom-and-pop quantitative easing because that's exactly what they did. They reset numbers not based on free market will because they just basically wanted to readjust them. Either to keep them abnormally low for the residents. Or because they just kind of lost track of how to gauge how much to raise the rents.

Basically, all mobile home park rents in America are going to grow substantially. My personal bet is they'll all end up being in the not too distant future up around $400 to $500 a month. Which is not quite double from where they are today.

Now I think that's a very reasonable price, because that still puts you at a price point that is well within the confines of 20 to 30 percent of your gross revenue in housing. And that's the number the US Government has pegged themselves as being what's fair.

Now, all other forms of housing can't do it. Right now, most american households are laboring under 50 and 60 percent of their entire gross revenue going towards housing. That's not what I'm talking about here. I'm simply talking about the fact that rents need to go up substantially to be where they were supposed to be to begin with.

However, even then once those rents get up there where they're supposed to be at $400 to $500 a month, that still does not mean that the park owner cannot seize that moment and make them go far higher. And that's what I call gaging. That's when you take your rent beyond the economic level that it should be at. And you try and basically take advantage of people and push it to levels never seen before.

There was a mobile home park owner I believe in Minnesota last year who sent a notice to his residents. The rents were already almost $500 a month. And he sent them a notice saying, this year I'm raising the rents double. He was going to basically take the rents from $450 to like $900 a month.

He guessed I guess that the people wouldn't move because they didn't have the money to move their homes and they would be trapped. However, the industry has a fail safe mechanism that no one ever seems to appreciate.

And that is, when rents go to an unreasonable level, when someone gauges their rents, the other park owners basically step in, and allow those folks to move their homes to their parks, typically with the park owner paying the cost of the move. That's how you have equilibrium. And that's how you ward off gaging.

It is not moral on the part of the park owner to gauge rents. Rents should be based on some kind of metrics. Some kind of reasonable system of economics. Not simply taking advantage of those who can't move their homes.

Or taking advantage of situations where suddenly they realize they've got a hot commodity, there's no other affordable housing around. So what the heck, lets go crazy and let's double the rents. No, that isn't the moral thing to do. Noblesse oblige would say that you should not, not gauge the rents.

Next thing if you want to really engage in noblesse oblige, taking care of those who are less fortunate than you, is offer really high quality product. You know, most of the mobile home parks that I drive around, and I drive parks almost every day of the week.

The best of the group from the average is only probably 10 or 20 percent better. And for that extra 10 or 20 percent of effort you get such a higher quality product. What separates the best of the pack when I drive in a mobile home park? Well right off the bat the entry.

The really good parks all have some kind of attractive feature running down the front. Typically, three rail fence, or something like that. And then you've got a really nice entry sign. And then you go inside and you've got really nice interior signage.

Typically, white vinyl post with caff with new signs on them. Your roads are free of pot holes and looking good. And typically they've been oiled, sealed and are nice, jet black in coloration with nice striping.

All the speed bumps dry, the mowing good, all the common areas immaculate, common area building is freshly painted, a little bit of landscaping, lots of feather flags. You know the playground equipment is all newish, brightly painted, cushioned fall zones.

But all these things I'm describing are not really expensive. You see, they're not. You can go out there and buy white vinyl fence for $10 per linear foots. Feather flags for $200 a unit. So what holds people back? Well they're apparently not engaging in the concept of noblesse oblige. They're not trying to take care of those less fortunate even though it's well within their budget to do so.

So if you've got a mobile home park, it is up to you, it is your responsibility to make that park as nice as you humanly can. And you'll be amazed at what you can do with almost any park if you put in a little effort.

I am blown away at some of our own properties that we bought when they were absolute disasters. And we have not brought them back to life in a manner where when I drive in, I'm like, wow, this looks amazing. But it doesn't cost a lot of money. All it takes is really the desire to get it done. And the willingness to spend that little bit extra to take it from an average property to a great product.

Don't forget that the late, great Steve Jobs once said, that his goal was to build insanely great products. There's no reason why you can't do that. Think of the impact you would have on all of your residents lives if you make that property as nice as it can humanly be. I think offering a high quality product is definitely an essential part of being a moral mobile home park owner.

Another part of being a moral mobile home park owner is creating great gathering spaces and building that sense of community. Time Magazine wrote an article last year called the home of the future. And it was very much in praise of mobile home parks which they described as gated communities for the less affluent.

I don't know if that's really true because our owners are not always less affluent. Many of our residents are actually doing quite well financially. But never the less, the theme of the article was good. And that's basically. Mobile home parks offer a great chance for a sense of community.

I toured a mobile home park owned by Tony Hsieh, he's the guy that sold zappos.com. A few years ago he netted $800,000,000 from the sale. What people don't know is, he lives in a mobile home park in Las Vegas. He owns the park and he lives in it.

He was living in a high rise condo in a penthouse. And he was very lonely. And he wanted a sense of community. He wanted to have people that he could share their stories, their interests, do things as a group.

So he brought to life an old mobile home park there in Las Vegas. And it's called Airstream Village. And he populated it with tiny homes and Airstream trailers. And he lives there, along with about 30 other households. And he loves the sense of community, that's why he did it.

In fact, he's expanding it now. He's moving it across the street and making it even bigger. The moral to all this is, people like being around other people. There was a Harvard study a while back that found that, they key to happiness in life are relationships. So what better place to have relationships than in a mobile home park.

My partner Dave Reynolds lived in several mobile home parks over the years as he was turning them around and fixing them. There's one in particular in Hondo that he moved into after a tornado. He wanted to be there on site to bring it back to life.

If you talk to Brandon, his son, he will tell you that those were some of his happiest childhood memories was that park in Hondo. Everyone was such a tight knit group. There was such a great sense of community there. So the moral thing to do under noblesse oblige with your park is to help create those relationships.

How do you do that? You have to be the catalyst. Provide gathering spaces, places for people to sit, to meet, to do things. They can just be picnic tables in the field. It can be a sports field, anything. Something that brings people together.

Also, generate that sense of community by having a park newsletter, maybe a park bulletin board, maybe a house of the month. Whatever you can do. Try and engage local, non profits into coming into your park and offering goods, and services and things, such as tutoring for kids. But try and create that sense of community. That is the noblesse oblige way. The moral thing to do with your residents.

Another part of noblesse oblige in a mobile home park is to try and help cut other household costs. Right now we're working on a pilot program to do cable bundling in some of our parks. What cable bundling means is that you effectively are able to go to the cable provider, and provide every person in the entire mobile home park their cable television bundled with internet, bundled with phone.

We found in some of our parks we can save our residents $100 a month by doing this. And why not? It doesn't cost us anymore. You'd be amazed at how low the bundled cost is for these services. And you can pass that savings right on to your residents. Why not? That's the moral thing to do. That's the noblesse oblige way to go.

Another thing we're looking at is trying to work on energy efficiency of homes. A lot of mobile homes lack one thing, they don't have a lot of insulation and the older homes don't have a lot of anything as far as helping the environment in the use of power and gas. So what do you do? Well you try and make the homes more efficient. We're working on programs right now to institute that.

Things as simple as sealing windows, trying to come up with new thermal blinds that people can use in the summer. Close the blinds and the blinds take the heat coming in through the windows. They also hold the heat in, in the winter. But try and find ways to make the cost of your residence go down.

Anything you can come up with in fact that helps the resident have a lower household cost. Whatever it may be directly benefits them and doesn't cost you a penny typically. And if it does cost you a penny its still good for you because if you keep their whole household cost lower, then as I've already discussed as rents must go up to be where they're supposed to be, it makes it all the more able for them to make those payments. So again, that's the moral thing to do is try and bring down costs.

The final thing to do is to help to solve the affordable housing crisis. And how do you do that with noblesse oblige? How do you do that the moral ways of a mobile home park owner? It's using every inch of your park to it's full advantage.

Many people with mobile home parks just ignore their vacant lots. They ignore those vacant opportunities. There's so many things you can do with them today. And they're not even aware. They're not even trying. We bought a mobile home park from a guy in Missouri. He is in a very, very highly desirable area. And he's got 80 vacant lots, 80. Not any effort for decades to ever fill those 80 vacant lots.

We bought the mobile home par from him and now we're aggressively filling them with nice happy households who can't believe what a deal they're getting. They're in this park able to get a brand new mobile home. A three bedroom, two bath home with a yard, one of top school districts in St. Louis for hundreds of dollars a month less than that nasty old apartment complex down the street.

The people cannot be more ecstatic. So if you really want to engage in noblesse oblige, if you want to be a moral mobile home park owner, you have got to fill your lots. You have got to learn the methods, the options to fill your lots. There's so many great things today that didn't exist even five years ago.

The 21st Mortgage program called the CASH program is out there. They've extended on now where you can do used homes as well. That allows you to bring in homes at zero cost to you. And all they ask in return is that you agree to make the payment on the home in between residents. That's not asking much. Many cases the homes don't default at all.

Lets say a home did default. What would you be out? Three or four months of payments tops. $1200 plus the cost of fixing the home, maybe $2000. Is $2000 a lot for out of pocket for over a 30 year horizon of that occupied lot? I think not.

So there's so many amazing options out there today to fill lots but you've got to harness it. You've gotta have the desire. You've gotta have the sense of urgency. You've gotta think that every vacant lot you have, is one more household that is not able to obtain affordable housing.

And on top of that if you're providing a great product, one more household that doesn't get to share in your great product, or that great sense of community that you're providing. So we've all, all park owners, ourselves included, to do the moral thing, to do what's right, to do noblesse oblige, we've got to find ways to fill all of our vacant lots. And don't forget as well, our vacant homes.

In every mobile home park in America you should see every home full and every lot full because that is the moral thing. That is the right thing, the just thing. That means you are finally engaging on a macro scale and noblesse oblige.

Because you the fortunate soul that owns the park is allowing everybody who needs your product, who needs affordable housing, to share in the bonanza. So you've got to basically be more aggressively embracing the concept of noblesse oblige.

This is Frank Rolfe, the mobile home park mastery series. I hope you enjoyed this three part series on the mobile home park owner morality. And I'll be back again next week.