Mobile Home Park Investing Newsletter

The Louisville Home Show was another great opportunity to see the continued growth in the quality of the mobile home product. New homes are equal or superior to the best of Class A apartments, as well as single-family residences. Perhaps with this continued improvement in our offerings, mobile home park owners can continue to gain pride in what we do and how we fit into the macro housing environment. It often disappoints us that community owners feel that we need to offer huge discounts on our “trailer” products because we are somehow inferior to the other housing options of customers. To the contrary, we believe that we don’t need to even offer a discount in our pricing structure in order for people to appreciate the concept of no neighbors banging on your walls or ceiling, the ability to park by your front door, having a yard, having a sense of community, and being a homeowner. We hope that 2018 will be a pivotal year in bringing renewed respect to an industry that never seems to fully appreciate what it has to offer.

Warren Buffett is the greatest investor in the history of the U.S. But he also has a way of explaining things that is simple and profound. He’s also a huge friend of the mobile home park industry, as the owner of Clayton (the nation’s larges mobile home retailer) and 21st Mortgage and Vanderbilt (which are the nation’s largest mobile home financing companies). Many of his best quotes directly tie to mobile home park axioms that we support, so we thought it would be interesting to compare some of his best bits of wisdom to some or our beliefs about the mobile home park sector.

“Without passion you don’t have energy, and without energy you have nothing”

Those that attack finding a mobile home park to buy with enthusiasm are the ones that always find the best deals because they are persistent and aggressive. If you are not that excited about buying a mobile home park, you should probably not do so, as it is a very important trait. The same is true about managing what you purchase. Those moms & pops that you just bought from were lacking passion about making the park the best it could be, which is why they sold out. If you are not 100% excited about continually grooming your property into a nice, clean, safe, affordable place for your residents to live, then it’s time to sell.

“The difference between successful people and really successful people is that really successful people say no to almost everything”

We look at a ton of deals before we find one that we find compelling enough to buy, just as Buffett looks at hundreds of stocks before making a purchase. Being highly selective is a critical trait in buying the right mobile home park to meet your goals. Don’t be in a rush. Take your time and look at a large volume of potential candidates before pulling the trigger. And when a deal doesn’t “feel right” just keep looking.

“If you don’t find a way to make money while you sleep, you will work until you die”

Mobile home parks make a terrific passive income source, as they require the least amount of management of any real estate sector. The number one reason that most people buy that first mobile home park is to create a second income stream and a hedge against the economic uncertainty in the U.S. It’s a noble pursuit and one that is very rewarding.

“Risk comes from not knowing what you’re doing”

This quote is similar to Ben Franklin’s “diligence is the mother of good luck”, and the basic meaning is that if you don’t know what’s good from bad, how can you possibly make a smart investment. Unlike gambling in Vegas, buying a mobile home park should be a matter of skill in making smart decisions based on good understanding for the facts. If you don’t know what a “packaging plant” is, or what the correct metro population is for sufficient demand, then you should learn those things before you set about buying a mobile home park. It should be noted that one of Buffett’s strengths as a young investor was his endless reading of financial reports so that he knew everything about the companies he invested in.

“Be fearful when others are greedy and greedy when others are fearful”

This is one of Buffett’s best axioms: the necessity of being contrarian to succeed in investing. Anyone who invests in a mobile home park is clearly defying the mainstream investing environment. But on top of that, there is the fact the simple fact that the “stigma” of the industry keeps most investors from even considering mobile home parks, despite the huge demand in the U.S. for affordable housing. That’s the reason we’ve been buying so many communities over the past two years (an average of 1.5 closings per week), because we know that this is the prime time to be buying before more investors discover our sector.

“Rule Number 1: Never lose money. Rule Number 2: Never forget rule number 1”

This quote is similar to the adage “before you can have return on principal, you have to have return of principal”. Same concept. Preservation of capital should be every investor’s #1 priority. That’s one of the strongest benefits of mobile home parks as an investment tool: the stability of the revenue since it costs $5,000 to move a mobile home from Point A to Point B. Having a stable revenue base is the key building block to your investment not declining in value. If you talk to a huge number of park owners, you will find that it is a very rare event to actually lose money on a mobile home park – it’s normally more a question of how much money you made.

Conclusion

Warren Buffett is the largest owner of mobile home manufacturing and financing in the U.S. While he does not own any mobile home parks, they completely fit his strategy and most common words of wisdom regarding investment strategy. Of course, that’s probably why he has bet a couple billion dollars on the industry, even though he’s not a park owner.

Manufactured Housing Review magazine – the only publication of its type in the industry – has named “Frank & Dave” the Industry Persons of the Year for 2018.

To view this month’s issue, click here!

We are very proud of receiving this honor, as we have spent around 20 years working to help make the industry more mainstream. However, there is still a lot of work to do. Rest assured that we will continue to be the “voice” of the industry until it doesn’t need one any more (which will be far into the future).

We’ve been using Westland to buy mobile home parts for over a decade. We’ve bought entire 18-wheeler loads of skirting from them. And it always shocks us that more people don’t know they exist or what they have to offer. So here are the reasons that you should talk to Westland about all-things mobile home:

• 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.

So if you want to be able to talk to people who know more than you do about how mobile homes are constructed and what part you need, and want to get great pricing and customer support, and want your parts shipped fast and tracked accurately, then you need to try Westland. You can reach them at 800-525-8847 or on their website. Tell them Frank & Dave sent you.

Privately-owned Champion Homes has merged with publicly-traded Skyline Homes INSERT LINK. This combination of mobile home manufacturers creates a larger force within the industry (as well as the ability for the owners of Champion to access public markets for liquidity an potential expansion. The stock market reacted well to the news, with the stock of Skyline/Champion going up __% since the announcement. It will be interesting to see what the impact of the merger will be with mobile home park owners, who represent the bulk of all new mobile home purchases today.

Obtaining a loan for a mobile home park can be difficult and time consuming if you do not know how to build an effective loan package, or which lenders to hit. And then there’s the unpleasant task of meeting with lenders and dealing with rejection, as well as knowing what terms are negotiable and how much you can push them. What’s the solution? For smart buyers, it’s MJ Vukovich at Bellwether Enterprise. MJ is one of the top loan brokers in the U.S. He goes out and gets the loan and all you have to do is pick which bank you want to go with from those that want the loan. It’s fast and painless, and the fee is around 1%, which is a real bargain. Best yet, you only pay on performance, with the fee due at closing. We’ve been using MJ with great success, and his real strength is in the “agency” arena with Freddie Mac and Fannie Mae, where his firm is a leading underwriter. Best of all, MJ is a third generation park owner, who understands the business and looks at the entire process from your perspective.

To get ahold of MJ Vukovich for questions or to get the loan process going, email him at [email protected] or call him at 612-335-7740. Let him know Frank & Dave referred you for VIP treatment. And let us know if your loan closes and we will send you a $500 gift card to the home improvement store of your choice to get you started on your park renovations.

There appears to be significant movement on the Federal level to bolster support for the mobile home industry by having Fannie Mae and Freddie Mac aggressively securitize chattel loans. All of this falls under the Duty to Serve regulations (to read Fannie Mae's Duty to Serve Plan, click here and to read Freddie Mac's Duty to Serve Plan, click here).

On December 18, 2017, the Federal Housing Finance Agency (FHFA) released Fannie Mae and Freddie Mac’s final 2018-2020 plans, which became effective on January 1, 2018. Both include themes such as safety, liquidity, and market outreach.

Highlights of Fannie Mae and Freddie Mac’s 2018-2020 Duty To Serve plans for manufactured housing include:   

• Freddie Mac will continue to expand their outreach and research on the chattel market during 2018, and begin purchasing chattel loans next year.   The chattel loan targets are 200 to 500 loans in 2019 and 600 to 1,500 loans in 2020. 
• Fannie Mae will also begin purchasing chattel loans next year.  The targets are 1,000 chattel loans by the end of 2019 and an additional 1,000 chattel loans by the end of 2020. 

While this is not an immediate game-changer for the industry at those levels, the securitization of 2,500 loans at roughly $30,000 per home is a $75 million shot in the arm and, most importantly, should hopefully just be an appetizer for much larger amounts in progressive years.

Over the past year, we have been rapidly converting every existing water meter in our portfolio to Metron-Farnier Sustainable Services. And every new mobile home park that we change to sub-metered water & sewer use, we meter using Metron. Our entire portfolio – except for those parks that are directly billed water/sewer by the city, or not allowed to sub-meter by law – will be with Metron by the end of this year. 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.

Many people just don’t have the time to travel all the way down to Louisville for the annual mobile home show. So for all those who wanted to be there but couldn’t, this link will give you a tour of the show with over 800 photos of interiors and exteriors from Louisville – just as good as being there but without investing the time or money to attend. The basic conclusion from the show (as demonstrated in the photos) is that the quality of the product has never been higher, while the price point has remained ridiculously low – the perfect combination for a tremendous value for the consumer. So enjoy these photos while you have a nice dinner on the money you saved from not having to be there in person.

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. We’ve used Mobile Insurance for over a decade, and their superior service is known throughout the industry. Kurt, the owner of Mobile Insurance, is a top resource for any park insurance question, and they provide free quotes on parks that you are acquiring. That’s why around 2,000 park owners in the U.S. are Mobile Insurance customers.

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].

One of the best-known fixtures at Los Angeles Lakers’ home games is the older gentleman with courtside seats that is always there with a fashion model. Nobody knew his identity until a few years ago, when it was revealed that he is the owner of several mobile home parks in the L.A. area. His name is Jimmy Goldstein, and he’s considered the #1 fan in the NBA, based on the total amount spent on game tickets. Although he is very secretive about his personal life, he is rumored to have purchased several mobile home parks during the buying heyday of the 1970s, and then rode the lot rents from $100 to $1,000 per month.

We started the Summit series in 2010, with the goal of doing an annual review of each sector of the mobile home park industry and focus on it’s current state-of-the-art and predictions for the New Year. We see this as an important part of any park owner’s strategy and planning. This year we have over 20 speakers who identify exactly what’s going on in everything from finance to cap rates, along with predictions going forward. You can get all this information for only $99, which is $5 per hour – a ridiculously low price for this type of insider data. We believe that if you can come away with only one great idea from the Summit then it was a success – and we bet it will be more like ten. Register Here Today!

Elvis would have been an unsuccessful park buyer – except maybe in Memphis. It is unlikely that most moms & pops would have bonded well with someone wearing a sequined body suit. So what should the typical mobile home park buyer wear when meeting with mom & pop? While there’s no independent study to confirm this, we have found that boring, traditional attire is your safest route. Remember that the whole point of meeting the seller is to engage in “bonding” which basically means gaining trust and friendship. And studies have shown that people tend to “bond” with people who they feel are similar to them in values and interests. So that means that the smart park buyer will try to dress in a fashion that would create trust with the average mom & pop. That means basically extremely conservative dress code for both men and women. If you want to wear a cape sometimes, save that for Halloween.

How many deals have you seen go down the drain because there was attorney involved that stacked up a million roadblocks to even the simplest problems, and then failed to offer any path to solving 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 in business if you can’t move forward on a single property, regardless of how good the economics and market are. 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.

It may seem shocking, but Rodeo Drive was a marketing gimmick. It was originally just another street of retail stores, but a dedicated effort to make it something more created a retail icon that is known throughout the world. So if you can take any old street in America and make it into a travel destination, then it’s a sure thing that you can take any mobile home park – regardless of its current reputation – and make it into a positive image. But how do you do it?

New name based on the strongest selling point

Many mobile home parks are best served by immediately changing the name upon purchase. If you find that the park has a bad reputation in the community, the best course of action is to give it a fresh start with a new moniker. The selection process is to isolate the most compelling feature of the property, and make that the name. In this way, every time you say the name you are basically selling the customer at the same time. For example, if a mobile home park is in a great school district called “Anderson” then you would want to name the park “Anderson Estates” as that reinforces why someone would want to live there. If the most compelling feature is big, shady trees, then “Big Oak Estates” might be more appropriate.

Create an impressive entrance

A white vinyl fence and new sign can yield tremendous dividends in the first impression that new residents will form of the property, as well as retention of current ones. The good news is that a nice entry is no longer extremely expensive. Thirty years ago, it would require a brick wall and monument sign. Today, you can put up white vinyl fencing for about $10 per linear foot, and a metal sign from FastSigns that looks almost as good. A nice entry also has the additional benefit of sending a message to the greater city that you care about the property and that you intend on being a good neighbor.

New website

Most consumers today are familiar with the internet and vetting properties with a search on Google. It would be a great idea, as a result, to have a nice website for your mobile home park. 99.9% of the parks we buy do not have a website (and that incredibly small number that do typically have a terrible one. So put some effort into giving the park a new web presence. This will give you a whole new lease on virtual life.

On-line presence with positive reviews

While we’re on the topic of the internet, you should pack it with positive reviews of your property. You can do this by hiring “professional reviewers” on sites like Fiverr and Upwork.

Work where you stand on a Google search

Write some articles on the many benefits of your property and post them on-line. Make it so that a simple Google search of mobile home parks in your area results in you popping up to the top of the list. You can do this by running local news press releases.

Be active in the community

Make a complete list of all of the ways your property can be active in the community, and the resulting costs. You will quickly realize that there are many terrific opportunities to promote your property for very little money. One example is by sponsoring local sports teams. A $100 gift to the high school football team – perhaps a “Gold Sponsorship” – can result in your park being featured prominently in every football program and game announcement. Or maybe you prefer to foster good will by sponsoring the police department’s softball team and being included on their t-shirts. Joining the Chamber of Commerce is a great way to get local support and visibility.

Make the park something you can be proud of

The most important way to build a positive image for your mobile home park is to make it a place you can be proud of. This means making the common areas the best they can be, and creating a sense of “pride of ownership” that elicits positive actions by the residents to keep up their property and yards. While this can take time to perfect, you can make huge strides by leading by example with your common areas and entrance.

Conclusion

There’s no reason that every park you buy can’t have a positive image in the community. One that attracts new residents and affirms current ones that they made the right choice. If you put your mind to it, even the park with the worst reputation in town can soon be considered a great place to live.

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.

For more information on this program visit their website or call Candice Doolan at 800-955-0021 ext 1735 or email her at [email protected].

While the media runs wild with phobic hatred of any term that seems to even imply discrimination of any group, it consistently ignores the rights of those who live in mobile home parks. In the latest issue of GLOBE, a man is labelled as being as “living in a trailer park” as an attempt at ridicule and shame. The suggestion is that Priscilla Presley is scraping the bottom of the barrel by socializing with a “trailer park” resident. There’s really no other way to view this. And, in doing so, the media once again discriminates against the 8% of the U.S. population that live in “trailer parks”. So the bigger question is “why does nobody attack this behavior and demand an end to it?” The answer is that our society has become complete hypocrites on discrimination, using it merely to further their own private goals, but not as a thematic concern.

When it comes to Phase I Environmental Assessments, nobody in the industry is more knowledgeable than Mike 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.

This is the Chrysler Storm Z-250, which was a prototype automobile from 1953. It had great looks, and could attain 100 mph with its 250 horsepower engine. It had the looks of the Ferrari and was designed to compete with it head-to-head. However, despite the amazing looks, great performance, and an impressive list of attributes, it never went into production due to high construction costs. Instead, it was replaced with the unappealing New Yorker model. The bottom line is that there are often roadblocks to producing great looking objects, and such may be the case with the mobile home.

Cost restrictions

Mobile homes are intended to be extremely inexpensive. Every cost item is vigorously analyzed for potential reduction. Some of the cool features that you see in tiny homes are economically impossible to achieve in mass production on a budget. If you tour the factory, you will see that the focus is always on total cost – even the leftover debris from a single home is expected not to exceed a single barrel. Sadly, this cost focus has some bad side effects, and that includes the inability to utilize some interesting design elements.

Code restrictions

Mobile home construction has been regulated and supervised by HUD since 1976, as evidenced by the seal on the back of the home. This governmental inclusion creates some severe side effects. One is that certain design elements – while desired by the consumer – are banned by HUD. You can see many of these attributes on the “tiny home” shows on HGTV. While having a roof-top patio seems neat, to do that in-line with HUD restrictions is impossible.

Shipping restrictions

And let’s not forget the problems in shipping mobile homes from one place to another, under overpasses and congested highways. This has been a battle since the industry’s beginning, when mobile homes were able to gain approval for consecutively 10’, 12’, 14’, 16’ and 18’ wide transport. Over the years, some features like half-story additions, were dropped due to shipment challenges. Any design today has to meet not only HUD standards, but those required by the Department of Transportation.

Consumer taste restrictions

Here’s one of the biggest challenges to cutting-edge mobile home design: selling the consumer on it. Clayton knows all too well with its E-Home, which was extremely attractive and timely, but was unable to attract enough sales to become mainstream. While people may talk a big game, the proof is in the sales, and the American public seems to prefer the less edgy designs. Don’t forget that both Frank Lloyd Wright and Raymond Leowy designed mobile homes, but both designs were never put into production for the simple reason that consumer testing indicated that they were too far ahead of their time. Here’s what Raymond Loewy said at the time “the adult public’s taste is not necessarily ready to accept the logical solutions to their requirements if the solution implies too vast a departure from what they have been conditioned into accepting as the norm”.

Conclusion

While many may complain that current mobile home designs are deficient in creativity, the truth is that it is not necessarily the manufacturers’ fault. There are many different chefs in the kitchen, and great designs often fail to impress in other areas. While we all hope that mobile home exterior designs continue to advance, these alterations are slow to happen as a result of governmental inclusion, as well as consumer desires.

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.