Mobile Home Park Mastery: Episode 202

The Great Race

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I am often asked what the “future” of the mobile home park industry is. And I think it’s most appropriately called “the Great Race”. In this Mobile Home Park Mastery podcast we’re going to discuss what I mean by “the Great Race”, how to enter it, how it will end, and what you need to know about the contest. Since we all live under “time urgency” it’s only appropriate to have a talk about that ticking time clock in terms of the mobile home park sector.

Episode 202: The Great Race Transcript

In 1965, Hollywood brought out the mid The Great Race, starring Tony Curtis, it was the most expensive comedy film ever made. At that time, but now we're entering a new chapter into the mobile home park industry which I would also call The Great Race. It's not from Hollywood, and it's not a comedy, it's very serious business. If you miss out on this great race you may will miss out on the last vestige of real estate that still has some real opportunity left in it. Now, the science of mobile home park investing has been now well established, we now know exactly how to correctly identify, evaluate, negotiate perform due diligence on renegotiate finance and turnaround mobile home parks. And we also know there the 44,000 mobile home parks, out there in the US, roughly 40,000 of those are still up for grabs. So you have the combination of knowing exactly what you should do. But the limiting factor that there's not an infinite number of mobile home parks out there to buy.

Not all mobile home parks, should be purchased. Now why is that well, there's four different reasons number one that Park may have very poor location. Real Estate's really about location, location, location, after all, and mobile home parks are no different. So you've got to select a property that is in the right spot, a place where people want to live in a place where there's plenty of demand, a place with a good economic future, a place that has all the right vital signs for the mobile home park industry. You also have to select a property that does not have poor infrastructure. Remember the mobile home park hunters hatch provide working water and sewer and roads and electric sometimes natural gas. So there are some requirements of infrastructure that not all parks have, there's some out there that don't have any of these attributes they have the wrong density for example, these are things you can't typically fix you can maybe alter them a little bit, had to plan on that accordingly though when you buy it on the front end. There are also some parks out there that have permit and legal problems, things that you may not be able to resolve whatsoever, Because really that mobile home park when it was built back in the day, really had no right to be there. We see those all the time, shocking in many instances a park located a large park in a major city and you'd say, well how can it be there. Well, Mom and Pop who built it just kind of disregarded the law and for whatever reason no one wanted to tangle with them over it, but believe me, they will on the next owner.

Finally there are parks out there that are simply overpriced. Even if a part meets all the other characteristics. There's absolutely no guarantee that the price is going to be reasonable enough to make any money with it. However, even despite the fact that some of those 40,000 remaining parks, fall under this framework, that doesn't mean that you should not get out there and look at virtually every single one. See, there were originally 44,000 parks in the US, but about 4000 of those have already been bought by people, such as ourselves, that saw the opportunity, sometimes years ago. And those become the 100 largest owners in the US. And if those 100 If you add up every single part that they all own. You see doesn't even add up to 4000 of them, but I assume there's many people off the radar who never contribute their numbers to these sites that track the largest owners. So I'm going to round it off to assume there's about 4000 parks in that group, which means you're still about 40,000 up for grabs. So why is there any sense of urgency here, why is it the great race. Why is it a race at all. Why is it just do it at your own leisure. Well, there are some problems with the concept of thinking that there's no sense of urgency, number one, more people are simply figuring it out. Most Americans, myself included, have long thought that trailer parks were filled with people who were trailer trash. There was no benefit to that form of investment at all, you were crazy to get involved in it that's what people told me when I bought my first part glenhaven People told me I was nuts. It was too dangerous. They had me so convinced I went down and got a concealed handgun license and bought a pistol. I was afraid to be on that property without a gun in my pocket. But of course I learned over time they were wrong, that the media stereotype this bed belt is in fact completely false. I got over it. Back then, not many people did that not back in the mid 90s they sure didn't. Today, however, a lot of people, either through necessity or just greater education on the industry have figured out. It's not scary. It's not dangerous, it's really like owning high density subdivisions. So you constantly have every day, more people figuring it out and entering the space.

Number two, and this is very important. There will never be any more mobile home park spelt. I don't care what they want to say at HUD. I don't care what they want to say in the current administration. They're not going to be building any more mobile home parks at least thought that form of affordable housing. And they're the government's been releasing all kinds of thoughts and comments recently oh they're going to bolster affordable housing when they say those things are talking about apartments. The government loves apartments, virtually everything in Section Eight is an apartment. I don't know what the tie in between them is I don't know if it's financial, I don't know what's going on, but they don't think about mobile home parks and that's just perfectly fine. I really would rather not have them build any more mobile home parks as a large mobile home park owner I'd be crazy if I said let's do it. But yeah, I can still face the facts if I was wrong but it's a very simple equation cities don't want mobile home parks, certainly not built in their boundaries, why would they mobile home park people don't pay a lot of tax and mobile home park don't pay a lot of property tax. As a result to a city, a mobile home park is nothing but a money losing proposition. And the neighbors don't want them to hurts their property values, the easy to prove. Just go on any real estate website that shows you the value of the property surrounding something and go to Zillow, for example, you'll see that the cheapest homes in the neighborhood are the ones nearest that mobile home park just been a block over, home prices seem to rise significantly shall if there aren't going to be any more mobile home parks built which they will not even if the government tried to build them from scratch themselves, they couldn't do it in any city anyone would want to live in. They can certainly build them in areas in America that are that are blighted places that people don't want to live anymore. Any idiot can in fact build a mobile home park it's not that difficult. But it's impossible to get the permit. And even though the government like to say it has lots of powers today. It doesn't have any power there. So as a result you just won't see any new parts come on the rise, when these last 40,000 are bought up there won't be another 40,000 coming down, down the pike, it won't be any more coming down at all.

Also, mom's a pops in the industry which have always been the bedrock that we buy from. There are all getting really old, almost all the parks out there that you'll buy rebuild, and perhaps still own by what are called the greatest generation and the silent generation. Now the greatest generation which are the nicest people I've ever met. They're certainly getting much, much older to be a Greatest Generation person you could virtually have lived during and fought in World War Two. So the greatest generation people, that's that's that for those who be alive today you are, you're beyond the actuarial tables of most insurance companies then you have the next group, the silent generation, these are the people who were born during the Depression. So, typically they're normally in about their 80s. And again, greatest people you will ever meet, but what are the greatest generation the silent generation both have in common. They're both simply fighting that biological clock. I'm no different. I'm a baby boomer, but baby boomers, the age range of baby boomers begins in 1946. So, baby boomers, many of them right now are in their mid 70s So I'm aware of my biological clock as well I know that we all don't live forever. And because of that in this one instance, age is in fact extremely important.

There's not an infinite amount of time left if you're going to go ahead and buy from his original Moms and Pops. Finally, the industry is facing widespread consolidation, this has always been known and discussed at least over the last decade. I've written countless articles on that reality. And we've seen it come to pass. I appear to be completely correct. Multiple multibillion dollar transactions have taken place in a whole lot in the hundreds of millions of dollars. I don't see that slowing anytime soon now that will not have a lot of impact on you getting into the business, it's more of an exit strategy item for the larger owners at this point. Most of the largest private equity groups have very, very large minimum investment standards, most want to spend on their first acquisition at least $100 million.

Not many people outside of that top 100 could even begin to remotely hit that kind of level. But nevertheless, as consolidation happens it will attract more people into the industry. People see these articles and they become fascinated, who didn't read the article about the multi 100 million dollar mobile home park that sold not too long ago near Silicon Valley. Many people did. Many people asked me about it. So consolidation will bring greater interest, people start saying wow, the Carlyle Group, the biggest private equity group in America is buying mobile home parks How strange. Perhaps I should do that too. So all these factors together as a group. Bring forth the theory of urgency. You know I have a plaque on my wall. It's been there since the 80s it says time kills deals. It means that we all work, our entire lives under an extreme sense of urgency. So in this case, don't be left out. Don't miss out on this opportunity. The Great Race is definitely on, you need to get in the race if you can, those who succeed in that race will do very well economically and very well financially, but they'll be a lot who didn't make the race they did not get into the business in time. That will be very sad for those people. So again, if you want to join the race. The science is there. We know virtually everything about this strange industry has all been developed over time. You have to learn it. And then you have to put it into action. But it's like a wonderful large buffet so much opportunity in such a price rage. Big parks small parks, every kind known, we can hit every budget, with at least one mobile home park out there, there seems to be almost one assigned to everyone fate holds it there seems to be a mobile home park for every budget and every interest in every goal. So start exploring it, because the Great Race is in fact upon us. This is Frank Rolfe mobile home park mastery podcast, Hope you enjoyed this talk to you again soon.