It’s extremely hot out at most of our properties. People are looking for a way to cool off. Most of the mobile home parks in the U.S. do not have swimming pools – even those that did have them subsequently removed them because they don’t meet modern safety standards in many cases. And it’s unlikely they’ll be going back in anytime soon, as a commercial pool is a huge capital investment that gets relatively little use and is hard to economically justify. But there’s a new product out there called the “splash pad”. It’s really nothing more than jets of water mounted on a surface with a drain. The water does not recirculate and, as a result, does not require any pumps, chlorine, or testing. And we’re not so sure that kids don’t enjoy these splash pads more than they do pools to begin with. If you think back to the 1960s, the toy market had many products like “water wiggle” that was just something you mounted on your hose to make it spin around and spray water on you and your friends. The splash pad is merely a modern-day interpretation of that same concept. We should all watch as this new amenity unfolds – many cities are now installing them in public parks – and see if it’s adaptable for our own use. Letting people get wet and cool off in a safe and economical manner could be a winner for many park owners and residents.
Memo From Frank & Dave
Why There Is Less Risk In Buying Mobile Home Parks Than Virtually Any Other Asset
People who buy regular business must have nerves of steel. Or be insane. Because it seems foolish to invest money in any business that you cannot prove out revenue and costs during due diligence. That means taking a horrifying leap of faith. The good news is that mobile home parks are one of the few assets you can buy that you can totally take apart in granular detail during diligence and rebuild revenue and expenses from the ground up – plus have so much “cushion” that you can recover from minor fails. So how does that work?
A revenue stream that you can see and touch
One great feature of mobile home parks is that they are completely transparent: what you see is what you get. You can walk around a mobile home park and actually count who your customers were for the past decades and for decades into the future. The fact is that mobile homes are anything but mobile, and 98% of the homes in any mobile home park have never moved from their original delivery location. If you find 78 mobile homes inside the park, you can already tell how many customers you will have going forward: 78. It’s that stable.
Demand that will fill the gap in any mistake
And if any of those 78 mobile homes, in the above example, turn out to be vacant, you can re-fill that home quickly, as the demand for affordable housing is off the charts. A typical mobile home park pulls in 20+ calls per week from people looking for mobile homes to rent or buy, and the normal industry metric is that it takes three calls to get one showing and three showings to get a home sold or rented. If you make a mistake during your estimate of revenue, the good news is that the demand will bail you out.
Expenses that can be nailed through actuals or three bids
Just as revenue in mobile home parks is very simplistic, so are the expenses. There are about 20 line items in a typical mobile home park expense statement, and all of these can be proved out through actual costs tracked electronically through utility providers, or by three bids from vendors. The only expense that requires “guesstimation” is repair and maintenance. Typically, the mom & pop owner don’t accurately record repair costs, and many do the work themselves, so there is no paper trail. We use a standard cost of $100 per lot per year for older parks and $50 per lot per year for newer ones (new parks are those with PVC pipes).
Very rare to screw it up if you know what you’re doing
We have been buying mobile home parks for over 20 years and have done due diligence on at least 400 properties we have purchased. Like anyone, we’ve made mistakes in home occupancy (thinking that a home was occupied when it really was not) or guessing who will pay the rent and not run off, or which homes need renovations. But the good news is that these mistakes, however real, have relatively little economic impact, because the really huge issues are 100% nailed.
Buying a mobile home park is a fraction as risky as buying nearly any other business or real estate sector. The reason is that are customers are so stable, the business model so simplistic, and the expenses so easy to prove out.
Whats Wrong With Living In A Smaller Space?
Somewhere America got on the path to believing that giant housing spaces are a part of happiness. But is that really true? Millennials (and others) are starting to question the validity of this premise, and the future of American housing hangs in the balance. Shows about the virtues of “tiny homes” fill HGTV, and the RV industry is booming because more and more Americans are shunning the traditional concepts of required housing size. Why is there a sudden backlash about “living large”?
Focusing on what’s important in life
Is life really all about huge rooms? Or is it more about what goes on in those rooms? A recent Harvard study found that the most important key to happiness is “relationships”. And sometimes smaller spaces lead to better relationships, because they not only cause more “togetherness” but the lower cost of living allows for less stress and more bonding time. This change in priorities can already be felt in the multi-family sector, where tiny apartments are being built in most major markets.
Mobile homes have become associated with conservation and all things sustainable. This actually makes sense, because small spaces require less heating and cooling. Just like U.S. automobiles were at one time gigantic and then became small during the 1970s gasoline crisis, housing units must become smaller to be in-tune with reduced carbon emissions and energy sustainability.
Living within your budget
Over the past few decades, it’s become positively in-vogue to live beyond your means. The 2007 Great Recession really began as a result of people over-extending themselves on single-family homes. The truth is that 70% of Americans do not even have $1,000 in savings. At some point, people are going to have to return to their roots of being solvent and not living on credit. Mobile homes allow people to have a detached residence at a fraction of the cost of a traditional home (median home prices in the U.S. are around $200,000, while used mobile homes routinely sell for around $20,000 or less). When you add on the lower utility costs, living in a mobile home is just what the doctor ordered for those who want to live within their budget.
The fun of being “different”
And then there are those who just like to forge a new path and not follow the crowd. These brave pioneers are finding fun and adventure in mobile home parks, where they can celebrate an alternative housing option that most Americans would never consider. It’s interesting that there’s the potential for living in mobile homes to become “hip” again – just as it was when Elvis lived in a mobile home park in two different movies from the 1960s.
Smaller spaces appear to be the future. Between living within your budget, forging better relationships, and being in-tune with the environment, it would appear that mobile homes are right in-line with this new megatrend.
Want To Re-Finance Your Park Using The New Agency Debt Product?
If you are considering re-financing your mobile home park, then you need to learn all the benefits of the new programs offered by Fannie Mae and Freddie Mac, collectively known as “Agency ”debt. The advantages of this type of financing are numerous, including:
- Low, fixed interest rates
- 12-year terms on 25 year amortization
- The ability to re-size the loan annually and take out even more money as income increases
MJ Vukovich is an expert on Agency debt and he works for Bellwether Enterprises, which is one of the top underwriters on this specialty loan product in the U.S. He is also a third-generation park owner who speaks your language. So give him a call today at (612) 335-7740 and let him tell you what an Agency debt loan can do for your property, or email him at [email protected].
Markets We Like: A Spotlight On Kansas
We recently came across this box when buying a new high-tech fan. You would figure it would be manufactured overseas, but instead it’s a product of Kansas. It seems that Kansas is full of surprises, and that includes how well it performs as a mobile home park location. Here’s why we are big fans of Kansas.
Low unemployment rates due to high levels of agriculture
The unemployment rate in Kansas remained far below the U.S. average during the Great Recession. The reason was that Kansas – like other “breadbasket” states – has a strong backstop to their economy in the form of agricultural jobs. While it’s not widely discussed (and gets zero mention in the media) the food production industry is one of America’s largest. This means that there is a recession-resistant foundation for Kansas that keeps the economy in check even during times of national crisis. The good news here, obviously, is that it keeps your residents gainfully employed and able to pay the rent.
Low stigma means better demand and higher demographic customers
By the time you cross the Oklahoma border, the stigma against “trailer park” residents diminishes greatly. We think that’s because many people in this region sell their brick house and retire into mobile homes, so if you call these folks “trailer trash” you’re effectively using that description on your own family. On top of that, mobile homes located on farms are common, and these farmers are far from penniless. With the stigma erased, you can attract and retain much better customers in your mobile home park.
High home prices yield high demand and higher lot rents
In most decent-sized metros in Kansas, the median home prices are high, as are the apartment rents. In Kansas City, for example, the median home costs $178,000 and in Wichita it’s $124,600. With higher home prices comes increased demand for affordable housing, as well as higher lot rents. It takes the same amount of effort to operate a mobile home park with $150 per month lot rents as it does one with $300 lot rents – but the amount of net income you create is double.
A progressive culture with a hip undercurrent
Another reason we like Kansas is that it has a lot of great things going on economically. It’s got large segments of higher education and healthcare, and a booming social life for millennials in many cities. There are hip manufacturing concerns (as shown in the photo of the Vornado box above) as well as diverse cultural opportunities. You can sense a renewed vitality there.
We’ve been big fans of Kansas for years. The average American has no idea what Kansas is like, and we guarantee you it’s more than tornadoes and stalks of corn. Look at the stats and you’ll see why Kansas is a great state for mobile home parks.
Why We’ve Been Converting All Of Our Water Sub-Meters To Metron
We have been rapidly converting every existing water meter in our 30,000 lot portfolio to Metron-Farnier Sustainable Services. So why are we such huge fans of the Metron metering system? The answers are many:
- These meters are read remotely and do not require our managers to read them (or screw up the readings).
- The meters are read by Metron every 60 minutes, 24 hours a day. As a result, Metron can alert you when there’s a leak, and that can save you thousands of dollars per year.
- The meters are amazingly accurate and strong.
- Metron’s meter bodies have been manufactured in Europe for years – they are well-established and a proven performer.
- Metron’s electronics are built and tested in Boulder, CO.
- The cost is only around $5 per month per meter, and in most states this cost can be passed on to the resident.
- These meters do not require you to have access to them, so they are perfect for winterization or difficult access situations.
So why would you not use Metron? We don’t have a clue.
To get more information on Metron metering, call Rick Minogue at 303-449-8833 or email him at [email protected] Tell them that Frank & Dave sent you. We’re their biggest fans.
How To Really Make $100,000 Per Year From One Mobile Home Park
If your quest is to make $100,000 in cash flow, after debt, from one mobile home park, the process is simpler than you think – and also probably much different than you expected. Unlike many industries, the path to success has been paved many years ago, and does not require much ingenuity or invention. And, unlike the modern high-tech sector, is not reliant on new ideas, but simply the persistence and focus to not venture from the established route.
Step 1: Find a mobile home park with at least 80 occupied lots
OK the first step is easy enough. You need to find a park with about 80 occupied lots. We would suggest you also strive to make sure that the property has city water and sewer, as well as is located in a market of roughly 100,000 metro with good unemployment rates and median home prices over $100,000. There are a ton of markets and parks that fit this bill (there’s roughly 44,000 total mobile home parks in the U.S.).
Step 2: Negotiate a cap rate that allows you to completely cover the debt payment with current occupancy and rental rates.
Now you have to simply negotiate a price under which the park will be able to pay its full monthly mortgage payment from net income – basically a park that totally pays for itself. Considering the fact that banks demand a coverage ratio, it would be nearly impossible to buy a mobile home park without this self-reliance. And this needs to be based on current occupancy and at current rental rates – do not include any future increases in either at this point.
Step 3: Select a market that has strong lot rents in competing parks, as well as a bright future.
This is the most important point: the park has to be in the right position. What you’re looking for is a property in which the lot rents are below market, and the economic foundation of the market is strong. It doesn’t have to be a huge market, nor is it essential that the new Amazon facility be moving there. Simply that the park’s lot rents are lower than most others in town, and that the economy be solid.
Step 4: Raise the rents $100 per month over 5 years or less.
The trick to making $100,000 per year from one park, in this example, is to simply raise the rents up a total of $100 per month over a period of years (typically about five or less). We’ve raised the rents in a park from $100 to $275 per month within 60 days before, because the market rent was $350 per month. But even if you can only raise them $20 per month, you’ll hit your target in 5 years. In some markets, you’ll find you can do much, much more than that. You might ask why mom & pop sellers let the rents get so low to begin with? Charles Becker, an economist at Duke University, estimates that most mobile home park lot rents are 40% or so below market. We call it “mom & pop quantitative easing” because it’s literally a case of landlords that deliberately did not keep pace with inflation.
ConclusionMaking $100,000 per year in cash flow off of a single mobile home park is not an impossible task. We’ve done it many times, and it’s really a simple game plane. Just follow this outline and you’ll be able to pull it off.
Here’s Your Copy Of This Month’s Manufactured Housing Review
If you enjoy this monthly newsletter, then you will certainly also like the Manufactured Housing Review – the industry’s only monthly magazine that covers many different industry topics. Edited by our friend Kurt Kelley of MobileInsurance, MHR offers many insights and opinions that reflect current events in the affordable housing industry, with no topic taboo.
To view this month’s issue, click here!
Why Do Some Mobile Home Park Owners Sleep So Soundly At Night?
The reason is simple: they carry the correct types of insurance and in the right amounts! So how do you figure all this out and pay lower premiums than that non-specialty carrier that you’re using now? You simply call America’s #1 mobile home park insurance agent: Kurt Kelley at Mobile Insurance. They represent over 2,000 park owners and you should be one of them. Mobile Insurance can help you engineer the policy you need to cover all your concerns, and their prices are unbelievably low. Being able to contact them when you need them is just as important. We recommend that every park buyer call them first, as we know of no other group that has the same expertise, quality of service, and low prices. Call them at 800-458-4320 or email [email protected]
We’ve been operating mobile home parks for over 20 years and have never paid a penny out of pocket on an insurance claim Sure we’ve had all the regular issues all par owners face – like falling trees and slip and falls – but we’ve always been properly covered. How can you stop any worry and sleep like a baby? Call Mobile Insurance today!
Does This Meet The Stereotype?
It’s amazing to us that most Americans believe the stereotype that mobile home park residents are a lesser class of people who are filled with danger and outrageous behavior. It’s a belief that’s been created by decades of media offerings like “Trailer Park Boys”, “COPS” and “8-Mile”. But it has no shred of truth and the stigma that has been created against mobile home parks creates a giant wall that holds back many suitable investors to this sector. So what are mobile home park residents really like?
First of all, isn’t this whole discussion kind of disgusting?
It seems remarkable that in an age of political correctness, mobile home park residents get no quarter at all. You can say “trailer trash” without any media backlash. Why not – they are more apt than anyone to use that description. A recent headline on a magazine read “Priscilla Presley’s New Lover Lives in Trailer Park!” and then went on to describe what a loser he must be since he resides in a “trailer”. Can you imagine if you substituted any other group into this type of stereotype classification? This double-standard regarding those who live in mobile home parks is astounding and pathetic.
An extremely wide spectrum
There’s no way that anyone can intelligently talk about mobile home park residents without first acknowledging that the range is so large that it’s nothing more than a broad-brush over-generalization at best. While the industry is best known for providing affordable housing, there’s a whole different sector called “lifestyle choice”, which focuses on amenity-rich environments predominantly for seniors. So the bottom line is that mobile homes sell from $1,000 to $500,000 and the residents are just as widely dispersed.
The upper end
For those who would like to relegate mobile home park residents into the classic stereotypes, how would you explain the mobile home parks in Malibu, which count Hillary Duff and Pam Anderson among their residents, and where mobile homes sell for around $500,000 and lot rents are $2,500 per month or so? Indeed, there are many affluent people who live in mobile home parks. Florida and California are filled with them, but high-demographics in many mobile home parks extend across America. A mobile home park in Montauk (the tip of the Hamptons) counts five different billionaires as owners there.
The average resident
While this is way too broad, the “average” mobile home park resident in the U.S. probably has a household income of $20,000 to $50,000 per year. While they are not the most affluent sector, they are also not anywhere near the bottom of the pyramid and have sufficient income to not only pay the necessities but some luxury items, as well. That’s why you’ll frequently see nice cars, carports, additions and landscaping in many parks. When the New York Times writer lived in rental home in our park in Illinois in 2014 – to write his story about the sector – he was fascinated that his neighbor was driving a brand new Porsche 911. These folks are no different than you and me, with the same goals and interests.
The lowest end of the spectrum
The bottom of the housing pyramid are not mobile home residents, but apartment dwellers. Mobile home park residents already have a positive financial statement: they own their own home. Apartment residents often own absolutely nothing and many are only able to afford living in those apartments based on subsidies from the U.S. government. If you wanted to do a show about scary people – with no media manipulation – they would all be set in apartment complexes not mobile home parks. It’s also important to note that the U.S. government did a study on crime in mobile home parks, and found they have no higher crime than the surrounding community of stick-built homes (read the report here).
So how do we fix this misconception?
If everything about the stereotype is incorrect, the big question is how did it get this way? The answer is not only the media, but also lack of attention to public relations by the industry itself. Unlike the RV industry – which has been publicly touting its “Go RVing” campaign for years now – the mobile home industry has only one public relations supporter: Warren Buffett’s Clayton Homes which ran some fantastic ads last year during college football titled “Have It Made”. To overcome a stigma as huge as the mobile home park industry suffers under will require a concerted effort by every owner and industry group simultaneously. Industry consolidation – which is picking up steam – may be the answer, as large private equity owners will bring with them professional public relations skills and pocketbooks that will afford those efforts. In addition, a whole new generations of Americans (Millennials) seem to really favor living in smaller spaces and “green” living options and are big fans of RVs. As this group matures, they will be easier to convince that the media has fed them a bag of lies, and maybe the stigma will just die off.
The average American has absolutely no idea of what a real mobile home park is like. Their views are 100% created by a media that is bent on promoting our sector as bastions of sex and violence for the purpose of boosting viewership. For some reason, America is endlessly tolerant of discrimination against mobile home park residents, despite the fact that roughly 8% of the U.S. population lives in a mobile home. Those in the industry know it’s “fake news” at its worst, but hopefully better industry P.R. going forward as a result of consolidation coupled with the rise of Millennials will bring this nonsense to an end.
Westland Has Acquired Arizona Home Supply And Nevada Home Supply
Westland is the dominant force in mobile home parts and accessories in the west – and they just got bigger! With their acquisition of Arizona Home Supply and Nevada Home Supply, they now have warehouses in Denver, CO, Tempe, AZ, Sacramento, CA, Phoenix, AZ and Las Vegas, NV. You can buy all your set-up parts, skirting, tie-downs, shading, decks, heating and cooling from one trusted source.
So why should you call Westland when you need that special part? There are many reasons:
- They have thousands of items in stock – virtually the Home Depot of mobile homes.
- They have award winning customer service. That’s super-important when you don’t know exactly what part you need for certain homes (and don’t know the exact name of it, if you did).
- They are truly a “one-stop shop” for all your parts needs. It saves you from having to make endless calls to different vendors (and staying on hold) looking for just one certain item.
- They have great pricing. That’s why we buy 18-wheelers of skirting from them (trust us, everyone wants that order).
- They have built the business on long-term relationships and live by the Golden Rule. They will go out of the way to make sure you are happy with their pricing and service.
But there's one new fact that even old customers may not know - they are under new ownership. The new management is an energetic, entrepreneurial group that is open to new ideas and growing together with your business.
If you want to be able to talk to people who know more than you do about how mobile homes are constructed and exactly what part you need -- and want to get great pricing, customer support, and fast shipping -- then you need to try Westland. To reach Westland call (800) 525-8847 or visit their websites at www.westlanddistributing.com, www.azhomesupply.com, or www.nvhomesupply.com. Tell them Frank & Dave sent you.
The Future Of The Clubhouse
When the mobile home park industry really began in the 1950’s, a standard feature of a good property was the existence of a clubhouse and pool. Mirroring the modern RV park, the whole purpose of the park was to not only give you a place to park your trailer, but to share in communal activities that were outside your 8’ wide home. Many parks have clubhouses today, but most are searching for a new purpose for them, as times have changed. So what is the future of the clubhouse?
No longer a necessity
When the industry began in earnest in the 1950s, homes were tiny and the clubhouse served as a giant living room where all residents could communally spread out before returning home to sleep. Even Tony Hsieh’s Airstream Village – the tiny home and RV “commune” created by the billionaire founder of Zappos where he lives with his friends and pet llama – is moving across the street where there is an old motel he owns that will be converted into a giant clubhouse. But with the advent of the 14’ to 18’ wide homes with lengths as much as 80’, the necessity for more space went the way of the buffalo.
Pinball and ping-pong are no longer going to cut it
And the initial activities of the clubhouse are no longer attractive to a modern America. Back when they were built, the clubhouse housed a pool table, ping-pong, and pinball machines (we’ve got the old brochures from some of our properties to prove it). Of course, 2018 is all about video games and soccer and those old games are of little interest to anyone.
“Gathering” areas for residents are an important tool in building a sense of community
So what are clubhouses good for in a modern world? Well, actually, quire a few things. The first is to grow one of the largest amenities that a mobile home park can offer and that’s a “sense of community”. This is the concept expressed in the Time magazine article called “The Home of the Future” that declared that mobile home parks are “like gated communities…” because of their strong sense of communal support. To jump start this amenity, you need residents to bond, and that requires opportunities for them to get together. A clubhouse serves as a great place to “gather”. But not with pinball machines. Our most successful clubhouses revolve around tables and chairs for reading, crafts, cards, bingo – activities like that. They’re basically big party rooms.
Central spot for management and home sales
Clubhouses also make great gathering areas to meet with current and potential customers. As the product has grown in cost and stature, meeting the customer in front of the home and filling out the lease on the hood is no longer a good way to conduct business. If you put some nice signage on your clubhouse – and a couple feather flags out front – and do your best Martha Stewart decorating on the interior with nice chairs, table and desk, you will get more deals closed with a better clientele, and it will definitely make clubhouse renovations worthwhile.
Required for dealer’s license in some states
In some states, you cannot obtain a dealer’s license to sell mobile homes without a permanent brick-and-mortar location to tie to your application. You even have to have a sign on it typically. The concept by the state is to make sure that people who sell mobile homes don’t just run off, and to give the customer assurance that the dealer is reputable. Clubhouses make great permanent locations for your official office.
None of us can predict the future needs of your residents
One big reason to keep your clubhouse well maintained is that we simply have no idea where this industry is heading another half-century from now, and there may be new uses for clubhouses going forward that will be very significant. So what will those uses be? We had a chance to tour Tony Hsieh’s Airstream Village in Las Vegas and we saw all kinds of new ideas brewing among Millennials for how mobile home parks should be oriented. They use their common areas for stages, outdoor cooking, and business centers. Maybe that’s what all clubhouses will feature in the years ahead. Keep your options open.
Mobile home park clubhouses are no longer needed for their original purpose. But that does not mean that there are not great ways to make sense of them in the modern world. See what the options are for your clubhouse.
Is Your Attorney a “Deal Killer” or a “Deal Maker”?
How many deals have you seen go down the drain because your attorney stacked up a million roadblocks to even the simplest problems, and then failed to offer any path to solve them? This is called “deal killing” and some attorneys do this so that they take no risk – if the deal never happens, they can never be criticized for missing a deal point, or for not spotting a flaw in the contract. The problem with this, however, is that you can’t get anywhere. At the other end of the spectrum are the “deal maker” attorneys that recognize real problems from trivial ones, and strive to solve these roadblocks using common sense and legal experience. And the best of those type of attorneys is Dave DiMarco from Woods Oviatt Gilman. We once had a deal go south in a big way – the very driveway into the property was determined to be on somebody else’s property. Any other attorney would have said “well, that’s it, the deal’s dead” but Dave DiMarco sprung into action. We located the owner, negotiated a purchase, personally handled the details, and the deal went forward. And all that over a weekend, no less. And that’s why we love Dave DiMarco and you should, too. If you need service like that, then consider using Dave DiMarco on your next transaction. You can reach him at (585) 987-2833.
How Mobile Homes And Hot Rods Have A Lot In Common
We drive. A lot. It’s been that way for over two decades. And if you drive a lot, you invariably start getting hooked on cars and the next thing you know, you’re reading car magazines. And some of those magazines feature hot rods as a special section. These are cars that have been heavily customized to meet the owner’s tastes. And, in many cases, mobile homes have a lot in common with hot rods. And that’s a good thing. So how are they similar?
Personalization and pride
Hot rods are 100% custom. They take the shape of their owner, and the two become inseparable. The same is true with some mobile homes. When you see a home that is bright pink or one in which the owner has covered the skirting in stone, don’t think about criticizing the owner for doing that. They are simply expressing their individuality.
Adapting better technologies and concepts
Many of these mobile home “customizers” will take risks and do projects that are cutting edge. We’ve seen old 1960’s flat roofs in which the owner has changed out all the windows and doors with more attractive and energy efficient replacements, and then added a pitched roof for better insulation and lower utility costs. This is no different than when a hot rod owner replaces the old engine in a Model A Ford with a brand-new V-8 and then adds air-conditioning. It’s simply a case of bringing old designs up-to-date and improving what’s there. The original designer of the mobile home would certainly applaud their efforts as they would have done the same thing if they could have re-designed them today.
Keeping old assets alive
When hot rodders began modifying classic cars back in the 1950s, car collectors were horrified. But the truth is that these folks are what kept these old cars alive. The same is true with modifying and updating mobile homes. I was in one recently in which the owner was taking all the walls and windows out of a 1960s unit, and bringing it back to life with a modern vibe. He was converting a 2 bedroom into a one bedroom, and doubling the size of the bathroom. Effectively, this was going to extend the usable life of that home by decades.
Appreciated by lenders
There’s an expression in the mobile home park business called “pride-of-ownership”. It means that you take care of your property and have an enthusiasm about living in the community. Nothing makes a banker more confident in resident “pride-of-ownership” than seeing old homes being significantly remodeled. The same is true of hot rods, which often have higher valuations today than their original classic car counterparts.
The moral is that you should never criticize these mobile home “artists”
As a park owner, your goal is to have uninterrupted lot rent on every lot. When a home is removed from your park for being obsolete, that rent continuity is interrupted, and you may have to step in to buy a new home to fill the vacant lot. That launches you into sticking capital into the home, managing the move, running the ads, showing homes, renovating homes in-between tenants and 101 other unpleasant duties. So it’s essential that you don’t ever have any homes leave. Some of the 1950s through 1970s models are not in-tune with modern tastes, and these mobile home “hot rodders” are actually doing you a huge favor by paving the way for these homes to stay for decades to come.
Every park owner should celebrate the brave souls who take an old, non-optimal floor plan and a design that was state of the art a half-century ago and bring it back to life.
The CASH Program From 21st Mortgage: One of the Big News Stories of 2018
One of the biggest things going in the mobile home park industry is the CASH program from 21st Mortgage. If you own a mobile home park, the power of this program is astounding. You can fill vacant lots with zero out-of-pocket cost. You can get customers approved to buy homes with amazing speed and a “can-do” attitude. You don’t have to get in the middle of financing or the SAFE Act. And you can tap hundreds of thousands – or millions – of dollars sitting there in vacant lots. The demand for affordable housing in the U.S. is enormous, and the only thing holding most parks back from 100% occupancy are new and used homes that your customers can qualify for. With the CASH program, those obstacles can be overcome and your occupancy can soar. We are the largest users of this program in the U.S., and we know how great it is.
The Case For Park Bulletin Boards
We’ve noticed that many of the best mobile home parks feature bulletin boards, typically located near the mailboxes. This is an amenity that most owners typically miss, but it can offer huge rewards. Should you bother to install a park bulletin boards and keep it up?
We’re not talking about a typical bulletin board here
Let’s start off with an important point. The “bulletin board” we are describing here is made of aluminum with a plexiglass face and is locked so nobody can get into it. You unlock the door, swing it open, insert what you want on the board, close the door and lock it. These are typically attached to a masonry wall or telephone poles, typically by the mailboxes. Just wanted to get that straight.
Great way to build a relationship between residents and management
We’ve been writing articles all year about the positive attributes of creating a “sense of community” in your property. And that quality of life boost extends to the relationship between the residents and management. One terrific way to let the residents know that you care is with a park bulletin board where you can communicate freely every day of the week. The combination of the bulletin board and a simple newsletter can do a massive amount of good in improving resident retention and happiness.
Central spot for announcements and reminders that can make or save you money
The bulletin board can be used for important announcements and reminders. These include “rent is due on the 1st” and “freeze warning: let faucets drip”. These type of announcements are worth far more than the paper they’re printed on. Particularly sales ads that talk about homes you have for sale or rent, or RV check-in instructions. If you really think about it, these bulletin boards are kind of like salespeople that give your sales pitch 24 hours a day on zero salary.
These type of locking bulletin boards cost $100 to $300. That’s an incredible bargain if you think about what all they can do for your property. And it’s a one-time charge, unless you let water get into it or a tenant breaks the plexi-glass face. You would be hard pressed to find anything else in the park that gives this much bang for the buck.
Bulletin boards have no moving parts to wear out. No pressurized pipes to blow. It’s a simple contraption with virtually no maintenance requirements except for two: 1) keep the water out of it and 2) keep the lock mechanism and hinges well lubricated. So make sure to spray some WD-40 on the hinges and into the lock cylinder periodically, as well as all rubber seals. You can’t get any easier than that.
If your park does not currently have a bulletin board, you might want to add one. They’re inexpensive, low maintenance and pack a real financial punch.
Need A Phase I Environmental Report? Mike Renz Is Your Man For The Job!
The New York Times called Frank a human encyclopedia of all things mobile home park and, if that’s true, then Mike Renz is the human encyclopedia of all things under the ground. You see, when it comes to Phase I Environmental Assessments, nobody in the industry is more knowledgeable than Renz. He’s our go-to guy for all things pollution-oriented, from Phase I reports to simply asking questions on what we see going on next door to the property (or even inside that concerns us). We were once walking through a property and saw a brown colored solution oozing from the property. Within minutes, Mike had pulled up the data and figured out what it was (rusty water from an iron-ore- rich artesian spring). That’ the kind of information that we find invaluable in today’s litigious world of environmental condition. On top of that, we’ve had Phase I reports that failed for existing pollution, and Mike Renz has been able to solve them by using common sense and technology, like the time he proved the EPA wrong by doing a simple core-drilling to prove that a supposed landfill on a mobile home park did not actually exist (it had been phoned into the EPA by a former manager who had a grudge against the owner). If you want that level of expertise on your side, then you need Mike Renz to be your Phase I Environmental provider. That’s who we use, and he’s amazingly good.
You can contact Mike Renz at (614) 538-0451.
The Truth About Self-Storage Units Inside Mobile Home Parks
We own hundreds of self-storage units inside mobile home parks that we own. And we’ve been renting them out for over twenty years. There are some things that you’d expect with this asset type, and others that you might not. So here’s the truth about owning and renting self-storage units inside mobile home parks.
A universal demand – but lower where there are fewer material goods
There’s no question that Americans are fans of materialism. This has fueled the entire storage industry, which is based on housing all those possessions. But don’t forget that mobile home park residents don’t always have a lot to store. Outside of some Christmas decorations and other seasonal items, many mobile home park residents are lacking sufficient items to require a storage unit. Because of this reality, self-storage units inside mobile home parks do not always experience as much demand as they do in the outside world.
Difficulty in bringing in “outside” customers
At the same time that demand can be lower for storage by mobile home park residents, there’s an equally large roadblock in attracting storage customers from the community-a-large. The reason is that the nationwide stereotype of mobile home park residents as being “dangerous” taints the attractiveness of storing goods inside a park. Many potential customers, once they realize that the storage unit is inside a mobile home park, simply keep driving until they hit that nice, safe Public Storage complex.
Be careful on estimated rent levels
Because of these two pressure points, the only solution in many mobile home parks is to rent your storage unit at a significantly lower price than the professional operators outside your park. If the rate of Public Storage is $100 per month for a 10’ x 10’ unit, then your price probably needs to be more like $50. You’ll know when you’ve hit the right rent level once you take over the mobile home park you’re buying, but until then, always make your rent projections on the low side. Don’t let anyone tell you that you’ll be able to match the rents of the professional storage centers.
A good combination with park operations
Storage and mobile home parks have many business model similarities. You are basically renting “dirt” in both cases, only one comes with walls, a roof, and a roll-up door. Remember that storage and mobile home parks share some very positive attributes, such as the lowest loan default rates in U.S. real estate, and the lowest expense ratios. You can have storage inside a park and it fits seamlessly with all other business operations. You already have a manager to rent the storage units, and you already have the infrastructure to operate it, such as liability insurance, power and roads.
Cities are often willing to let you add storage to your property
Another great thing about storage is that most cities are open to the concept of adding it to a mobile home park on available vacant land. The reason is simple, it creates greater tax revenue without really adding any cost to the city (nobody lives in storage units, so there are no education or healthcare costs). In addition, storage really has no enemies – it’s that tame, politically correct real estate sector that gets nobody too excited so there’s no voter pushback. And it’s very simple to build storage and it has no complications such as traffic or parking. Got some vacant land inside your mobile home park? There’s a good chance that self-storage is your solution.
The solution for some rules violation issues
Of course, another plus for storage inside mobile home parks is that it’s a logical solution for resident rule violations. If someone has a bunch of items in their yard – including work-related materials – placing that stuff in a storage unit solves the crisis. We have some parks in which individual storage buildings are located on each lot to take the pressure off items in the yard – that’s how effective they can be. So there’s really a win/win potential with self-storage inside of a mobile home park that pays bigger dividends than just a monthly rent.
Storage and mobile home parks work well together. They are very happy partners in providing residents with a higher quality of life than apartments can offer. But be careful on your storage rental rate expectations when buying a mobile home park and look for opportunities to add storage to vacant areas. Self-storage and mobile home parks are a great combination.
Join Us For Our Next Boot Camp In Las Vegas On August 24th To 26th
If you want to learn the correct way to identify, evaluate, negotiate, perform due diligence on, re-negotiate, finance, turn-around and operate mobile home parks, then consider attending our next Mobile Home Park Investor’s Boot Camp in Las Vegas on August 24th to 26th. It’s one of our most popular for the simple reason that it’s in Las Vegas, and that means terrific dining and shows after class each day. You can bring the family and they can have a great time while you attend the course. It’s a three day immersion weekend that is taught both in a classroom as well as in the field inside real mobile home parks. And you’ll learn how NOT to gamble with your investment dollars in a setting which encourages the exact opposite behavior.
Seats are filling up fast, so hurry and order your tickets today!
Scenes From The 1957 Texas Mobile Home Show
Thanks to D.J. Pendleton and the Texas Manufactured Housing Association (TMHA) for posting these terrific photos from the 1957 Texas Mobile Home Show. If you want to see what the industry looked like 61 years ago, here’s your opportunity.
It’s worthy of note that the TMHA began in 1952, and has been delivering support to mobile home park owners for over a half-century. Thanks, D.J.!
The MHU Investor’s Club Classified Ads
To advertise here, you must be a member of the MHU Investor’s Club which is a program available to our Mobile Home Park Boot Camp and Mobile Home Park Home Study Course customers. Contact us for more information.