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June 1st, 2017

Memo From Frank & Dave

It is once again the time of year for mowing. In most mobile home parks, this is looked on as a dreaded event, as the other six months are so much easier. However, Mother Nature is a major partner in the mobile home park enterprise, and if you want trees to shade your residents, and flowers to improve your entry, then grass and weeds are part of the deal. For most park owners, the correct way to approach mowing is to get a firm handle on one of two options: 1) hire an outside mowing company or 2) taking the mowing in-house and have employees do it themselves. In deriving this exercise, you will quickly see which is the better option. If your cost savings is thousands of dollars, then you may be game for the unpleasant task of hiring and managing an “in-house” landscaper. If, however, the cost savings is very small, then hiring an independent contractor is an easy decision to make. Remember that you have to not only pay that mowing employee, but also provide their parts, supplies and insurance, and also worry about the inevitable problems that may require you to fire them, as well as all of the complex and litigious labor laws in this country today. There’s no question that hiring an outside contractor is much simpler and pleasant – particularly in cases where they do the job well, and you don’t have any exposure to labor laws and the like. But if the cost savings is hundreds or thousands of dollars per month, it may be worth the extra risk and worry. If the cost of employing the mower is more expensive than the outside contractor, then you have either bid the job out incorrectly or you have an unusually non-competitive market. Always remember to get at least three bids and have your insurance check on the company’s insurance (both liability and workmen’s comp) so that you know that you’re safe. We have found that, in mowing, you should be quick to terminate the agreement (or employee) at the first sign of failure to get the job done. Your residents are counting on you to keep all common areas mowed, and your failure to do that will trigger a response by them to stop caring about their lots, too. The good news? In six months the mowing season will be over!

Why The Media Does Not Understand Our Business Model

After spending three days filming the National Geographic Explorer segment – and talking to the host for around 20 hours – I think I have a pretty good idea of where the breakdown occurs in the relationship between park owners and the media. The bottom line is that they simply do not understand our business model (and perhaps other realities of life, as well).

Trouble grasping business altogether

The segment’s host is a vegan who does not believe in cars, houses, suits or responsibility. He told me that he dreams of living on an island that does not allow automobiles or anything more formal than a swimsuit. He has spent his life either making short films or narrating TV segments, and has never held a “regular” job. So how can someone from that background possibly have even the remotest concept of what business is. In fact, nobody on the set had ever worked outside Hollywood or New York in any capacity other than journalism or film making. Right off the bat it was apparent we were in trouble when it came to grasping real estate investing, since nobody knew what a cap rate was, or even how a standard real estate loan is structured. Several thought that park owners own all the mobile homes in every property (only in our nightmares). The knowledge gap was a thousand miles wide.

Natural hostility to business people

Unless you’re wearing Birkenstocks and a Grateful Dead t-shirt, you will not get an immediate positive response from those in the media business. So you can imagine how favorable my bonding was in my standard Brooks Brothers grey suit. The media sees all Americans in two groups: 1) conservative business people and 2) the people they like. You can see that in the final edits, as they attempted to show me as Marie Antoinette living in a nice house while my customers were slugging away in poverty. If I had found the cure for cancer live on the show, they would have said “so what took you so long”? Business people, to the media, can do no right.

Disbelief that you can make money legitimately

Maybe “American Greed” has been on the air for too long, but the media thinks that any profitable business is inherently evil or a scam. Of course, this is probably the view of most Americans, as well, who view entitlement programs and giveaways as the “good” in society – without ever thinking who actually pays for those programs (hint: the folks that make money). I wish that they could have a television program simply about the Greatest Generation, who built this country. They would soon learn that capitalism is the driving force behind all that’s good in the U.S. and not charity. I have often said that the greatest problem in America is not affordable housing but the fact that future generations will never know the Greatest Generation -- amazing individuals that have contributed so much, and are a unique base of mentors that are dwindling daily.

And, of course, complete hypocrisy in many cases

National Geographic is a business. Virtually all media outlets are. Except for PBS, none are non-profit. Although the filming crews and reporters may not know it, behind the scenes are executives trying to increase revenue and cut costs and – this is the scary part – make a profit. To be bitter to the very concepts that pay these people a paycheck is the worst form of hypocrisy.

That being said, everyone in this industry must never miss a chance to talk to the media

Those five members of the National Geographic Explorer team had never been inside a mobile home park before. Even though they didn’t realize it, their perception of the industry changed from spending three days with me in the properties. The final product was much more positive than it would have been if I’d refused to meet with them. I guarantee that at least one of them went back to New York and said “you know, mobile home parks are much nicer than I expected” – just as Gary Rivlin from the New York Times did back in 2014. The mobile home park industry has a terrible stigma with most Americans, and the only way to break that down is to talk to people and be more inclusive. When your industry has great P.R., then you have the luxury of saying “no comment” when the media comes calling. But nobody in the mobile home park business can afford to say any less than “sure, what do you what do you want to know” or “come by and let me show you how a mobile home park works”. It will take a massive grassroots approach to overturn decades of negative stigma – much of which stems from media ignorance and portrayal of our residents in a poor light.

Conclusion

Overall, we felt the National Geographic Explorer piece on the mobile home park industry was positive – despite their attempt to skew the facts as best they could. Despite the fact that most media outlets simply do not understand business or our business model, we will all benefit from continuing the media dialogue.

The Power Of Inflation: And Why Our Lot Rents Are Insanely Low

mobile home ad

This is a home advertisement from 1930. If you adjust that $448 price from 1930 dollars to 2017 dollars, it’s a price tag of $6,272. That’s still 32 times less than the median home price today in the U.S. So inflation is one thing, but most products have gone up in price far more than just the rate of inflation. So I think we’d agree that simply pacing inflation is a bargain. But what about when you don’t even stay on track with inflation? Such is the state of mobile home park lot rents.

Take any mobile home park lot rent in the U.S. and simply adjust them for inflation

A normal mobile home park lot rent in 1950 was $50 per month (less than $2 per day). If you adjust that from 1950 dollars to 2017 dollars, that’s $500 per month – ten times more. However, the average lot rent in the U.S. is $280 per month – roughly half of where it’s supposed to be. What happened? Mom and pops across America failed to re-adjust rent annually in-line with the CPI. It’s as simple as that.

Compare this to the other housing types

As we’ve already discussed, single family is up 30 times the rate of inflation. Apartments also far outstripped the CPI. In every category of housing, the rate of inflation was lower than the annual price adjustments. Except for one sector: mobile home parks.

Talk to the former owners on their inflation-adjustment strategy

It’s easy to see how this happened when you talk to most moms and pops on how they set their rents. They don’t raise them for years – or decades – at a time. While apartment operators make annual analysis of comps and CPI and then a very thoughtful rent adjustment, mobile home park owners either throw out a number that ties to nothing – like a $5 increase – or avoid the concept altogether. While the tenants like this behavior, it makes no business sense.

Look at historic rent rolls

To know what mobile home park lot rents should be, look no further than what the rents were when the property was built and then simply adjust for inflation. CPI increases from the 1950s are roughly ten times, 1960s eight times and 1970s six times. You will be blown away by the discrepancy between what rents should be based on inflation adjustment, and what they really are.

Small annual increases are far superior to drastic catch-up measures

If you were to double lot rents, you would be fixing the failure by moms and pops to do annual CPI increases all at one time. And it’s painful to the residents, who need to budget accordingly. Mild annual increases are far superior to giant increases every decade or so. But such is the state of our industry, and there’s no getting around the necessity to bring mobile home park lot rent levels up to the new millennium.

The dangers of staying “cheap”

Land is finite. There is no more to ever be created (other than from volcanic eruptions). The value of the uses of land vary, from farmland at one extreme to high-rise office buildings at the other. The lower valued uses are replaced with the more valuable. So being “cheap” puts that use in jeopardy of being replaced by something more profitable. You see that happening every year in the number of mobile home parks that are torn down and replaced with new developments, the majority of which are apartments.

Conclusion

Mobile home park lot rents are ridiculously low across America. The reason is simply that moms and pops never adjusted the rents annually based on inflation. This will now have to be corrected going forward, with large jumps inevitable. Without those adjustments, mobile home parks will begin to be replaced with more profitable uses for the land – namely apartments and single-family homes. Those sectors have outstripped inflation while we have sat stagnant.

The Reasons We Like Michigan

micihgan

For many years, Michigan was poorly thought of as an economic blight on the U.S. map of jobs and industry. This was never true and a horrible stereotype caused by changes in the automotive industry and focused specifically in and around Detroit. Over the past few years, the attitude towards Michigan has changed significantly – and rightfully so. You can now obtain attractive financing in this great state, and the economy has re-built itself into a solid, diversified engine of new industries. We own many properties in Michigan. So why invest in Michigan today?

Solid fundamentals

The “new” Michigan has a very diversified employer grouping, which includes “new” industries like technology. However, that’s not entirely true, as there is no “new” Michigan outside of Detroit. The rest of the state, such as Ann Arbor, never have had a recessionary period, and the “old” employer base is just fine. Much of the anti-Michigan sentiment – 100% caused by the problems in Detroit – was never fair or accurate.

Demand for affordable housing

Michigan (and most of the northern part of the U.S.) has extremely high single-family home and apartment prices. This has created a shortage of affordable housing and extreme demand. We call this quality “contrast”, with the theory being that you have to have expensive housing in order to create the need for affordable housing. Michigan test ads typically pull extremely well.

Great customers

Michigan has great residents. They have extremely high “pride-of-ownership”, and take really good care of both home and yard. They also are very responsible with their finances and have extremely high rates of rent collection. Why are they so good? It’s a unique feature of Michigan, Minnesota and Wisconsin. If they could distill that quality and sell it, landlords throughout America would buy it by the truckload.

Occupancy challenges – and opportunities

Many mobile home parks in Michigan have occupancy challenges. This is typically a result of the impact of the auto industry in the east, and the failure to obtain loans to buy homes in the west. It is not uncommon to find properties available with 30% to 50% vacancy. This does not mean that the demand is not there to fill the homes, nor that the customers don’t meet credit standards. But it does mean that the park buyer will have to actively get engaged in the entire home process, using such programs as the CASH program from Clayton, or buying used or repo homes.

Financing has returned

We cannot emphasize enough that all those park financing roadblocks have now been fully removed. You can get bank debt, CMBS debt, and agency debt in the State of Michigan today. If you like Michigan but assume that financing is impossible, then time to look again. The financing available is the same as for every other state.

Conclusion

We have long been huge fans of Michigan. We have always felt that the entire state was falsely stereotyped due to failings finite only to Detroit. Fortunately, that stigma is now ending. If you have not looked at Michigan recently, you should re-visit the topic.

Unique Attributes Of The Oldest Mobile Home Parks

museum architecture

The mobile home park industry has been around for nearly a century, if you count those early “trailer parks” from the 1920s. But there were quite a few built during the 1940s and early 1950s that share some unique traits – some positive and some negative. So what are the things you need to know about these early properties?

Gas stations

A common format for mobile home parks of the past was to have a gas station at the front, since the concept was for these properties to be “full service for travelers”. While that was a nice concept 70 years ago, that’s before the advent of the concept of environmental pollution. Make sure that you always get a Phase I for every property you buy, but particularly any park that had a gas station at one time. You have no idea how much petroleum was leaked by those tanks, and the clean-up cost can be substantial.

Old motel units converted to apartments

Next to the gas station in the older parks were the “motel court” which were basically stand-alone hotel rooms with attached garage or carport. While many of these were demolished in later years, other parks have these still in use, but in the adaptive form of apartments. If you are buying a mobile home park with these type of “apartments” make sure to inspect them, as they are often in terrible condition. The deferred maintenance of these units can sometimes be more than they are worth, and they are obviously extremely small and difficult to find quality tenants for. Since the seller is going to try to cap the rent on these facilities, you may end up paying $50,000 per unit for an old one-room building with bath that needs $40,000 of repair to meet city codes. These units have killed many a deal, and rightfully so.

Tiny lots

Back in the early days, the average mobile home lot was only 50’ deep – if even that long. Mobile homes were only 30 to 40 feet in length back in the day, so the spatial requirements of the lots were extremely small. This can cause big problems in today’s world of 76’ long homes. Since the smallest 2/1 mobile home is roughly 14’ x 46’, any lot that won’t hold a home this small is really just an RV lot. And if you want to combine two lots together to hold a larger home, make sure your permit and easements will allow it, and that you have factored a loss of 2 lots for 1 in your budget.

Master-metered electricity

Early parks had full-on power 24/7. This allowed people to pull in their mobile home and just plug it in and turn the lights on. To allow for this, the power had to be on to every lot at all times, and that required a wiring concept called “master-metered” electric. In this framework, the park owns all of the lines and meters, and has to maintain them. This is very unattractive to most park buyers, so beware of this issue. If the park does have it, you need to have an electrician update the total amount of amps the park residents pull, vs. the amount of amps the wires can provide. You should also look at the cost and possibility to re-wire to direct-billed. Many of these old parks, thankfully, have already had their power systems converted to direct billed and not master-metered.

Sometimes amazing locations

Despite these problems, what attracts many buyers to these old mobile home parks can be summed up in one word: “location”. Some of the best located parks in the U.S. come from this early period. That’s because cities became hostile to mobile home park zoning by the 1960s, and would never allow parks today anywhere near where these older parks are located. Secondly, cities have often literally grown up around those early parks – and the “C” location of the 1950s is the “A+” location of today. There’s a mobile home park in Austin right off the edge of downtown. That was only possible in 1950.

Conclusion

Old parks have unique problems – and opportunities. Make sure you understand the risks. If you focus on the downside, the upside will take care of itself.

Join Us In Minneapolis, MN At The Mobile Home Park Boot Camp On July 14th-16th

If you want to learn how to correctly identify, evaluate, negotiate, perform due diligence, re-negotiate, finance, turn-around and operate mobile home parks, then you should definitely consider attending the Mobile Home Park Investor’s Boot Camp in Minneapolis, MN on July 14th-16th. It’s a three-day immersion weekend on all things mobile home park – and it is 100% Q&A from the minute it starts. It also includes one day in the field walking and analyzing real mobile home parks, using the I-D-E-A-L evaluation system. If you don’t know what that is, then you should come to the Boot Camp. Warren Buffett once said “risk comes from not knowing what you’re doing”. Before the Boot Camp, mobile home park investing was full of risk – after the Boot Camp began there’s no excuse. Come see why the New York Times call it “…the best thing in affordable housing”. As always, the course is taught by Frank Rolfe who, with his partner Dave Reynolds, is the 5th largest owner of mobile home parks in the U.S. with over 25,000 lots in over 30 states. Classes are small enough to allow for continual access and discussion. For more information and to register, Click Here or call us at 855-879-2738.

The Multifamily Alternative: Manufactured Housing - By MJ Vukovich

As I discuss prospective deals with clients, lenders and equity groups, there is a common theme emerging these days. Trepidation creeps into people’s voices as the whisper softly and furtively the words “real estate bubble”. Everyone is afraid of it happening again and in being a victim to it. No more so than in the multifamily sector.

Multifamily has had an amazing run since the downturn. The subprime mortgage crisis not only created more renters in the short term, but also made many re-think the American dream of homeownership and opt for rental real estate as a long term solution to their housing needs. This is further exacerbated by the amount of Millennials coming out of college with massive student loans who are unable to qualify for a mortgage until much later into their careers. Long story short, the increase in demand for rental housing has maybe never been stronger.

However, like all things that increase rapidly in value, there is a race to provide more and more product and capitalize on it. While demand has been very high, development has started to catch up. In cities like Washington DC and Denver, higher end multifamily projects are starting to have to use concessions to attract renters in order to get the projected rents that were put into their proformas. Those discounts drive down net effective rents which, in turn, hamper cash flows. For properties that are already trading at record low cap rates, this starts to really squeeze the yields on these assets.

Due to this, investors have been going “down the chain” to lower asset classes in multifamily. First, they would put a little money into a B-class apartment complex and spruce it up to try and sneak right under the A-class rents. Then, after cap rates on those assets dropped, investors started targeting C-class assets for larger turnarounds. Both of these movements, inclusive of the rehab and rent raising, has left a large swath of the population in need of an affordable solution to their housing needs.

Enter Manufactured Housing as a solution to both the need for affordable housing product and investment yield. Manufactured Housing Communities (or MHCs) have had a pretty bad rap over the years. From the cinematic exploits of “Trailer Park Boys” to the drama of a mid-western tornado destroying a mobile home park on the news, these properties tend to be looked down upon pretty regularly. However, the industry has begun to attract a good amount of attention of some of the savviest minds in real estate including Sam Zell (the largest single owner of MHCs) and Warren Buffet (the largest owner of home manufacturing and in community lending).

The advantages to investing in MHCs are many fold. They tend to cost a fraction per unit to their comparable multifamily brethren (a B-/C+ apartment project in a market like Denver, CO would cost upwards of $125,000 per unit, whereas a similar class of MHC would cost $50,000 for the site and $35,000 for the home, if it’s needed, for a total per unit cost of $85,000 and those comparable units would demand the same rental rate) and they tend to serve families over individuals, making their tenant base much less transient. Further, the price per square foot in rental rate is nearly 30% less than apartment pricing with no adjoining walls and parking spaces at each unit. Lastly, cap rates for this product type tend to be 100 to 200 basis points higher than the comparable pricing for an apartment unit (for example, an B-class apartment complex in Saint Louis might sell for a 6% cap rate where an MHC of similar grade would sell for a 7% cap).

In addition to the benefits from an investor’s point of view, this product also serves a desperate need for quality affordable housing. There have been numerous studies outlining how bad the problem is, but one of the main studies conducted annually by the Low Income Housing Coalition called the “Out of Reach” report states that, on average, a working class wage earner will pay around 38% of their gross income if they want to rent the average two bedroom apartment. A rental rate is considered “a ordable” for a person if their rent is less than or equal to 30% of their gross wages. In looking at pricing between an MHC with ground rent added to a mortgage on a manufactured home, this tends to be around 15% cheaper than renting the typical two-bedroom apartment in any given city. Since the majority of renters are still people who would be considered “working class”, this represents a major source of housing that is affordable for families who are working in service, construction and transportation industries around the country.

What this all means is that Manufactured Housing is a less expensive alternative to purchasing multifamily real estate, provides a better value proposition for the residents and is an excellent source of housing that is affordable for the average working wage earner over the average apartment. As concerns about the economic cycle persist, the need for affordable housing is something that won’t go away in any economic era. While multifamily product is still a very good asset class, one that may deserve a little more attention would be MHC.

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.

MH Lessons Learned From The Military

mobile home park lessons from the military

Some of the best business management theories come from the U.S. military. Nobody knows the urgency of “life or death” better, or has stronger consequences for their actions. So what are the lessons learned from the military that can be adapted to mobile home park ownership?

The necessity of planning

Nobody plans more than the military. They have to: if they fail, people get killed. Or the nation fails to exist. The Normandy Invasion during World War II, also known as D-Day, was the most highly planned event in world history. It included a Plan A, Plan B and Plan C for millions of men and equipment. It featured planning for weather contingencies, and intelligence and counter-intelligence measures. It included floating fake plans in briefcases, so mislead the enemy of where the invasion would occur. If you think you’re big on planning, read a book on military strategy and you’ll feel under-prepared.

Anything you do has improved odds if you “put on your bayonet and run at the target”

In the American Civil War, it became obvious that the winning leaders would instruct their men to mount their bayonets and run screaming at the enemy. This sense of total commitment improves the odds of success. The same is true when trying to find a mobile home park to buy. If you attack on all fronts at one time and with 100% persistence and commitment, you will definitely find the right park to buy.

A sense of urgency

George Patton once said “a good plan today is infinitely better than an excellent plan in a couple weeks”. What he basically meant was that time was of the essence. Throughout military strategy books, you will find the concept of time urgency. A common saying by real estate investors is “time kills deals”. It’s the same theory. Sign up the seller today, not tomorrow. Run that test ad as soon as possible. Call that seller and renegotiate immediately upon finding a deal-killing problem in due diligence. Buy that used home now rather than let it get away.

Never underestimate your enemy

Alexander the Great was well known to expect the worst and plan accordingly. He never went into a battle thinking “I’ve got this in the bag – it’s a piece of cake”. By always expecting the worst, he was rarely disappointed, and always had an overwhelming force. Park owners can use this concept in setting budgets. Set conservative expectations for occupancy and collections. If you think that filling one lot per month is aggressive, then drop it to one every two months. You can always beat budgets, but not hitting your goals is a disaster.

You are responsible if your managers fail

All branches of the military share this philosophy, which is basically that if you fire someone who fails, you are responsible for their failure because you picked them out. This creates the concept of accountability, as you cannot simply deflect any failure to the thought “it was their fault, not mine”. Park owners should make good decisions on hiring, under the assumption that they alone are responsible. It also means that you should engage in good training to increase their odds of success.

The “80% Solution”

This is an interesting theory that is in the U.S. Army Management book. It states that if you are pinned down under fire and are going nowhere, you have 80% better odds to break out in some different direction and try again. They supposedly tested this out in war games, and found that the worst possible thing you can do is to sit in one spot. Park owners can use this theory in many different events. For example, if your park-finding search is not producing results, try something completely different. If your lawyer is not winning eviction cases, replace them immediately. Break out of all ruts and try a fresh approach.

Conclusion

Military strategy dates back to the beginnings of time – thousands of years before the first mobile home park was built. These theories are time-proven and easy to understand. If you want to get some fresh ideas on your mobile home park business, read a military biography and put those ideas to use.

Why Mobile Insurance Is The Best Protection At Affordable Prices

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]

The Real 8-Mile (Hint: The Media Lied)

8 mile mobile home park
8 mile mobile home park

We were recently in Detroit and decided to hunt down the real 8-Mile – the mobile home park used in the film which was the autobiographical account of the life of the rapper Eminem. In the film, the mobile home park that Eminem grew up in was shown as filthy and scary. However, as you can see in the photo, the real 8-Mile is clean and pleasant and absolutely nothing like the property the film portrayed. How is this possible? Of course, the truth is that the film’s director wanted to make Eminem look like he came from more adverse beginnings. The problem is that this furthered the stereotype that mobile home parks are the bastion of drugs, alcoholics, and those down on their luck. When you talk to many people and say “what comes to your mind when I say mobile home park” the answer is always “8-Mile”. It’s a shame that they don’t know the truth.

8 mile mobile home park
8 mile mobile home park

A Story About Dave DiMarco

The best corporate lawyer we have ever used is Dave DiMarco at Woods Oviatt Gilman, LLP. We have used him on virtually all of our conduit loans, as well as traditional bank loans. What we love about Dave DiMarco is that he knows what we are trying to accomplish (get the loan closed quickly and inexpensively) and he can quarterback the situation and push it to the goal line without us having to bug him or worry about our progress. Here’s a story that illustrates why we use Dave Dimarco.

A few years ago we bought a mobile home park and, after turning it around, went to refinance it into conduit debt. Everything looked great until the lender’s counsel found a minor problem with the title: a city street that fed into the park actually belonged to the park and not the city. On top of that there was around 16 square feet of land that the park owner had not obtained an easement for 40 years ago, and that made one side of the city’s road in jeopardy. Now, the whole situation was ridiculous, as the city itself was adamant that they owned the street. In fact, state law mandated that, under adverse possession, they had owned the street for decades. It even showed as the city’s street on the street map. However, the impossible-to-please lender would not move forward unless we could obtain a letter from a judge stating that the city owned the street – which could take months or years. So Dave DiMarco ran out and located the owner of the 16 square feet, initiated negotiations, and we bought the easement. It saved the day on that loan. No other attorney on earth would have taken that outside the box effort. We knew then that Dave Dimarco was our man.

If you need service like that, then consider using Dave DiMarco on your next transaction. You can reach him at (585) 987-2833. And, yes, he’s the brother of Anthony and Gerry DiMarco – the #1 mobile home park loan brokers in the U.S. This is a family that definitely shapes the industry.

Predicting Future Growth Of American Cities

Fort

This is a model of a major American city in 1750. While just an assortment of primitive dwellings back then, it now has a metro population of over three million. Obviously, the growth of a market has a huge impact on future rents and appraised values. So how can you predict the growth of cities, and separate the ones that grow to millions from those that don’t grow at all?

Walmart

The best initial affirmation of the future of a city is the existence of Walmart in that market. Walmart employs the greatest due diligence team in the U.S., and have a phenomenal success rate in predicting market growth. Basically, if there’s a Walmart in your town, it’s going to grow. Several Walmarts in your town is even better. One of the first things any park buyer should do is map out how far their property is to Walmart. Our best properties have traditionally been only blocks away – or directly across the street.

Colleges

College towns have always exhibited very high levels of growth. While major university towns take off like a rocket ship, even smaller private colleges are a huge source of economic prosperity. They typically attract fresh, growing industries like technology and healthcare that locate nearby their talent pool. Warren Buffett only ones one piece of commercial real estate – a shopping center across from NYU. And he has many times said that the reason he bought it is because he thinks that real estate near colleges is always a good investment.

Regional hospitals

Just like colleges and universities, hospitals are a magnet for future growth. As the nation’s population ages, the demand for healthcare is always increasing, and this is one industry that has zero chance of workforce reduction going forward. There are giant metro populations in healthcare hubs, such as St. Louis and Houston, and it has been an historical feature of virtually every large city in the U.S.

Capitols or County Seats

Government is a huge driver to employment and growth, and county seats and capitols always steer key government-funded projects to their home turf. Government employees are a huge part of the U.S. economy and virtually recession-resistant. On top of that, every time there is a huge national grant or construction initiative, it always ends up near the capital or county centers.

Geographic advantages

Based on the many U.S. megatrends, certain regions of the U.S. have a better chance of growth than others. At the top of the list are areas that are attractive to the 10,000 baby boomers who are retiring per day, which would tend to favor warmer climates. Then there is the megatrend of certain technologies taking dominance, which favors areas surrounding technology and other new industries, such as north Texas. While you can make a case for growth in virtually every section of the U.S. map, there are also those that have little future growth potential, such as Louisiana and Mississippi.

Future road projects in their infancy

While the Walmart due diligence team certainly pours over them, most Americans are unaware that the expansion of the highway system is of public record. Want to know where are the highways are being built in Texas for the next ten years? Just contact the Texas Department of Transportation and get a copy. These reports are full of fascinating information and make it easy to see the path of growth around every state. The reports show proposed highways, those that are currently having the right-of-way purchased, and those that are under construction. It also shows projected completion dates. Pretty amazing stuff.

Conclusion

While nobody has a crystal ball on growth, there are certain clues of what makes certain cities and markets grow while others remain stagnant. Since growth is tied directly to real estate location value, this is knowledge that can give your mobile home park purchase a definite edge.

Why We Love Clayton’s CASH Program So Much

As many people know, we are the largest users of 21st Mortgage/Clayton Home’s CASH program in the U.S. We have around 1,000 homes in our parks under this initiative. So why are we such huge fans of CASH?

  • It allows you to fill your vacant lots with no money out of pocket.
  • You are not the home owner: the customer is the buyer and 21st is the lender.
  • 21st Mortgage handles all the paperwork, so you do not have to be SAFE Act licensed.
  • 21st does a terrific job of screening applicants, and has very low defaults.

We’re not alone in our excitement for this program, as the number of homes ordered under CASH has more than doubled this year from a variety of park owners, both large and small.

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

Using Assembly Line Tactics To Turn Around Mobile Home Parks

Assembly Line

Henry Ford revolutionized auto manufacturing with the concept of the “assembly line”. This is a photo from the automotive museum in Detroit, showing such an assembly line from the 1970s. Ford’s invention allows for the greatest efficiency, management effectiveness, and measurement of daily progress. It was sheer genius when compared to the cottage industry of multiple workers without a single goal. So why should you utilize this method in turning around a mobile home park?

Volume pricing

Most every vendor offers volume discounts – essentially lowering their price for a larger volume commitment. If you can offer a painter 5 mobile homes to paint instead of 1, their price may drop from $500 to $300 – a 40% reduction. The best route when having to perform several tasks at a recently acquired mobile home park is to divide up all work needed into several simple functions and bid them out separately. For example, hiring one man to paint the home and skirt it will never be as affordable as hiring one man to do several paint jobs and another person to skirt several homes. The best hope you have of lowering price is employ specialization and volume.

Ease of management

Having each contractor do one finite task also improves your management ease. It’s much simpler to say “OK, send me a photo of every home you skirted this week” to one person, than managing a number of contractors at the same time. Since most park owners manage their properties remotely, having a simpler source of supervision is a huge advantage.

Get the pain over quickly on the front end

Just as Henry Ford knew, assembly lines yield faster job completion. When you first buy a mobile home park and start the turn-around effort, it’s a good plan to get the work done as soon as possible. As long as you’ve budgeted the money, what’s the point of wasting time. The sooner the work is done, the better the park looks, the more new customers you attract, the better your existing customer retention and the better your relationship with city hall.

Conclusion

The assembly line was a great invention of Henry Ford, but its merit extends beyond simply automobile assembly. Use the same principles that Ford employed and you will get your park fixed faster and more efficiently, and at a lower cost.

“Trailer Park” Used To Be A Compliment

Laramie Trailer Park

This is a photo of a mobile home park entrance from the movie “the Long, Long Trailer” in 1951, starring Lucille Ball and Desi Arnaz. You’ll note that it proudly announces that it is the “Laramie Trailer Park”. In the movie, Desi Arnaz is a Manhattan executive that trades in his penthouse apartment for a mobile home. So why would a classy couple wearing a dinner jacket and a cocktail gown ever enter a property branded by “Trailer Park”? It’s because the term “trailer park” used to be a compliment. In the early days of the industry, cities built these free parking lots in order to encourage wealthy Americans to park their trailers there as they drove across America. It was never an insult of any type. While it is not uncommon for products to go up and down in consumer perception – such as railroad travel – rarely has there been more of a seismic shift than in the simple term “trailer park”. What caused the change? Basically, the media through such shows as COPS and “Trailer Park Boys”. But don’t let anyone ever try to convince you that “trailer park” is a dirty term. It’s not. Unless you don’t know what you’re talking about.

Protecting Yourself From Liability

Protection

Despite his skills, even King Arthur would have trouble defending himself against modern litigation perils using old-fashioned swords and shields. To protect against modern hazards, smart mobile home park owners use several proven approaches.

Be proactive on potential hazards

If you see a potential problem, fix it before it turns into a liability claim. The most common ones that we see are uneven paved surfaces and missing electrical box covers – but open holes and dead trees and dangerous breeds of dogs should definitely be on that list.

Carry lots of insurance

You can never carry too much insurance. Carry enough that you have plenty of money to give a plaintiff and their attorney in the event of an accident. How much is that? Certainly at least $1 million, but even more in an umbrella if you can afford it.

Be aware of the jury awards in the state the property is located in

Some state juries award greater judgements than others in liability cases. Know how your state ranks. If the rewards are high, carry even more insurance. You agent can fill you in on where your state stands, or you can research it on Google.

Never own a property in your personal name

This goes without saying, yet we are often shocked that many moms & pops own their properties in their personal name and without any insurance. That’s a terrible idea. The standard industry practice is to form an LLC to own a mobile home park. Talk to your attorney about this.

Understand how the system works in today’s litigious America

When it comes to liability claims, our nation is uniquely screwed up if you compare it to other countries. There are more lawyers in the U.S. than all other countries in the world combined. We litigate over nothing, and the jury awards make no logical sense in many cases. Your only protection from this sometimes unfair system is to have lots of insurance. Otherwise, you’ll never sleep.

Conclusion

You cannot own a mobile home park without proactive liability management. Identify risks and fix them. Carry lots of insurance. Act smart and get guidance. Take charge and shield yourself from a sometimes unfair system.

Why Mike Renz Is The Only Name You Need For Phase I Environmental Reports

You can’t buy a mobile home park without doing a Phase I – you could lose everything if it turns out to have environmental pollution on it. So who do you choose to do the report? We choose Mike Renz. Mike is the consummate professional and his range of knowledge is unparalleled. Here’s an example. We were buying a mobile home park and it failed the Phase I. Most people would have given up, but Renz knew that something did not seem right. It seems that a disgruntled manager had called the EPA and claimed that the owner had been operating an illegal land fill at the back of the property, yet Renz saw no evidence of this on aerial photos. So he did some quick borings and found the claim was a lie and the EPA removed it from their database. Case closed and park purchased. That’s the reason that we refer so many people to Mike Renz. Have you ever seen the “Beard of Knowledge” character on the show Pawn Stars – the guy who is a walking encyclopedia of all trivia? Well, for environmental issues, Mike Renz is that guy.

You can contact Mike Renz at (614) 538-0451.

The Adorable Housing Crisis: A Celebration Of Classic Mobile Homes

Yellow Mobile Home

Many park owners and new entrants to the industry believe that the future is the new home. However, what they fail to grasp is that many older homes are still attractive to most consumers and offer a huge amount of charm and nostalgia at a very low price. But these homes are an endangered species in many communities. Perhaps the “adorable housing crisis” is as big as the “affordable housing crisis” in the U.S. The home shown above is located on our property in Decatur, Illinois. It’s roughly a half-century old, but still looks great. Sure, the room sizes are slightly smaller than modern homes, but it offers a certain charm that modern home do not. If you take a historic mobile home and paint it, and add the necessary shutters and awnings, you can end up with a showplace that is timeless. Help solve the “adorable home crisis” and don’t just remove those old homes when they are in good condition. Renovate them and celebrate their age ad unique position in mobile home park history!

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.

Member Name: Steve BaikPhone: 206-326-8764
I am looking for a park with City Water & Sewer. Septic will also be considered. I am willing to pay commission if you can bring me an off market deal. 30+ lot preferred. Price between $500,000 - $1.5 million. Please call me at 206-326-8764 or email me at [email protected]
Member Name: Charles BracewellPhone: 202-491-7696
Hi, I am looking for mobile home parks to buy with 30+ lots on public utilities. I am based in Maryland and my target geography is east of the Mississippi river. Target deal size is $750,000-$5 million. I am also open to active partnership opportunities, but not really interested in purely passive investments. Please give me a call at 202-491-7696 or email at [email protected] if you would like to talk. Thank you, Charles.
Member Name: Trent FrantaPhone: 614-309-5944
I HAVE CONTRACT WILLING TO ASIGN. 60 SPACE PARK IN LAPORTE INDIANA. $300,000 WILL BUY THIS PARK, MUST BE CASH DEAL. WELL, SEPTIC PAVED ROADS AND INFRASTRUCTURE SEEM TO BE I GOOD SHAPE. OWNER CLAIMS TO HAVE PAID TAP FEE FOR CITY WATER AND SEWER NEARBY. THIS WILL REQUIRE LIFT STATION FOR SEWER. APPROXIMATELY 32 HOME ON SITE IN MANY STAGES OF REPAIR. ABOUT 10 HOMES PAYING RENT AT THIS TIME. THIS PARK HAS TONS OFF UPSIDE! ONE STICK FRAME HOME IN NEED OF REPAIR. FLORIDA OWNER 85 YEARS OLD HAS NOT HAD GOOD MANAGEMENT LOTS OF THE MAGIOR CLEANUP HAS BEEN DONE AND READY FOR HOMES. LESS THAN HALF OF 15 PLUS ACRES HAVE BEEN DEVELOPED. LOTS OF FRONTAGE ON TWO MAGIOR ROADS. CONTACT ME FOR MORE DETAILS:
Member Name: Greg GoodmanPhone: 702-751-6891
Looking for a 30-65 unit MHP on City water and sewer, paved streets preferred. I am based in Las Vegas, but Im looking in the Midwest states IL, IN, MO, OK, TX, AK. Target Deal size 500,000k - 1mil. Partners Welcome. . . willing to pay referral fee for a good deal. Please contact me Greg 702-751-6891 [email protected]
Member Name: Major HillardPhone: 804-314-1788
Virginia and North Carolina MHP Specialist. We are looking to purchase another 4 parks prior to December of this year. We are always working with and searching for new equity, passive, and active partners. Check out our website at MHESTATESLLC.com. Feel free to call at aytime.
Member Name: Michael HinshawPhone: 949-202-9806
Dear Mobile Home Park (MHP) Owners and Brokers, Donna and I are interested in purchasing a MHP and can act quickly to close the deal. We are principals and will be happy to pay referral fees or commissions when we close on your park. Our preferred park criteria include up to @$2M purchase price, 50 – 150 spaces, paved roads, city water, city sewer and a sound economy. With that said we do realize that few parks are perfect and we are willing to concede certain criteria for the right opportunity. We have quick access to additional equity and can purchase a park up to @$4M if the seller is willing to participate in a 1031 exchange. Please feel free to visit our webpage at http://gallerymhp.com for more on our background and objectives. If you do have a newly available MHP to sell we would like to discuss purchasing it with you. I can be reached at 949 202-9806 or [email protected] Sincerely, Mike Hinshaw
Member Name: Steven IltzPhone: 503-439-9069
Looking for a MHP deal size of about $3 to $4 million , with about $1.9 million of debt or larger. Have about $1.0 million cash as part of a 1031 exchange. The clock is ticking for an exchange to identify by January 2018. Looking for Mobile Home Park to own or joint venture with others. I have cash to invest. My preference is to own a park with city water/ sewer, paved streets. If your looking for someone for your team for Joint Venture that can add value and time along with cash, give me a call (503) 439-9069 Portland, OR. Former MHP owner, that turned a average MHP to a great MHP that was 100% owner occupied park. I can help to turn a park from good to great.
Member Name: Shoaib KhawajaPhone: 312-568-6493
Looking for equity partners who would like to purchase MHP's in the midwest. (MI, IL, OH, WI, IN). I have cash to invest.
Member Name: Megan KrekorianPhone: 530-830-2803
We have a park under contract that our credit partner just fell out due to personal reasons. We are looking for credit partner on a park. Here's your chance to get vested in a park without cash.
Member Name: Andrew NissenPhone: 615-456-5391
- Capital partner wanted to buy parks Will provide Capital Partners with Tax benefits or Cashflow or Equity - depending on your needs / desires. Let us know how we can work with you to accomplish your goals through MHP investing. We currently own two parks. Have 4 years experience owning and operating MHP's. Real Estate investing since 2004. Experience as a general contractor. Accredited investors ourselves. Currently seeking Parks in and around the Carolinas and Ohio but will gladly go further if the deal is right. Call or e-mail any time. Will gladly provide resume, references and so on. Thanks, Andy
Member Name: Patrick O'HarenPhone: 817-952-9120
Dear owners and brokers, We are interested in purchasing mobile home parks with the following criteria: * Targeting WI, MI, MN, IN, OH and Texas, and opportunistically elsewhere. * $1.5-$2.5M range, could be somewhat smaller in the right area or right park * Near larger employment centers * We can work with septic and wells, park-owned homes and 30-40% vacancy We have a $3M equity fund for mobile home parks (http://genuitycap.com) and are happy to pay referral fees or commissions when we close on your park.
Member Name: Bryce RobertsonPhone: 714-603-1394
I have a 200 space value add MHP that I'm closing on in the mid west. This park has all the typical metrics of an attractive MHP deal. If you are interested in becoming part of this deal please email [email protected] or call (714) 603-1394. Thanks, Bryce
Member Name: Cindy Tucker-DavisPhone: 970-987-7523
I am interested in a manager position. I will consider any location, but Colorado, Arizona, California (Western States) would be preferred. I currently live in Colorado, but will relocate to your park. I have 25 years of Property Management experience. Several years in private home property management in Aspen, CO. The last 14 years I have worked at two Housing Authorities as the Property Management Supervisor. Affordable, government housing is where I have the most experience. I am ready to move on to something new. I am also interested in purchasing a mobile home park and I am working on that as well. Salary requirements will depend upon the size of the park, the number of staff members to be supervised, whether housing is provided or not, and any benefits that may be offered. If you are interested in speaking to me about a possible position, please feel free to email me at your convenience. I check my personal emails frequently and will get back to you as quickly as possible. Thank you!
Member Name: Sue Vander PylPhone: 201-956-2806
Looking to purchase Mobile Home Parks in the Northeast, 50 plus lots, mostly tenant owned, prefer public utilities, paved roads, have funds available to move quickly. Call Sue at 201-956-2806 or email [email protected] anytime.
Member Name: Ryan WannerPhone: 615-481-5395
I currently have 2 properties under contract. 1 in Hutchinson MN MSA and 1 in South Bend IN. We are looking to either assign the purchase agreements or preferably looking for equity partners to help complete our purchase. Thanks.
Member Name: Val WhalingPhone: 413-822-6960
To Brokers and Owners: We are interested in purchasing several MHParks and are set up to close the deal quickly. We are principals and will be happy to pay referral fees or commissions when we close on your park. Our ideal park criteria include up to @$2M purchase price, 50 – 150 spaces, paved roads, city water, city sewer and a solid economy. However, we do understand that few parks are perfect and we are willing to concede certain criteria for the right opportunity. Please feel free to call anytime: Val Whaling [email protected] 413-822-6960
Member Name: Ed WillisPhone: 907-460-6646
If anyone is looking to start a direct mail campaign to find deals I can help you. If you're not wanting to do the owner address research yourself I could provide you with lists for MO, KS, NE, IA, & ID (1000 owner addresses thus far). If you've got another state you want to mail I could help with that too. I can help you design your postcard or do it for you. I also know of deals I'm unable to do that I can refer. Let me know if you're interested, Ed Willis 907-460-6646
Member Name: Shelly ZickefoosePhone: 559-907-8080
Looking for a mobile home within 500 miles of AZ. Max size 18x70. Min age 2003. Max price $12,000. Call (559) 907-8080. Thank you,
Member Name: Brian ZobergPhone: 305-301-2443
I have several years experience of buying, owning, operating and selling (for excellent returns) mobile home parks. I am looking to partner with other owners, investors who are interested in buying their first park or expanding their portfolio. I am also offering to pay a referral fee for a mobile home park on any deals. Please contact me if you are interested. Criteria: minimum 25 occupied lots, city sewer or septic, city water or well water.

The Market Report

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