I frequently get calls from people who are looking at the concept of mobile home park investing and tell me “looks like all the good deals are taken and there’s not much left out there” – which they gather from a quick glance at on-line offerings. This thought is not supported by the simple fact that only around 4,000 of the 44,000 mobile home parks are institutionally owned. But if 90% of mobile home parks are still in the hands of moms and pops, why is this not readily apparent? That’s the topic of this Mobile Home Park Mastery podcast in which we examine why the opportunity is bigger than meets the eye and what you have to do to tap into it.
Episode 247: Why The Opportunity Is Much Larger Than Meets The Eye Transcript
Like all Americans, I make snap judgments. I might read a book and just read the first few pages and decide whether or not I think that book is a good one, or I might grab a magazine, look at the cover and then maybe put it back.
This is Frank Rolfe, of the Mobile Home Park Mastery Podcast. We're gonna talk about the problem when you look at the Mobile Home Park, just industry just on the surface, and why it does not give you the actual truth about the opportunity that it has. Now, there are about 44,000 parks in the United States. At any given moment, there's roughly about 800 to a thousand that are available online through two sources; Mobile Home Park Store, and LoopNet. The problem you have is, that's not a giant sampling, and all of those listings pretty much follow the same general pattern. The first pattern is that, these are all people, sellers who wanted to bring their park to market, so they have reached out to a broker or doing it independently, to stick their Mobile Home Park out there. However, all the other sellers out there, with many of the better Mobile Home Parks, they're still awaiting you to go out and seek them out. So this is those who have volunteered to stick their product out there for all the world to see. And so, say, listed on the internet, many of those deals have prices that are much higher than what the seller anticipates, they can probably get.
Also those that are vetted through brokers, brokers typically only accept listings that are higher price because they want higher commissions. So, the bottom line is, when you look at Mobile Home Park Store, you look at LoopNet, you do have a lot of parks there to examine, to explore. There might be an opportunity for you, but you can't make your decision just based on that batch. That's only showing you, at that given moment, the Mobile Home Parks that are for sale, that have been placed online. So you might say, "Well then, where else can you find mobile home parks, if not on just those two online resources?" Well, many other places. One of the first places that most people find Mobile Home Parks from, and the one that we've found the most that we've purchased, come from brokers. Now, you can find the brokers. If you search on Mobile Home Parks Store or LoopNet, you'll start seeing them all; Marcus & Millichap, Sunstone, many other groups. There's roughly 100 people full-time, that make a living, selling Mobile Home Parks, and that's a lot of people.
And every single one of those brokers has two types of listings. Public listings, which might be on Mobile Home Park Store or LoopNet, and then what are called pocket listings, which are listings they do not express to the general public. They often hold those listings back, waiting for someone to come to them, that wants to buy a certain Mobile Home Park, and then they say, "Oh, well, here's the big reveal. I've got a park just like that. And if you're interested, we'll get it tied up." Now, why would a seller do a pocket listing? Well, those sellers don't want the manager or the people living in the park to know it's for sale. So, to protect their identity, they do not allow them to publicly advertise them, but they're listings that are there, just the same.
So one great spot to find Mobile Home Parks, way more mobile home parks than you'll find online, is simply by approaching the brokers. Another way is to do cold-calling and direct mail to all those parks out there, in the areas that you wanna buy a park in. If you identify a metro area of interest to you and you Google up for Mobile Home Parks in the area, you won't capture them all, because many moms and pops no longer advertise for new customers, and they fall off the radar screen of the analytics, the places like Google use, to find Mobile Home Parks to list on that list. However, they're still there, just the same. If you obtain the addresses to those parks, you can then go to property tax assessors databases, enter in the addresses, and that will give you the name and address of the owner of the Mobile Home Park. You can then, go ahead and through a reverse look-up site like switchboard.com, get the phone number for those mobile home park owners, and they have all the information you need, to do either direct mail or cold-calling.
In this manner, you're gonna be reaching out to a much larger universe, you're gonna be casting a much larger net, than those you will see online. And when you do that, you're also gonna find sellers who may have not given a lot of serious consideration to selling in the past, or better yet, you may find sellers who have thought about it in the past, but never took action until you called. Also remember, that when you do either cold-calling or direct mail, or even in many cases, using a Mobile Home Park broker, there's more to it than simply ordering out of a Neiman Marcus catalog. When you order off of LLBean and you call to place your order for that pair of jeans or maybe those water-infused boots that repel everything, then there's nothing to that relationship, other than order taking. You call in, you say, "I wanna buy this product," they take your credit card and it's done.
That's not how Mobile Home Parks are bought and sold. There's more to it than that. Sellers traditionally wanna make sure, the park is going into the right hands, they like to bond with the seller. They like to feel like there's more to life than just money. And so, when you employ the methods that have human contact in them, they typically go much, much better. Now, that's not to say that all of the listings on Mobile Home Park Store and LoopNet are bad. That's far from the case. But, you have to make them into a deal, you have to go to that seller or to that broker and say, "Hey, I like this deal, but I don't like the price," and see if you can get the price negotiated down. I once spotted a deal off Mobile Home Park Store in Springfield, Missouri. The listing said, "2 million dollars firm." But when I ran the numbers, it was not attractive at more than roughly a million dollars. I called up the seller, even though the listing said firm, and said, "Look, I don't know what I'm doing wrong, 'cause I'm running the numbers and I only come up that it's worth a million dollars," to which he said, "Well, but it says 2 million firm." I said, "I know that, but here's the deal. If you ever wanna sell it for more like a million, write down my name and number. That offer is always on the table. I would buy that park for around a million. I think, at some point, you'll drop the price. I don't think it will ever appraise at that price."
It didn't go more than a week or two, and I get a call from the seller. The seller says, "You remember, when you called me a couple of weeks ago, about the Mobile Home Park you said you'd pay about a million?" I said, "Yeah." He says, "Is that offer still on the table?" I said, "Yeah." He said, "Well, send me a contract." Now, what had happened there?
Well, a lot of those listings on Mobile Home Park Store and LoopNet, after they sit for a period of time, sellers begin to realize they cannot get their pie in the sky price. So as a result, they start dropping it. And apparently, many people on that listing, rather than call and offer something below two million, simply didn't. When he put the word, "firm" on there, they thought, "What's the point? What's the purpose?" Was I the only guy to ever call and say, "Hey, I'd give you a million."? I'm not really sure. I don't know. Maybe, there had been others, but for some reason, mine stuck in his brain, and maybe two weeks later, he just suddenly realized, "You know what, It's never gonna sell. I better call that last guy that called me, and proceed with it. So sometimes, you can get those deals, you can still make those deals work, if only you have the bravery to call up and offer the lower price. There's certainly nothing wrong in doing that. Mobile home park pricing is very elastic. That's because mom and pops typically have no debt. If you go buy an apartment complex for someone who bought one just recently, their profit would be the theoretical sum of the equation of the price you're going to pay, less the price they just paid.
So if you buy the apartment for 2 million dollars and they just bought it for a million eight, they only make $200,000 of profit. But, if they have no debt at all, if they built this thing from scratch, 40, 50 years ago, then the $2 million dropped to 1.8. They still get a million eight. Drop the price to a million, they still get a million. That's probably why moms and pops are so very flexible when it comes to their pricing. Now, if you come out of other spaces, if you come out of the single-family home market, for example, most all of that is reflected online. There are vast networks like no one has ever seen before, Realtor.com, Zillow, all of these resources that just dice and splice single family to the very inch. I could pull up any home in America, and it tells me how many square feet, how much the estimated price per square foot is. It even gives me the estimated price of the house.
But, you don't have that on Mobile Home Parks, there is no spot you can go and say, "Oh, I wonder how mobile home parks are, in Little Rock, Arkansas. Let me go to that spot and look at... See what's out there and look through the wide, vast array of Mobile Home Parks in that city." It doesn't exist. We're left off this entire internet-inspired single family plethora of information. We don't have any. The bottom line to it all is, if you wanna get a good feel for the industry, you've gotta go beyond just a quick cursory glance at Mobile Home Park Store and LoopNet. There are important tools to find a property, but you can't look at them and say, "Oh well, this is reflective of the state of the industry. Look at this listing here. It looks so much higher than what I had hoped it would be. There must be no good deals left, out there," because that is not really fair, nor is it true. Case in point, there are 44,000 parks in the United States, but there are only 4000 that are institutionally owned.
It ranged from number one, Sam Zell, DLS, down to number 100. I think, to be number 100 today, you have to have roughly about 1000 lots, maybe seven or eight properties. If you add all those together, you do not even add up to 4000 parks, which leaves 40,000 still out there, up for grabs. So, when you ponder investing in Mobile Home Parks, please look beyond just the simple way, the cover of the book, the cover of the magazine. Don't just go to what you see online and say, "Oh well, here's my snap determination," 'cause that determination could really hold back your financial future.
0:10:47.7 Frank Rolfe: This is Frank Rolfe, the Mobile Home Mastery Podcast. I hope you enjoyed this. Talk to you again soon.