The mobile home park industry is notorious for jargon that is either politically incorrect or meaningless. In this Mobile Home Park Mastery podcast we’re going to explore commonly used terms and what the correct versions of them should be.
Episode 417: Using The Correct Terminology Transcript
One of the most annoying things in our society today is our nearly phobic focus on political correctness. The jargon that we use, the terminology we use today is so fraught with risk. Every time you open your mouth, you're afraid that people will misinterpret the words that you say. And no industry has a bigger problem with that than the mobile home park business. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're going to talk about political correct terminology and the fact that many of the words that we use in our industry are really effectively not correct. It's not based on what the consumer wants to hear, what the lender wants to hear.
And so I thought we would explore these expressions to try and figure out what the correct one is based on the application. So the very name of our industry is a joke. Our industry has changed its name so many times in its endless desire to reinvent itself. And today, most everyone is lost on what the correct thing to say when describing who we are or what we do. So the old original version of our industry was called Trailer Park. Although if you talked to a lot of old timers, some people also even back then used the vernacular of coaches. And in fact, the national association of our industry at one time had the word coach in it. But we all know today that that's probably not a good terminology.
The Trailer Park implies the American media stigma of white trash, toothless hillbillies, all the things that we've been trying to avoid for a long time. And the industry itself kind of acknowledged that when they made their changeover from Trailer Park to Mobile Home Park. So we overnight reclassified our line of business. We were no longer in the Trailer Park business, even though if you really deep dive research, you'll see Trailer Park was actually a compliment. Many cities were very proud of their Trailer Park because at that time, trailers were all one in the same with RVs and they did not have a negative stigma.
But the industry didn't like it. We wanted to be different, wanted to change what we were. They wanted to acknowledge that the homes were going to get bigger. And so we became the Mobile Home Park industry. And that seemed to be okay for the moment, but it never really had very good vibes from the consumers. They really didn't like it. So then the industry reinvented itself again as the Manufactured Home Community industry. And that still didn't work though, because no one likes the concept of something that's manufactured. We all prefer things that are custom made. You always want to buy a custom home over one that's just one of many in a subdivision.
So the word manufactured, bad name, gotta ditch that. So then some people brought up the concept of Land Lease Community. No one has a clue what that even means. Never was adopted by almost anyone, yet some people in our industry write whole articles using the word Land Lease Community over and over again as though by beating us to death with those words, somehow they'll stick. They're never going to ever stick. So then which is the correct one to use? Well, the correct one to use when talking to a city hall or a bank is Manufactured Home Community. That's the classiest of the three that are understood by the American public. But when you're out there talking to customers trying to sell a mobile home in a mobile home park, then you use mobile home park.
And that's simply because studies have shown under search engine optimization known as SEO that the average American knows our product as mobile home park. So we use two of the vernaculars then. We use mobile home park when dealing with the consumers and the internet. We use manufactured home community when working with lenders and banks because it sounds classier than mobile home park. And then you have the product itself, which was originally known as a trailer or a coach and then it changed to a mobile home and then it changed to a manufactured home. I would tell you that none of those are any good. They're all bad.
Clearly when it comes beyond the SEO of the word mobile home, which is the number one most searched term, the best term to use is just simply home. Drop the manufactured and the mobile off the front and just make it a home. No one out in America on a single family home describes their home as to how it was constructed. Right? It's just a home. Some are made of frames, some are made of bricks, some are custom, some are assembly line made out there in the great outdoors in a subdivision, but no one puts that word. No one needs to know that word. We don't need that additional adjective. We can just go with home. So I think that's the most appropriate thing in your advertising. Just talk the word home.
Then we have the issue with park-owned homes. Some people call their park-owned home rentals as rent-to-owns. That is wrong. You cannot do a rent-to-own. You've not been able to do a rent-to-own since the SAFE Act and Dodd-Frank under the Obama administration dating all the way back to about 2008 to 2010. Today, if you use the word rent-to-own, that will be considered what they call through the SAFE Act a disguised mortgage. And that will just get you in all kinds of trouble, and it's typically not even what you're doing. So your homes today, if you're renting them, is simply a rental. Not rent-to-own. I find some park owners use the term rent-to-own because they didn't know any better. That's what mom and pop used to call it back when they were really doing a rent-to-own agreement. So rent-to-own means a person rents it, and after a period of time, the home becomes theirs.
That's considered a disguised mortgage. You can't do that. You can rent a home, or you can sell a home. But you can't sell a home via the rent. That's not allowable under the rules. Now, some would say, well, you can do a rent credit. Yes, you can do a rent credit in many states. I would check with your state MHA to make sure. And under a rent credit, what you do is you give the customer credits every time they pay you their rent. And they can use those credits, same as cash, to buy that home or any home in the entire park if they so choose. But it's still a rental. It's always a rental.
So don't use the term rent-to-own. Either say, I'm renting homes or I'm selling them. There is no hybrid in between. Then you have the issue with the terminology of grandfathering. Now, we all call grandfathering the right that we have as park owners to continue on operating the property as a mobile home park, even though almost every city and town in the United States outlawed mobile home parks 50 years ago. But we're still allowed to keep the existing one and go in under the concept of grandfathering.
But the real name for grandfathering, grandfathering is a slang term. The real term is legal nonconforming. So when you're talking to a lender or anyone who's educated on the industry, the correct terminology is legal nonconforming, as opposed to legal conforming, which means you could build it again today, and illegal, which means you can't operate it even today. It has no right to exist. And let's talk for a minute about floodplain. It used to be prior to Hurricane Harvey, where they dumped five feet of rain in Texas without any prior warning, floodplain was not taken that seriously in our industry. I remember back in the 90s, if you had a park in a floodplain, and many of them did, you just said it's a floodplain. The lender was like, yeah, it's whatever, it probably never floods.
Today, people take things much more seriously. It's not enough to say, oh, my park is in floodplain. Instead, you've got to be a little more descriptive. And most every lender wants to know three attributes of this floodplain designation. Number one, how many lots are impacted? How many lots are actually in the floodplain? I've seen parks with a floodplain designation that the only area that floods is the playground or some green space. That doesn't matter.
All that people care about are your lots. How many of these lots actually are in the floodplain? Number two, they want to know whether you're in the floodway or still pooling water. Are you in water, like in a bathtub, that is slowly rising? Or are you in water kind of like the faucet going into the tub, which has a lot of power to it? Because the floodway, when it happens, it'll yank those mobile homes out of the ground, and they'll go just sailing down the river. But when you're in still pooling water, the water elevation goes up quietly.
And so, yes, it can damage the home, but nothing near the damage that is presented in the floodway. And the third item is called BFE, or Base Floodplain Elevation. That means how high the water goes up. And if the water in a BFE only is a five inch, it's not going to really damage the home. It goes under the home, but then it drains back out from under the home when the waters recede. But it's not enough today to say floodplain. That's not actually the jargon you use. You can say, this park is in floodplain. It's got X number of lots. It's in still pooling water, and it's got a BFE of whatever that amount is. That's how you assess your risk.
Then you have the issue of how we term our net income, because many people just use net income or NOI. Many of your lenders prefer a different jargon, which is EBITDA, which stands Earnings Before Interest, Taxes, Depreciation, and Amortization. Which is more accurate, EBITDA? EBITDA is something that is apples to apples, what most every sophisticated lender wants to hear. And since when you get down to talking about net income, you're normally talking about going to a buyer to sell your park or a bank to get it refinanced, I would stick with EBITDA over the more generic term of net income.
The bottom line is what you say is important. What you call things is important. I would think through the jargon we all use in the industry. There's often better ways to express what we're trying to get at, and it'll be better accepted by the public at large. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.