Back in the 1950s to 1970s, moms & pops often built clubhouses and laundry buildings as needed service facilities for residents who lived in 8’ to 12’ wide trailers with little room on the inside and no washer and dryer connections. However, more modern homes don’t require these amenities, and today these buildings often sit vacant or under-utilized. In this fourth installment of a five-part series, we’re going to discuss the insider secrets on how to make the best of these structures.
Episode 27: Economic Opportunity With Clubhouses And Laundry Buildings Transcript
I have a fascination with history, and there's so much collective history inside old mobile home parks. It all relates back to laundry buildings and clubhouses. I've seen some amazing ones over the last 20-plus years I've been in the industry.
I saw a clubhouse built by Stanley Marcus that looked just like a Neiman Marcus store. Apparently he was going to try his hand at mobile home park development. I bought a mobile home park in Shreveport, Louisiana that a State Senator built, an amazing structure at the front, A V-shaped building. One half was office. The other half was clubhouse, floor to ceiling glass windows. Looked like an I. M. Pei structure. I've seen a giant 5,000 square foot British Tudor mansion clubhouse in one property, and I've seen multiple laundry buildings that really are two-story and look like something you'd find in a nice commercial shopping center area. But these are all remnants of a time past.
In today's Mobile Home Park Mastery, we're going to talk in the fourth part of our five-part series on things that sometimes come free with mobile home parks, about those laundry buildings and clubhouses, and just various structures that come with mobile home parks and what the heck you do with them and of all the things you can get. We've talked about mom and pop homes. We've talked about apartments. We've talked about self-storage and commercial buildings.
One of the great oddities are these laundry buildings and clubhouses. They offer the mobile home park owner the real dilemma of what do I do with these things? How do I maximize their existence? Should I tear them down? Should I embrace them? Should I restore them? We're going to drill down with some insider secrets that we've learned over the last 20-plus years on how to deal with laundry buildings and clubhouses.
First, let's do a quick history lesson of why they exist. Mobile homes started really as RVs, and RVs, as advanced as they even are today, they just don't typically have washers and dryers in them. The industry began back in the 1920s, and there weren't really laundry facilities inside mobile homes really until the late '70s. There was a very long run of about a half a century where there were no washers and dryers inside of RVs/mobile homes.
As a result, all those places you park them had to provide laundry facilities. Otherwise, what would you do with your clothes? This was in an era before the establishment of quick wash and commercial laundromats. If you didn't have a washer and dryer in the mobile home park, there really just was no place you could do your clothes. So every good mobile home park owner back in the day would always build a laundry building or two.
Clubhouses were similar. Those early mobile homes were very, very narrow. Eight feet wide, then 10, then 12. Didn't get to 14 wide until about the 1980s. Until you get to 14 wide, those homes seem very, very small. As a result, you had to have some place to congregate, socialize, just basically have some space. That place became the clubhouse. In the 1960s, when the federal government got involved in mobile home park design and construction, they had an amazingly good program through HUD to help moms and pops build mobile home parks. But as part of using their money, they required you to build to their specs. One item they always required was a clubhouse. So many of those better clubhouses you see, the brick ones, the ones that look like Pizza Hut restaurants, those are parts of the old HUD program from the '60s, and they're great structures, and they're very well-built. There's nothing you can say to the contrary on that. But nevertheless, what do you do with them today, because they really stand as a history lesson?
Well, I recently toured Tony Hsieh's park. Tony Hsieh is the billionaire. Not quite billionaire. 800 million in cash from his sale to, I believe, Amazon, of his company Zappos.com. Here he is with a large amount of money, and what does he do? He decides to rebuild an area of Los Vegas called the Fremont area and to live in the area. He lived originally in a high rise, I believe in the penthouse, but he grew unhappy with it. There was no one to hang out with. So instead, he built a small mobile home park a couple blocks down.
I was given a tour of that from the people that work for Tony Hsieh. The biggest feature of that property is the fact that it's got its own kind of clubhouse facility. He used steel storage units. One building is a laundry building, and the other is a business center, where you can go and work computers and print things off. Even in the modern park, in the Airstream Village, there's the need for a clubhouse. Bear in mind, Airstream Village is made of Airstream RVs.
So really, modern mobile homes today, with the exception of Airstream RVs and other small structures, those homes are plenty large enough that you can really live in those without having to use the clubhouse. Really, both the laundries and the clubhouses today really don't have a purpose.
Since you have these structures sitting there, how do you repurpose them? What do you do with it? Well, one thing to think about is if you can create a way to garner actual rent in those units, that will be classified as real property, because one thing they have going for them is they're real property. They're permanently attached to the ground. The appraiser and the bank will count income you receive from those buildings just the same as lot rent in your mobile home park. So my first observation would be if there is any way to make a residential unit out of that laundry building or out of a portion of that clubhouse, you would be money ahead to do that. That's the only way you can convert income from those into real property income.
Laundry building income typically is not counted by an appraiser or by a bank because that's not real property income. That's income derived by the coin operation of washers and dryers. That's not going to get you anywhere. That's like putting a vending machine in. No bank and no appraiser is going to stand behind a 10 cap of a vending machine, but if you can make those into residential units, now you've burst through that ceiling and now that money will actually be counted towards real property.
Is it hard to convert a laundry building into a residential unit? It completely depends. Number one, will the city allow you to do it? Number two, is the cost prohibitive to do it? We've done it before. It can be done. It's not inexpensive, but again, if you can convert that laundry building into an apartment, and even if it costs you $10,000 to do so, if you can rent that thing out for $500 a month, you're going to get many multiple return on your capital investment as far as the value of the mobile home park. So the first thing you should steer towards on any laundry building or clubhouse that's not being utilized is is there a way to retrofit it into a housing unit?
Now, again, because it's then a housing unit, you've got to make sure it's done 100% legally. Do not expose yourself by trying to sneak in an apartment into a laundry building or sneak in an apartment into a clubhouse. If you ever had a fire or some other mishap, you would be in deep trouble if you had done that without getting any of the appropriate permits.
Also, don't forget that any structure that's habitable has to have certain items. Water, sewer, kitchen, heat, air conditioning if the windows don't open. There's a lot of mandatory items under most of the habitability warranties in most states. The good news is, both of those typically have those things. Laundry buildings have water and sewer lines typically by necessity, and they also have a lot of power to power those dryers. Clubhouses have the same. So really, retrofitting those is not impossible, so look into that. See if you can find some way to make that work.
Now, at the same time, you also need to consider the fact maybe you would get even more value by working on that amenity called community. It's something we're working on really hard this year is trying to figure out how can we build a stronger sense of community for our residents? You can convert parts of laundry buildings and clubhouses into gathering areas for people to socialize and build those ties to create what Time Magazine called in their article, The Home of the Future, that sense of community. In fact, the author liked the park so much, he wrote that mobile home parks are like gated communities for the less affluent. It all comes back to building that support network by getting people together to hang out, talk to each other, and do activities. To do that, they have to have places to go.
How can you achieve that? You can take that clubhouse and bring it back to life. Install tables and chairs. Paint it, change the flooring. Make it a place people are proud of that they would want to, in fact, go to congregate. Laundry buildings are no different. Take out the washers and dryers, or maybe they already have been removed. That's a masonry building. It's not that hard to retrofit that into a meeting area. So look at the opportunities there and maybe that building that sense of community dollar for dollar is of even more value to you than making those into residential dwellings. That may be the case particularly in a larger park, where you really want to have a very wonderful first impression for that appraiser and that banker and that future buyer. What better way to do that than having tenants who have lots of pride of ownership who are very happy living there, where you have very high retention rates and very high attraction rates?
Now, if you're going to think about converting the clubhouse or the laundry room into rental housing, remember again that just like when we discussed apartments and just like we discussed mom and pop's house, you have to assume you're going to have to go with cheaper rents. Why? Well, because A, it's inside a mobile home park. It has all the drawbacks and limitations we already talked about regarding mom and pop's old house. B, a dwelling inside of a laundry building typically is not going to be the best looking dwelling that anyone has ever seen before. So give yourself plenty of cush in your numbers. Give yourself a safety cushion to make sure that you don't go in there and get too aggressive. If that building you think upon completion will rent as an apartment for $700 a month, I am thinking more like $400. Maybe even $395.
Also remember, your pool of customers, as we already talked about with mom and pop houses and in apartments, is going to be people who traditionally are mobile home park residents or friends and family of people who already live in your park. They do not have high disposable incomes nor are they really in a position to pay a whole lot of rent. So don't get yourself out of control on your numbers. Build in plenty of vacancy. Build in really low rents.
Again, also, don't think about gilding the lily. Your mobile home park is devoted to affordable housing. Any conversions you make of these laundromats or clubhouses should also be focused on affordable housing. That means although it needs to be nice, safe, clean, and affordable, you should not be putting in Berber carpets. You should not be doing massive retrofits the cost tens of thousands of dollars. If you want to try and convert that laundry building into an apartment and the city blesses the concept, you've got to have to know the minimum habitability warranty of your state, and you have to provide a product although it looks nice and is perfectly usable, you're not going to be able to pour $100,000 into that retrofit and make any sense of it. If that's what you're after, you're better off just making that into a community space and you will not have to put in nearly the capital investment and you may get as much out of it in the end.
One final thing. You can sometimes house your manager in those buildings. Often, the clubhouse and laundry building is located right at the front of the property. It's very advantageous to you to have your manager right at the front. So if the opportunity is there to convert that into your manager's quarters, just like public storage and other storage operators do, that may be the best idea of all. By having your manager live there, it frees up one more mobile home or mobile home lot rent in your property, which is again, real property, which goes straight towards the value of the mobile home park.
Again, this is Frank Rolfe with Mobile Home Park Mastery. I hope you've enjoyed this fourth part in our five-part series on what to do with those extra freebies that mom and pop often give you when you buy a mobile home park. Our next and final installment will be discussing raw land. We've worked our way now through all the different buildings, mom and pop homes, apartments, storage, commercial, laundry and clubhouses. Now we're working up to that final item, raw land. Again, Frank Rolfe with Mobile Home Park Mastery. I'll be back talking to you soon.