Imagine a mobile home park as a chess board and every vacant lot as an opportunity to make the right move towards your goal of maximizing park income, value, and ease of operations. In this Mobile Home Park Mastery podcast we’re going to review the time-proven methods to optimize your move on each and every vacant lot.
Episode 422: Playing Chess With Your Vacant Lots Transcript
A mobile home park looks a lot like a chessboard. You have a bunch of little squares. In the case of the mobile home park, you've got little parcels that you put mobile homes on. And the way you play the game, the way you play that chess game of mobile home parks, how you fill those empty squares, can have a huge impact on how much money you make and the value of your property. This is Frank Rolfe, from the Mobile Home Park Mastery Podcast. We're going to talk about how to select what to put on your vacant lots and in what order you should put things on your vacant lots. And let's first all agree on the assumption that a vacant lot is worth basically nothing, zero, based on net income. But an occupied lot, in today's world, based on your lot rent, can range in price from anywhere from probably $30 to $40,000, all the way up to over $100,000 of space. So clearly, it makes complete sense if you are a park owner that you want to ponder how to fill those vacant lots. And one of the key items when you're looking at filling your vacant lots initially is just first try to figure out what the options are.
So let's lay those all out there on the table. In most mobile home parks, if not all mobile home parks, your primary option is to bring in mobile homes. But hopefully in diligence, you checked that, because sometimes the cities disagree and they don't want you to bring anything in. They want to keep that park at the current existing customer base. But assume you did your diligence and you do know you can bring in mobile homes. Okay, that's good. But let's also check to see if we can bring in any RVs. Because most mobile home parks, the initial operating permit, there was no differentiation between mobile home and RV. They were all just known under the concept of trailer. They didn't define a difference between the RVs and the mobile homes till much later. And on paper, not until 1976, when the government took over mobile home manufacturing. That's when it splintered permanently and legally between mobile homes, which have a HUD seal, and RVs, which do not. But if you can bring in RVs, that gives you another way to fill vacant lots. So there's another option we have. Another way to fill vacant lots, in fact, would be to rent the vacant lot to the neighbor to expand the size of their yard. There's a third option. And a fourth option with a vacant lot is to put some kind of an amenity on it: playground, picnic tables, charcoal grills, whatever the case may be. So the first thing we want to do with the mobile home park is figure out what the playing pieces we have for the chessboard are. So you need to investigate and see if all of those pieces are allowable in your particular game of chess. Once we've determined that, now let's look at the little squares and start sorting what we should do with them. The number one most in-demand feature in any mobile home park when it comes to selling homes are three-bedroom homes. Why? Because they're so rare, they're so unique. There's very few apartments out there that offer three-bedroom options. There's always one-bedrooms, there's always two-bedrooms, there's efficiency apartments, but it is so rare to find a three. And yet most American families want and need a three. If they've got kids, they want to have at least one bedroom for the girls and one for the boys and one for the parents. Two bedrooms don't really cut it if you have a large family.
And on top of that, there's a lot of seniors even who prefer the three bedrooms because they like to have one... One to serve as a bedroom and possibly one is like a study or office, and one maybe to put in a little workout equipment. Whatever the case may be, Americans just like the concept of the three-bedroom mobile home. So I would measure each of those little squares on your chessboard and I would figure out which ones can accommodate at least a three-bedroom mobile home. Now, the gold standard is of course the three-bedroom, two-bath. We know that one's 76 feet long, but there are three-bedroom, one-baths that come in smaller options, maybe all the way down in the 60-foot variety. So any square you have on that chessboard that can hold a three-bedroom, whether it's a three-two or a three-one, those are your most important lots to fill. So let's color code which ones those are because those are the ones that are going to make you the most money because you're going to be able to bring in homes and sell those things and finance them through a lender like Pep, and it will be fantastic. So we're going to go out for those three bedrooms. Now, let's also look at the squares you just colorized that can hold a three-bedroom. Let's start with the ones nearest the entrance of the park. Why? Because when a customer comes in that park to look at the home, we want to have it as close to them as possible so they can't miss it. Also, if you bring in your home, whether it's new or a 1990s and newer used home, it's going to give a nicer look to the park. It's going to improve your first impression of anyone going in the property. And you can typically often see it from the street based on where it is. So it will even draw people into the community. So let's utilize the three-bedroom lots nearest the entrance. That's just a given. Now, while we're at it, if we can, if we have the credit facility, let's also bring in a two-bedroom, two-bath home if it will fit. Pick a lot that's shorter, that will not hold a three-bedroom under any circumstances, but it will hold a two. If we put in that home, now it gives us an extra marketing option.
People who come in to look at the three-bedroom, we can try and also show them and downsell them into the two-bedroom, which will be by nature a cheaper home. That little improvement in their monthly cost of the mortgage to buy the two-bedroom may be enough to tip some buyers over into the two-bedroom category. And that's great for you as the park owner because we know the three-bedrooms always bring customers in the door. Let's use the marketing power of the three-bedroom to start getting people into those two-bedroom lots. Now, if it works and if you're able to bring in people looking at the threes and move them down to the twos, every time you sell the two, bring in another two. And let's see how many of those squares get eaten up with two-bedroom homes. Now, the lots you have that will not hold a two-bedroom home, let's ponder other alternative uses that might be more money. Because the problem with one-bedroom mobile homes is nobody wants them. They're very, very, very hard to sell. If you've got a park in a hot market like Austin, you might pull it off. But if you have a park in most American areas, the concept of bringing in a one-bedroom home, particularly a new one, and selling it's nearly impossible. Because for the monthly cost of the lot rent and the note payment, most people are not going to step off into that kind of a price category for one-bedroom. And sadly, the one-bedrooms cost nearly the same as the two-bedrooms. So those lots I'm going to be looking at more potentially green space and amenity. Does your park have a playground? Do you have any common areas at all? Remember that in most mobile home parks, we have to give back value to raise the rents. We have to give some form of value back.
So on those smaller lots, maybe the best thing we can do with those things is to go ahead and use them for some form of amenity. The best amenities are things like picnic tables and charcoal grills, playgrounds. These are the things that all of your residents can use and will use on a regular basis. Swimming pools, splash pads... These things are extremely costly to build, very costly to maintain, and only a fraction of your tenant base is actually going to make use of it. Now, once we look at the squares for the common areas, and let's say we say, "Oh yeah, we need a little common area space, so let's take out a square, two of that." Now, with what we have remaining, your best absolute option you have is going to be probably RV. And if not RV, then we're going to maybe make that into one of two options: overflow parking, so basically just pave the green space so they can have cars. If you have too many cars in the park, we can put those on those lots or as RV spaces. Because RVs come much smaller than even a one-bedroom mobile home. Now, as you lay this chessboard out, as you figure out the squares, as you start laying out the master plan of where things should go, now you have a little more order to your life. You have a little more sanity. You don't have the manager calling you saying, "Hey, I've got a guy with an RV. He wants to bring it in. Which lot do I put it on?" Because you have a master plan that you can share with the manager. You can color code that map. You can say, "Okay, all the lots that are green are going to be three-bedroom homes. All the ones in pink are going to be two-bedroom mobile homes. All the ones in yellow, we're going to kind of figure that out as we go. We're looking at an amenity on those, or maybe we're looking at an RV on those. Maybe we're going to look at to rent those to someone as an extension of their yard." But you got to create that plan. You should look at every mobile home park as an amazing opportunity, a work in progress that only you can figure out. You're like a sculptor. And in that block of clay is the ultimate assortment for your mobile home park to maximize its value, but it's up to you to figure it all out. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.