Some people think that finding a mobile home park to buy is nearly impossible. But is it really? In this third of our four-part series on “Breaking the Barrier’s we’re going to examine the exact steps to finding a mobile home park to buy and determine just how difficult they are. With over 44,000 mobile home parks in the U.S., this is a big issue.
Well, I guess all the good mobile home parks have been bought up. Nothing left to buy. Is that true? In this, our third part installment on Breaking the Barriers, Understand the Misinformation and Myths About the Mobile Home Park Industry, we're going to be reviewing the myths about buying a mobile home park.
Now, if you think that all the good mobile home parks have been bought up, I have some statistical evidence that you're way, way, way off base. There are roughly 44,000 mobile home parks in the US. Now, you may see some Google results showing that there's roughly 10,000. No, there's 44,000. How do we know? We have the list. Took two years to build the list, but yes, in fact there are roughly 44,000 mobile home parks in America. We even know the breakdown per state.
Why are the other lists saying there's only 10,000? Well they took the lazy way out, there are about 10,000 parks that used to run large yellow page display ads. So that's where that list came from, but it's in no way accurate. It just identified the 10,000 of the largest, most expensive mobile home parks. But the truth is, there's 44,000 parks out there. Now, this next step may shock you, but if you take all of the owners, the top 100 owners from number one, Equity Lifestyle, Sam Zell's company. Then Sun Communities, and Yes, and RHP, and us, all the way down to number 100; all of those parks combined does not even add up to 4,000.
So, the 44,000 parks out there, only 4,000 are what you might call institutionally owned. That's a pretty big leap, because the number 100th owner only own 700 lots, which in many cases might only be three parks. So clearly we are very, very scattered and there are many, many parks left to be bought out there. Only about 10 percent of all of the parks have been purchased by what is perhaps the final owner, the professional owner who's going to sit on it, and nurture it, and finance it for decades perhaps. But there's certainly a lot of parks left out there.
Now, what about the concept that you just can't compete? The small guy just can't get anywhere in the industry, it's just dominated by big players. Well, once again, absolutely not true, but don't trust me. Just Google up MHU.com. Top 100 owners. What do you see there? Well, you'll see that in the number 100th position is someone who owns 750 lots. So what does it say? Well, it means even the top 100 people aren't that big.
If you look at the apartment industries top 100, it's roughly 10 times larger. Their 100 slot in the apartment world is 7,000 units. That's a lot of units, but 700 units, that's really not that big. So what that tells me is you can compete, because there just aren't that many large players out there. And bear in mind that most of the large players don't want to buy what most people want to buy. They're trying to buy very large properties. Some of them like buying properties or up to a thousand lots in size. Well, that's a city. That's a city of 3,000 or 4,000 people. But they're not typically competing for the kind of things you're probably looking at.
Now, can you compete with them if they did? If one of them had their hearts set on a park, could you pull it off? Yes, you could, if you bonded with the seller, and they liked you better. Most old mom and pops would go with the person they like, over someone with just offering a little bit extra money. You can definitely beat them on speed, because you can certainly make a decision much faster than they ever can. Those big companies all work through committees, so they can't compete with you on that. So the answer is yes, you can compete with them. So, there's not that many institutional players in the industry at this point, and yes, you certainly can compete.
Now the next myth is you need a ton of money. Oh, you can't get into business without a bunch of money, right? Well, let's look at that for a moment. My first mobile home park, Glen Haven, was a $400,000 transaction with $10,000 down. With the owner, the seller carrying $390,000 fully amortizing. Didn't take a lot of capital to get into Glen Haven, my first Park. My second park took less, $5,000 down on my second park.
Dave and I have combined on 12 deals for nothing down, zero down. Can't get any less capital than that, I think. You'll also find there's a lot of deals out there that allow people to step into the owner's shoes, do assumptions of debt, all kinds of things people do. Master lease with option to buy. There's a lot. There's a very large variety, but the bottom line is you don't need a ton of money. Now, if you have a ton of money, it doesn't hurt. If you say, "Well, I can allocate a million dollars to buy in a park," what does it mean?
Well, it means a lot of brokers are going to love you, because there's not that many people out there looking to buy parks that have a million dollars in the bank. But, at the same time, if you don't have a lot of capital, that doesn't mean you can't buy a mobile home park. It just means you've got to look maybe a little farther. You have to cast a bigger net to find that deal that doesn't require a huge amount of capital down, but they are out there. There's one other alternative called deal assignments. Our industry is kind of unique on this.
People go out and find mobile home parks that are a good deal. They tie them up and then they sell assignments of the contracts, and that business model doesn't require any money at all. So, it's not true that you need a ton of money to get into the business. It's also sometimes thought that it's hard to get mobile home parks financed. "Oh my gosh, if I found what I wanted to buy, I'd never get it financed it's so difficult." Well, that could not be further from the truth.
Mobile home parks are very, very desirable to banks. "Why?" would you say, "Why? Why would they want to have a mobile home park?" Well, it's because mobile home parks have typically the lowest or next to lowest default rate of any form of real estate. Typically mobile home parks and self storage facilities are neck and neck in the annual competition for lowest default rate. But the simple fact that we always come in number one or two is extremely impressive. Every bank has learned that those mobile home park loans rarely ever go into foreclosure.
Why do banks like the industry? Why do we have such low failure rates? Well, again, it's because mobile home parks are very stable. We know exactly how many customers we're going to have roughly every day. The homes that never really move, so a lot of the risks that happens in most business units is off the table. Look as storage for a minute. They turn 10 percent of the customers per month, that's the national average on self storage. That means each year you turn your entire customer base statistically.
In the mobile home park sector, we rarely have ever lose any customers at all. It's estimated that 98 percent of all mobile homes have never moved from the position they occupied when they were first delivered. So it's not that hard to get financing, there's so many versions of financing in our industry. Because we're buying directly from mom and pops, they can still sell or finance. That's not available in most other sectors. You never could buy a stick built home with somebody who seller finances. It's very, very rare. Can't buy a shopping center with seller financing, that's for sure.
But in our industry, since it's still so non-compiled, we're still so unaggregated, that mom and pops, the original builders are selling their own property, they can carry the financing. Besides mom and pop, you have small bank, large bank. You have CMBS, conduit debt. Now you have agency debt, Fannie Mae and Freddie Mac are becoming very prolific, very aggressive financier's of mobile home parks. So bottom line is, no, it's not that hard to get financed to buy a mobile home park.
Another thing that people think is that, you have to look only at mobile home parks that are near you, that you can't really look or cast a very big net. Well, that's what I thought. My First Park Glen Haven, I was convinced that the only way to manage a mobile home park was to do it in person. For roughly one year I went out every day, and sat in a little trailer at Glen Haven from nine to five. Learning the business, but more importantly being the onsite manager because by Gosh, that's the only way you can succeed.
What did I learn at the end of the year? I learned I had wasted a year. I had not done a thing by being there. I did a lot of stupid stuff. I repainted the laundry building three different shades of green, because I didn't like it. Things that no one in the entire park would ever. ever care about. I was so bored. I, had nothing to do. So the bottom line is you don't have to buy a park right near where you live. Now. It's easy for me to say I've been doing this for over 20 years, so I'm very comfortable with owning a park that's 2,000 miles away.
But I will suggest to you, if you're going to look at buying a mobile home park, at least give yourself little flexibility. I find that if you buy a property that's five hours driving distance from your house that, that's almost as good as having it in your backyard. Because if you need to on a Saturday you can wake up, drive out to the property, stare at it or whatever you want to do, and drive back, and you'll be home for dinner. So to me that's not too bad.
It only gets more stressful when you have to take a plane flight to see it. So even if you're uncomfortable on your very first property of buying something that's a plane flight away, why not look at something that's at least five hours? That gives you a pretty large area. Where I am in Missouri, a five hour radius around my house yields 10 major US cities, Memphis, Kansas city, Chicago, Nashville, Louisville, the list is endless. Now I understand that not everyone's going to have that much geography in that five hour circle.
If you live in California, half your circle may be the ocean, same with Florida. But nevertheless you'll find there's quite a few of those 44,000 parks within a five hour span around your house. Once you understand that you can cast a little bit bigger net, then it all starts to fall into place, because suddenly you find that there's quite a lot of deals to look at. Things that are online, a lot of things that brokers have. Half of the things that we buy come from brokers. You can find all those brokers at The Mobile Home Park Store in the broker tab.
So in answer to the question that you just can't find anything because it has to be right around where you live, the answer is no. It doesn't have to be right around where you live. Maybe initially on your first deal or so, you go with a five hour circle, but you're going to find you'll start relaxing that. Pretty soon your circle is going to be 10 hours away, and by then you're going to be flying on southwest and no longer driving to get there.
I might also add, is we'll talk about next week on management, you don't go to your park very frequently. Most owners only visit there parks once or twice a year. You manage from afar, this is what we'll be talking about all next week. Basically having the park not in your backyard actually might be a good thing. It might get you focused on watching what's important on the park, and not focusing on stupid stuff like I did, on what color of green to paint the laundry building.
So the bottom line is yes, you can buy a mobile home park, if you think you cannot. That's a myth. It's misinformation. There's 44,000 parks in America, all the good ones have not been bought up. You can definitely compete with the large companies. You don't need to have a ton of money. You can easily get the financing, and there's plenty of parks, no matter where you live in America to look at.
Again, this is Frank Rolfe with The Mobile Home Park Mastery podcast series. Hope you enjoyed this third installment in our four part series on Breaking the Barriers. we'll be back next week to talk about breaking the barriers on park management.