Mobile Home Park Mastery: Episode 208

The Perils – And Opportunities – Of Fixing Density

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Mobile home parks are known for high density compared to single-family subdivisions (their closest cousin). While this is not a problem most of the time, you can reach a density that causes potential issues with the fire marshal as well as simply moving homes in and out. So what do you do to fix density that is too high in a property? In this Mobile Home Park Mastery podcast we’re going to review this issue and offer some real-life fixes.

Episode 208: The Perils – And Opportunities – Of Fixing Density Transcript

Webster's Dictionary defines density as mass per unit volume. That probably was very valuable information back in science class. But what happens when you talk about density and mobile home parks? This is Frank Rolfe with the Mobile Home Park Mastery Podcast, we're going to be talking about the perils and opportunities of fixing density. Because often with mobile home parks, you have problems with density.

And let's first define what does that mean? How do you have a problem with density in a mobile home park? Well, when we say mass per unit volume, with a mobile home park, we're talking how many mobile home park lots there are per acre. That's how people define density. And we all know that the dream density is seven units per acre. Because at seven units per acre density, you can place on any lot, the largest doublewide ever made. So if your park has seven units per density, it doesn't really matter what kind of home the customer has, you can easily fit it and have a nice sized yard to go with it. But the problem is mobile home parks were predominantly built in the 1950s, 60s, and 70s. As a result, the home sizes you see today weren't even on the radar screen back then.

So no park, I won't say no but almost virtually none in America, have sent seven units per acre density. Instead, what you're going to find our parks that typically range around 10 to 15 units per acre. And when you have 10 to 15 units per acre, you cannot fit the largest homes ever made on every lot, not even close. But yet, you still have a kind of a usable density, where you can place homes of most common sizes, all the way up to a 76 foot long three bedroom, two bath home. But sometimes parks don't even have that kind of appropriate density. There are parks out there that can go up to 20 units per acre, even in excess of that.

And what happens is when you have parks that are two dense, you have two main issues you have to now contend with. Number one, it probably is going to violate the fire marshal, his code of what he feels to be safe. Now who is the fire marshal? The fire marshal is a person who watches out for our health and safety regarding fires. He's a part of the fire department. And his job is to go around looking for situations proactively that might lead to personal harm or property damage. And many fire marshals want to see a separation from the wall of the mobile home to the next wall of 10 feet. When they see less than 10 feet, they can find that to be too dangerous. Not always, but it's up to them. It's up to their opinion when they see that kind of an issue. And if you've got a park where nothing is 10 foot from the next mobile home, then the fire marshal theoretically has the ability to shut your park down or to make you remove those offending homes that are too close to each other. That's a huge problem.

The other problem you have with high density is you can't fit new homes, sometimes even on any of the lots. In a level of high density, it may be you cannot fit a home that is at least 14 feet wide, and at least 46 feet long, which is a standard two bedroom one bath size. And when you have that situation, that's not really a mobile home lot any longer. Now, when you have lots smaller than that, typically you can still fit RVs on them, although not always. But it ceases to be a mobile home lot when you cannot fit a brand new two bedroom, one bath. And if you bought a mobile home park to use those vacant lots and you can't use the vacant lots, clearly you won't be able to hit your budget, and that's catastrophe.

So how do you fix parks with high density? How do you solve that? Well, the first thing you can do is you can start combining lots, taking vacant lots and combining them together either side by side or lengthwise, to accommodate larger homes. Now, if it's side by side with small lots, typically you're going to get a small double wide perhaps to give you enough bedrooms to make that home saleable. So typically a more common way to combine lots is end to end. Because often the law will allow you to put in a mobile home that's at least 14 feet wide, but the lot is too short to bring in a home of appropriate length.

Now, there's two ways you'll see when you add when you add vacant lots together if you have picture this picture, two lots fronting on one street, which back up to two lots fronting on another street, so a collection of four lots that are all side by side and lengthwise. Typically with that you're going to have two options. You can do what's called the "three for four maneuver." What you do is you have two homes go lengthwise into the back of the lot behind, and then you turn one mobile home parallel to the street that's shorter. So you can therefore, if you have four vacant lots, if they're too small, you can end up with three lots that are reasonably sized. Another option is you end up doing a two for four, where you take two homes that are long, and push them both so far to the next lot you can't even accommodate a home parallel to the street. But the bottom line in both cases is your occupancy is shrinking, your usable lots are shrinking. So you're really going to lose to two lots for every four, so 50%, or you're going to lose one lot for four down 25%. But the bottom line is if you bought that mobile home park with expectations of let's say 100 space park, and you start combining lots together, well, you won't hit 100 space anymore. So you've got to make sure that you've got that in your budget.

Another thing you can do is you can actually reconfigure lots. In many cities, they don't really care where the lots are, they only care how many you can have. In this manner, what you can do is you can go ahead and maneuver lots around to give you the ability to put in larger homes. A classic case of this was a park I bought in Oklahoma City where the lots were what was called built radially. It looks like you know the sun, with rays of sunshine around the old circular sun, kind of like something on the box for a breakfast cereal. The problem with it was on that radial spacing like that, on the edges of each little circle, those two homes would hit each other at the back. So clearly what I needed to do with that park, which I did, was to bring all the homes into one straight line. Why did they not do that to begin with? Well, because when that park was built back in the 60s, they thought that was kind of cool and different, to have them rather than being parallel, having them at all different angles. Visually, perhaps it did look in the 1960s like a step above the typical park. But the problem was it ruined the ability to have a good density.

When you do that kind of a maneuver, where I'm just straightening the lots to make sure I can get larger homes, I will get have pretty significant capital costs. Because now I'm going to have to literally move homes and moving homes is never inexpensive. Even if you do them in a large volume, it still is thousands and thousands of dollars. And then also in doing that, sometimes you have to reorient such items as the driveways and utilities. Another option I saw someone do here not too long ago was when they had homes that were less than 10 feet apart, the fire marshal was mad. They went ahead and built firewalls between the homes. So anytime the walls were less than the desired 10 feet, they would actually build a masonry cinderblock firewall. Again, very, very capital intensive.

However, there are opportunities with high density you need to be aware of. First off, sometimes you can buy parks with density issues very, very cheap. Because most people buying parks either don't know how to, or are unwilling to take the time and effort to fix the density issue. So parks with density problems can often sit on the market for long periods of time, Mom and Pop seller ultimately gets desperate, and then you can get a real deal on it. If you're able to then come in and fix the density after buying it inexpensively, well of course, that's a recipe for making lots of money.

Another thing you can do with those parts with very, very high density is you can convince the seller to carry the paper for the simple reason that it has a density crisis. We all know that seller financing is our preferred method of financing. Only kind of financing better is Fannie Mae, Freddie Mac and CMBS Conduit debt, but all day long, you would always choose seller financing over traditional bank debt. It simply normally has a lower interest rate, a longer term, and most importantly is non recourse. So sometimes you can take the density and use the density as a tool to get what you really wanted and that was not only a low price, but the seller to carry the financing. Because again, most people who are unfamiliar with the industry just don't have a clue of how to fix it. They have no idea what the options are, what the cost of those options are, and it frightens them because they're new to the industry and they don't want to touch it.

However, I must caution you, you can't always fix all density issues. Now let me give you a one example which was a park in Ohio. This park was so unique and so uniquely improperly built, what the mom and pop owner did was, and I'm not sure where they got this idea instead of having the homes spaced, what they did was, imagine taking the property and dividing it into two halves. One half is nothing but paved parking. The other half is nothing but trailers at very, very high density. I think most of the trailers were around four to five feet separated all the way around. Now, I'm not really sure what the guy was thinking when he built it. Because when you look at the windows of the mobile home, you look smack either into the window of the neighbor or into the wall of the home of the neighbor. But this struck someone as being a good idea. And the property, because it was so screwed up, was going to auction at a very low price. So I flew out to go look at it. The problem was there was no way to fix the density issue. You'd have to literally rebuild the entire park from scratch.

Now, the city might have allowed you to do that. But look at the cost you would have. You'd have to run all new water, all new sewer, all new power, all new pads for every home, all new parking pads, it would have been impossible. So someone who was thinking, "Well, I can fix that density issue," well, no, you really couldn't. Another park was in Kansas City. It was very, very dense, but also had extreme topography issues. The problem was you couldn't combine the lots. Most of the lots had retaining walls that came with them. The homes, to install a home across two lots, would have taken massive amounts of engineering. Very, very awkward setting. And in many states not even an allowable setting. There's a limit to how high you can jack a mobile home off the ground in many, if not most, states. And in the case of this park with the topography issues they had, you could not have met those standards.

The bottom line to it all is that there are opportunities with density problems. Density problems are fairly common, particularly some of the best parks in America. The oldest parks with those great locations typically are the ones that have all the density because back when that great location was built, back when they allowed it to be built, the homes weren't that big. So don't be afraid of density. Look at it honestly. See if you can use it as a lever, as a tool to get a better deal and perhaps better financing. But don't be fooled into thinking that every density issue can be solved, because it cannot. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.