If you attended the 2015 Mobile Home Park Summit a few days ago, you would have heard of many new, positive developments for park owners. For example, the new technology of “replacing” your corroded galvanized water lines by sandblasting and lining them with plastic without any digging – and saving about 40% over the cost of regular line replacement. Even though the mobile home park is a “low tech” industry that does not mean that modern inventions don’t go unnoticed. The ability of the park owner to embrace new technologies can result in a massive amount of time and money savings, as well as the ability to remain highly competitive. Everyone should stay abreast of these developments and use them to the fullest. Just on our due diligence alone, the internet saves us literally hundreds of man hours in travel and wasted meetings. So don’t fear new advances – take advantage of them.
Memo From Frank & Dave
The Dangers – And Rewards – Of Being A Pioneer
In 1927, a 25 year old Charles Lindbergh climbed into the cockpit of the Spirit of St. Louis and flew the Atlantic in 33 ½ continuous hours, often only 200 feet above the ocean surface. In 1965, Edward White opened the capsule door in Gemini IV, and completed the first spacewalk, miles above the earth’s surface. Both men were true pioneers, and paved the way for future generations to do the same tasks without incident or worry. But being a pioneer is not for everyone, and there are certain mobile home park explorations that end in total failure. You have to understand how to be a “smart” pioneer to truly do a service to yourself in the risky business of pioneering.
Blazing a new trail can lead to disastrous consequences if your plan is flawed
The reason that both Lindbergh and White succeeded was because they had an extremely well thought-out plan. When buying a mobile home park, it’s imperative that you have a terrific plan to begin with. You need to think through all of the costs and challenges, and make sure that you have accounted for every nickel and every risk that may pop up. The great pioneers appear to be risk takers, which they were, but they were also the ones that had reasonable plans to succeed. Lindbergh was not the first one to attempt the Atlantic crossing – but the others all died because they did not have successful business plans. So the first rule to being a successful pioneer is to have a great plan to work from.
But if you succeed, you will be miles ahead of the pack
We live in a risk/reward world, in which the more you risk, the greater the return you should receive. As a result, the first pioneers to succeed have a huge head start on the competition. Dave and I got in the business almost 20 years ago, at a time in which nobody had any interest in it. As a result, we had the chance to learn how to turn around mobile home parks years ahead of anyone else. This kind of advantage is priceless, and makes the danger worth the risk and effort. The mobile home park industry is so young that there is still a ton of opportunity out there, and the competition is very weak compared to other real estate niches.
You make your luck through due diligence
Ben Franklin said “Diligence is the Mother of Good Luck”. If you do proper due diligence, you leave nothing to chance, as you have uncovered every skeleton in the closet prior to the end of your due diligence period. Franklin was exactly correct, and we have never seen a deal in foreclosure that the buyer used thorough due diligence on. Instead, it’s the deals where the buyer never confirmed the permit legality, or verified the revenue or expenses, or even visited the property prior to closing. We once looked at a deal in which the buyer had paid $5 million and the bank was looking for $400,000 for it in foreclosure. In that case, the buyer had relied on the broker and the seller and done no due diligence at all. Don’t let that be you. Listen to Franklin, and hedge your risk with diligence.
Having a Plan B is critical
Paul McCartney, the legendary Beatle, never was confident that his music career would take off, even when he was at his peak. So he always kept a fallback plan of opening a sandwich shop as his “Plan B”. Everyone should have a Plan B for every contingency. The only reason Lindbergh survived his Atlantic crossing was because he had a back-up plan for everything that could go wrong. When we could not see where he was, he carried some crude navigational tools and, when that failed, he guided his plane by following the stars and, when that failed, he went down to a couple hundred feet above the ocean and looked for clues there. I was once on a Southwest Airlines flight and the guy sitting next to me was an aircraft engineer. So I ask him why Southwest has never had a fatality with millions of people flown per year, while private airplanes crash all the time. He told me that’s because commercial planes like Southwest flies have two back-up systems for every control issue, while the private plane has none. If something breaks on the Southwest flight – and they frequently do – the passengers don’t even know it because the pilot just goes to Plan B. In the private plane, there is no Plan B. You want to be more like Southwest.
Being a pioneer can have great benefits, but it can also be suicide if you don’t have a great plan, great due diligence, and a Plan B for every negative that might pop up. You make your own luck in the mobile home park business.
If You Want To Succeed, Never Let Your Competition Out Of Your Sight
These photos are of two different eras in spy planes. The first is a WWI model, and the second is the U2 from the cold war. Armies have been spying on each other since the time of Alexander the Great, in which he would have a dinner with the opposing king before each battle, and try to get his secrets out of him by supplying him with vast amounts of wine. Knowing your competition is extremely important in any business, and mobile home parks are no different.
Track market lot rents
One of the most important pieces of competitive information is your competitors’ lot rents. You need to proactively call and track their lot rents several times per year. This will keep you abreast of opportunities to increase your own lot rent. And increasing your lot rent is the #1 way to boost your park’s net operating income, as it costs only 50 cents to enact (the price of a stamp) and 100% of the increase falls to the bottom line. A good park owner can recite the rents of every park in his market, and knows exactly how they rank in that list.
Mystery shop for home prices and rentals
If you have any park-owned homes – and even if you don’t but have vacant lots – you should track their rental rates and move-in specials, as well as pricing to buy the home for cash. In so doing, you will know the true value of every home in your park, and be able to make immediate, snap judgements on how much you can pay for any vacant home that is offered to you by a resident, estate, or abandonment.
Watch for Lonnie Dealers
Few park owners seem to understand the value of the Lonnie Dealer. Here’s a bunch of folks that want to fill your lots for you and ask very little in return. The hardest thing about working with Lonnie Dealers is finding them in the first place – they are like hummingbirds and hard to easily identify. So watch for signs of their existence in your competitor’s parks. One tell-tale method is to watch for repetitive phone numbers on homes for sale or rent, other than those owned by the park. Another is to watch for the same type of listings in the metro newspaper, or fancy signs in the windows of vacant homes, or simply cold-calling mobile home movers and see if they know any. With the value of most occupied lots $20,000+ these days, a single Lonnie that fills five lots makes you $100,000 with little time, effort or risk on your part. And that’s a pretty good deal in our minds.
Watch out for “raiding”
By watching your competitors, you can help guard against “raiding” which is the attempt of competitive parks to steal your tenants from you under the offer of a free move to their park. Only a park owner and a bank can afford to pay for the move of a mobile home, so these threats should not be taken lightly. We react immediately and aggressively when another park owner sends a letter to each of our tenants offering to move their home for free in exchange for a long-term lease, typically offering a “move-in special” of reduced rent for six months or so. We call the owner or manager of this park and tell the the following: “we know that you sent a flyer to our tenants trying to steal them, and we are prepared to send an identical offer to all of your tenants today. You might steal a couple of our tenants, but we will steal the same number of your tenants. It will cost us each $5,000 to move those tenants, and neither of our occupancies will increase. Or, the other option is that you withdraw your offer to our tenants if any of them call you, and we will not send out our flyers. What do you want to do?” In every case that we have done this, the other park owner has elected to withdraw the attack. But if we did not follow our competition and know that they had fired this missile, we would not have been able to fire back and solve the crisis.
Just like a good general in a war, you need to stay proactively on top of your competitors. This continuous flow of data will allow you to make educated decisions and spot opportunities when they arise. When you know everything about what your competition is offering as far as rates and prices are concerned, and the status of their occupancy and Lonnie Dealer alliances, you will be in a position to be a great commander for your mobile home park investment.
New Parks for Sale on MobileHomeParkStore.com
Is This The Perfect Tree?
This is a photo of a metal tree in a sculpture garden. It’s a metal frame wrapped in stainless steel. And this may be the perfect tree for mobile home parks, except that it has no leaves and costs around $100,000 to build. It is the perfect trade off of aesthetic improvement without root intrusion – and it certainly can’t fall down in a windstorm. But since we can’t get stainless steel trees in our parks, what’s our position on regular trees?
Trees improve park aesthetics
Most mobile home parks are not very attractive. While mobile homes are cheap to rent, they are not known for their physical beauty. As a result, in most parks the trees are the only thing that gives the park any aesthetically pleasing qualities at all. If you were to remove all the trees, you would have nothing to look at but grey fading asphalt streets and singlewide mobile homes – not something that most people want to live in. So, just from a surface beauty standpoint, trees are an important part of the mobile home park greenscape.
Tree roots cause issues with sewer lines
Tree roots are notorious for getting inside of sewer lines and causing calls to Roto-Rooter. They can’t help themselves – they are trees and are in a constant search for sources of water. There’s no way to fix this dilemma. Trees have roots, and roots hurt pipes. So the question is: are trees worth the aggravation of the occasional Roto-Rooter bill? We think so. A Roto-Rooter call costs around $250. A nice group of trees probably increases the park’s value in the appraiser’s mind by thousands if not hundreds of thousands of dollars.
Trees provide shade in the summer
Another benefit of trees is that they provide shade to your tenants, which reduces their power costs and makes their life more pleasurable. Tenants find trees to be one of their biggest amenities – most every tenant would happily trade the park pool and clubhouse for nice shade in the summer. If your park had no trees, you’d have trouble attracting or retaining tenants, as everybody loves trees.
Trees drop leaves everywhere in the winter
The same thing that makes trees fun for the tenants in the summer are a mess for the park owner in the winter. The tenants rarely do much with the falling leaves but push them out to the street, where they become the park’s responsibility to dispose of them. The removal of the park leaves just needs to become a fixture of your annual mowing budget. The nice thing about leaves is that, unlike mowing, you only have to do it once and it’s over.
Trees cost nothing to grow
Once a tree is planted and takes root, it does everything on its own after that, and at no cost to the park owner. Those gorgeous trees that some parks own, that stretch 100’ in the air and look like something out of “Gone with the Wind”, those trees only cost the park owner around $50 to plant thirty years earlier, and mother nature paid the rest. If you want to know the cheapest way to improve a park’s appearance, the easy answer is to plant trees that are native to the area and don’t need extra watering besides the rain.
Trees cost a lot when they die
While living trees are cheap to take care of, dead trees are the exact reverse. Removing a giant tree can cost several thousand dollars. Dead trees and tree limbs can also cost a lot in liability, with trees falling on and destroying mobile homes and cars alike (and sometimes even people). There’s really nothing you can do to prolong the life of a tree, and it’s hard if not impossible to budget for this event, as a tree could live another 100 years or die in three months. It’s just a cost of doing business in our parks.
Trees are a major trade off for us – we love and hate them at the same time. We’ve come to the conclusion that we are neutral on the tree issue; we neither plant nor remove them, unless they’re dead. So until they can create inexpensive metal trees for parks, we will continue to work with what we have to the betterment of the tenants, the appraisers, and ourselves.
Mobile Insurance Is Our Insurance Expert!
Whether you are simply in need of an insurance quote or you have the unfortunate, yet common task of filing a claim, Mobile Insurance is ready and waiting to take your call.
They offer you the best mobile home park insurance coverage when you need it. Being able to contact them when you need them is just as important. Shopping for insurance or setting the wheels in motion to get your damaged home or your business back on track is not easy. At Mobile Insurance, they work to make the whole process easier with greater value for your money. Call them at 800 458-4320 or email [email protected]
The 2015 Affordable Housing Summit Recordings Are Now Available
If you missed the live event, now you can at least get the recordings. The 2015 Affordable Housing Summit is our annual symposium in which we discuss the latest things you need to know to stay ahead of the competition in 2015 and beyond – and this year’s event hosted many speakers from all sectors of the mobile home park industry. Learn how Nu-Flow Technologies can sandblast and coat your entire corroded galvanized water system with plastic for 40% less than normal replacement, and no digging. Learn how 21st Century Mortgage wants to make loans to your residents to help you fill lots. Hear how ROC is making it possible for your own tenants to buy your park, at more money than any other buyer can offer. You’ll also hear the key steps to getting your loan closed by Dave DiMarco, attorney-at-law, how to understand the Phase I Environmental report from Mike Renz, and get a 40 year industry overview from Jim Visser, publisher of the Journal of Manufactured Housing. You can’t listen to this event and not walk away with at least ten ideas to improve your profitability for 2015. You will get instant access to the recording downloads for $99.
A Testimonial For Renz And Associates
I wanted to share my recent experience with Mike Renz. Jeff and I needed a Phase I completed for a mobile home park purchase late last year. I shopped around, including Mike Renz as one of my quotes, and eventually chose a local consultant to perform the work. The savings was on the order of $300, and the local guy was "local"--meaning, he should be familiar with the area databases, industries, geology, etc.
In my initial conversation with Mr. Renz (and during every presentation he's given for you), he mentioned that regardless of who I chose, if I had questions, to call him. His advice would be free of charge.
The report I received from the local consultants was pretty bad. Being an engineering consultant in my prior life, I was expecting a much higher quality report. The local guys didn't really do any consulting, and worse, made blanket assumptions, suggested scientific theories that were incorrect with no supporting data, and worst of all, erroneously listed recognized environmental conditions (REC). I called Mr. Renz--he immediately/graciously reviewed the report, talked me through his major concerns, and provided a detailed email with a list of talking points that helped me discuss the report with the local consultant. With the talking points, I was able to reason with the local consultant. The final product was a Phase I report that I felt comfortable with, and more importantly, that the bank accepted.
Needless to say, next time Jeff and I need a Phase I, we're calling Mr. Renz.
As always, Jeff and I appreciate your help and advice and your willingness to share your experiences. After listening to Mr. Renz' presentation oat the Summit, I wanted to thank you again for bringing professionals like Mr. Renz to our attention.
You can contact Mike Renz at (614) 538-0451.
Filling Your Vacant Lots Just Got Easier With The Legacy Park Finance Program
Most mobile home park operators have vacant lots to fill in their parks. They know they have the demand to fill the homes, and they know that they can get enough in rent to cover the costs. But the problem is financing – nobody carries the paper on the homes so you have to come out of pocket 100%, right? Well, that’s not the case anymore. Legacy Homes has brought out a new Park Finance Program that allows you to buy homes to fill your lots directly from Legacy, and they’ll finance 70% of the cost of the home including installation. We think that this will be a game changer for many operators, as they have been dreaming of a dependable financing source for their home purchases. And the Legacy product is outstanding as a home – nice floor plans, attractive colors, and great low pricing. We have been customers of this program from day one, and are excited that Legacy is now offering this program to all park owners, large and small. If you are interested in it, call Mark Ledet at Legacy at (786) 785- 9827, or contact us for a reference. We’re one of their largest customers.
Security Mortgage Group Is Our Banking VIP
We did a lot of conduit loans -- and regular bank loans -- last year. A common feature of those loans was Security Mortgage Group. If you are buying or financing a mobile home park, let Security Mortgage Group get you the loan. They'll get you better terms than you'll ever be able to find on your own. That's why the win the industry mortgage broker award virtually every year from MHI. If you have any loans you need help on, you can reach Anthony or Gerry at (585) 423-0230.
The Market Report
Equity Lifestyle Properties - 87.22
Sun Communities - 88.70
UMH Properties - 15.68