Mobile Home Park Mastery: Episode 301

Our 300th Anniversary Special

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That’s right, we have released Mobile Home Park Mastery’s 300th episode. That’s over 50 hours of recorded information on all aspects of the mobile home park industry and available right here. But how have things changed in this sector over the past six years – as we’ve been doing this podcast since 2017? In this Mobile Home Park Mastery podcast anniversary special we’re going to look back on the origins of the podcast and explore the top ten most significant changes to the industry since we first went on the air.

Episode 301: Our 300th Anniversary Special Transcript

How big is 300 podcasts? Well, it's about 3000 minutes, about 50 hours of material. But to me it's about 900 hours in preparation and recording to accomplish that. It's about 38 days of my life so far spent making these podcasts for you. Is that a good trade? Should I spend that much time doing this? And the answer to me is clearly yes. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're doing our 300th anniversary special, and the first thing you have to ask is, is it worth it? We've spent all this time together, 50 hours together. To me, it's important for this industry to thrive, to grow, it's got to be scientifically analyzed. We have to understand the facts behind what makes the Mobile Home Park Industry tick, and how can we make it work better. We have to unlock the science of an industry that's been treated for decades as though it's just a piece of junk.

So as a result, I don't mind spending all this time doing these podcasts because if I don't do it, I don't know who will. I don't see anyone else out there who is providing factual information and data on the Mobile Home Park sector. So for that reason, I will continue on for another 300 and another 300 after that till the end of time. Now, every time I do one of these podcasts, I offend people and they let us know almost immediately. So, I might get an email from a judge very offended that I happen to say that the American legal system is flawed, that it's broken, or I get an email from someone who's a mobile home salesperson very, very upset that I said in the podcast the mobile homes are built so lightly that they cannot handle extreme wear and tear as rental property. Or maybe I get an email from someone who works in city government who's absolutely furious that I dare say that cities, state or federal government, that that bureaucracy is not highly effective and is very inefficient.

But I have to say these things despite the hate mail, simply because it's the truth. We have to go forward together as a group in the Mobile Home Park Industry in complete honesty. And to me, that's the biggest part of the Mobile Home Park Mastery Podcast has been tell you like it is, and not worrying about who we offend. So, on that note, I thought it would be interesting for this 300th anniversary special to go over the top 10 biggest changes to the industry since August of 2017. That's when we first did our very, very first Mobile Home Park Mastery podcast. So here we go. My top 10 biggest changes since that very first podcast. The first one is interest rates. I never would've imagined I would see the insanity that Jerome Powell is pelting America with right now. In 2017, interest rates were very, very low. We were coming off the Great Recession, quantitative easing, Fed Funds rates were nearly zero.

They were like 0.25%. So as a result, loans on Mobile Home Parks were also low, and cap rates were also low. But the key item was not that they were low, the key item was that they were stable. You could plan accordingly. You knew if you bought a property, what the interest rate would be on the loan today, and what you presumed it would be 10 years from now when those loans come due in the balloon. But then Jerome Powell decides last year to just go insane. He's just a man on a mission, but it's a mission that isn't ever going to work. So, as a result, we have this insanely fast rising interest rates without any prior warning. No sane person would ever do it that way. It was tried during the Trump administration. He was smart enough to stop it. Things started shaking violently on the airplane when they started to raise rates just a tiny smidge, and they decided, wait, let's not do that. It's just too fast like that.

Nobody, no economist, no one working in any major bank that does any kind of projections would've ever dreamed that anyone would have the gall to raise rates this quickly. If I go and buy a goldfish at the goldfish store for your son or daughter, and as a good parent, I want obviously for it to live when we get back from the pet store, so I have to put it in the aquarium. What you do is you fill up the aquarium with water, then you take the bag with the goldfish in it, and you let it float inside that bag inside the water till the water in the bag that the goldfish came from is the same temperature as the water in the aquarium. And then you release it, and it does fine. That's not what we're doing right now. We're basically killing the economy, killing it in this misguided quest to lower inflation, which you never have been able to solve inflation with interest rates. It's absolute lunacy.

We all know the truth because we saw it happen during the Ronald Reagan era. If you look up on Ronald Reagan, how did he beat Jimmy Carter's disastrous stagflation? Through the deregulation of energy. That's what causes the inflation, is energy. Nobody has the guts in Washington to admit that. That basically the Green New Deal has launched us into this catastrophe of inflation, along with really idiotic spending during COVID. But you're not gonna get there with interest rates. So, the number one big thing to me that we've seen as a big change is just this whole idea of interest rate instability. If interest rates went up and were stable, we could all adapt to that, like the goldfish in the goldfish bowl. But we've gotta stop this insanity of not having a stable interest rate environment. The second big top 10 change since 2017 has been mobile home prices. Prior to COVID, you could typically go out and buy a new mobile home and stick it in a Mobile Home Park and get it set up and put skirting and deck on it.

The whole thing for, you know, $35, $40,000. And that was a perfectly good price. At that price, you could buy a home from a factory, put it in your park, add on market lot rent and you would still be under $1000 a month to the customer. And then here comes COVID, and suddenly the prices of mobile homes effectively double, just like that. Literally in the span of just a year or two. Now, I don't know why it is. I suspect it was a little bit more gouging than it was the reality of what we were told, which was supply chain interruption. That seems to be the greatest excuse of all time. You can get out of anything by simply saying the words COVID and supply chain interruption. But the damage has been done because mobile home prices today on new mobile homes are terrifyingly high. That same home, that three bedroom, two bath you were bringing in for $40,000 is now $70,000 or $80,000.

And the problem is, it pushes park owners of fully vacant lots to go into territory we've never been at before. It's not uncommon today for a park filling in new home on a lot to be in it at $1200, $1300, $1400 a month to the customer. And that's extremely high. It's resulted in much more pressure on people buying used mobile homes. Because now they can get a used mobile home and still hit that $30,000 price point or so, which allows you to get to the customer what they need for affordable house, which is a sub $1000 a month payment. Next on my list, it was the great COVID performance by the Mobile Home Park Industry. That was a true delight. No one knew what would happen when we decided to crazily shut America down during COVID and suddenly businesses were either going to go bankrupt or survive based on if you made the essential or non-essential list. Home Depot was essential. Hobby Lobby was not essential.

Fortunately, Mobile Home Parks were deemed by whoever it is at Washington who made the list, which they've never revealed who that person was or what rights they had as an authority to make such a list. But nevertheless, Mobile Home Parks, we survive because we were part of an essential industry. We provided housing. But that didn't cure everything. There were lots of people who served essential industries and they still got killed, but we didn't, why? Because we learned from that that Mobile Home Park customers are mostly essential workers, mostly blue collar people who do things that you have to do for society to exist. So our customer base, we learned, was pretty much bulletproof. And we also learned that since people own their mobile homes through were stakeholders in the business, and therefore they didn't wanna lose their home. They knew if they didn't pay their rent and if the rent wasn't forgiven, they would lose their home, so they kept paying.

When other industries were not getting paid, predominantly apartments, we were still getting paid. Another big change is this refocus on blue collar America in the form of the Infrastructure Bill. Now, I'm not a big fan of what was passed, certainly. But nevertheless, I love the fact that it is going to have a very positive impact on Mobile Home Parks. Why do I say that? Well, the Infrastructure Bill, if you cut loose all of the parts that relates to the green new deal, etcetera, it's going to dump hundreds of billions of dollars on rebuilding America. And the trades required to rebuild America are all the kinds of trades that our customers are involved in. And if you look at the cities that benefit from it is all of your Rust Belt Midwestern markets. It's the ones that many, many Mobile Home Parks are located in. Now, we've not really seen any impact.

I don't think it really starts until next year, but the fact that they're gonna re-open steel mills, they're gonna go ahead and buy a whole lot of new tractors from John Deere and Case equipment and hire tons of people to re-pave roads and replace all the utility lines, that bodes very well for our customers and what they earn. Next, the advent of so many private equity groups getting into the industry. Back in 2017, there'd only been three major buys at that time that involved private equity groups. There was Yes! Communities which sold to the sovereign nation fund of Singapore called GIC. RHP community sold to Brookfield asset and Carefree community sold to Sun. That was it. But since then, almost every major US private equity group has jumped into the mill. We now have the Carlyle, Apollo, Invesco, Blackstone, TPG to name a few of the major New York predominantly private equity groups.

They've now thrown their hat in the ring and got in the Mobile Home Park business. Next, you have flagship communities going public in Canada. Didn't get a lot of notoriety, a lot of people haven't talked about it, but to me it was a very big issue since 2017. Because it was the first attempt of someone in the good old family affordable space, which most Mobile Home Park owners are in, to get out there and take a gamble and go public in Canada. Now, if you look at the stock, it hasn't done incredibly well, it opened at 15, I believe. And I think today it's only at 15 and a half and that's if you held it over a span of several years. The dividend is, I think, three point something percent. But the key item is that it shows that finally people are going to start proceeding onward with the affordable family side of the business. Because at this point, mostly lifestyle choice is what most of your institutionally owned Mobile Home Parks are.

So to me, it's good, it's interesting to see somebody stepping out who's a all-age affordable operator, trying to make their own way through the equities markets. Next biggest item, the death of Sam Zell. Now, I have always said that the greatest problem for Americans today is that they will never have the chance, younger Americans, to have spent any time talking with Greatest Generation folk. That's terrible. You will never talk to better people than those who have the greatest generation and the silent generation. And that's, most of your mom and pop owners today are greatest and silent generation folks. And they know so much, and they have such a positive attitude. And they're so smart on all of the things you can do to succeed in the world. And they got there by going through so much adversity, whether it was World War II or whether it was Korea or the Great Depression. They can benefit you so much in talking to them. It was a shame we lost Sam Zell.

I've always thought he was one of the great geniuses of real estate, obviously not only because he was the largest owner of office buildings, retail and Mobile Home Parks in the world, but the other big issue was that Zell had such great theories on what to do to mitigate risk and to succeed. If you haven't read his book, Am I Being Too Subtle? It would be a good homework assignment. You'll learn a whole lot from that book. Up to bat next, is inflation going crazy? We already talked about Jerome Powell and interest rates and his battle that isn't going to work, trying to stem it without doing what Reagan did, which was energy deregulation. But inflation going crazy isn't really bad for real estate. In fact, real estate does really, really well in inflation. If you look in a textbook, an economics textbook back from the '70s, back when I went to college, you will find there's only two things in that book that it tells you do well in inflation.

One, precious metals, like gold and silver, and the other is real estate. So the fact that we are now in an inflationary environment, one positive of that is real estate prospers always during eras of high inflation. The ninth item is US crime and COVID has made most Americans flee urban markets and move on to suburbs and exurbs, and that's great for our industry, simply because most Mobile Home Parks are in suburbs and exurbs. They never were in urban markets. It's very hard to find a Mobile Home Park in a downtown area. You find them mostly outside of downtown in those suburbs and exurbs. And that movement of people away from urban markets, from urban cores, going out, has been great for park owners. We've never seen demand so high. We've never had as many calls or showings or sold as many homes at our company until COVID came on the scene. So that mega trend of people pushing out has been fantastic for Mobile Home Park owners.

Finally, my 10th item I want to discuss is the crazy rise in housing prices in America. The single family home price has shot post-COVID to $400,000 on average. That's an astounding amount. And look at the graph of how fast it got there. We literally went up $100,000 plus in no time at all. People have just gone nuts with excitement on buying homes and bidding them through the roof. Who ever heard of people bidding to buy a single family home? It's absolutely crazy. And apartment rents have also followed suit. They're now over $2000 a month. That's an insanely high price. Who can afford that? Who knows? But the bottom line is that real estate, residential real estate, single family home and apartment prices have become now so stellar, it puts all this enormous pressure on affordable housing. That's why we love the affordable housing sector, is because our phone rings off the hook. That's why we can raise rates, that's why we can fill vacant lots with homes. It's simply because our product is hugely in demand.

It wasn't always that way. If you owned a park in the mid-'90s, well, you probably felt lonely at times. Your phone didn't ring that much. Back in the mid-'90s, everyone felt kind of prosperous and they were able to go out and get pretty easy to buy home mortgages. Now the tide has turned. Suddenly, we are the hottest thing in residential real estate. The bottom line to it is we've seen a lot of changes since that very first podcast in August of 2017. But you know, we're going to see a whole lot more coming forward. We are living in a very uncertain time right now. None of us really know the direction the country is going at all. And anyone who says they do is lying to you. But seek solace in the fact I'll always be here to tell you how it's going, my own honest thoughts on it, and how that relates to the Mobile Home Park Industry here at the Mobile Home Park Mastery Podcast. Talk to everyone again soon. Thanks for being here.