At the Nashville Boot Camp, we walked several parks owned by one owner named Randall, who had owned them since the early 1980’s. He told the group that his method to being a successful park owner was to treat the customers with respect, and to demand respect in return. If you pay the rent on time and abide by the rules, Randall will not hassle the tenants over petty issues. We’ve found that most tenants react well to this relationship of mutual respect, and that should make logical sense to any park owner. Many people think that mobile home park residents are hard to handle, an opinion they formed from shows such as COPS. That’s as ridiculous as forming the opinion that all hotel keepers are insane from watching the movie The Shining. The truth is that the majority of mobile home park residents are no different from you and I, only with perhaps a lower disposable income. They have the same goals, and share the same wants and desires. One of those desires is to be treated fairly and with respect. When you talk to unhappy residents of parks we buy, one common theme is that the former owner treated them unfairly. While it’s perfectly reasonable to demand that rent be paid on time, and that park rules be obeyed, it’s something completely else when you terrorize the residents with insanely demanding rules or actually pick on certain residents you don’t like. We toured a property at the Austin Boot Camp in which the owner told us that he has the resident’s car towed if even one of their tires is not parked squarely on the concrete parking pad. That’s not a winning formula for any business. The Golden Rule applies to mobile home parks, just as it does to everything else.
Memo From Frank & Dave
The Negative Stereotyping Of Mobile Home Park Residents
There is probably no group that is more improperly treated by the American public than the mobile home park resident – or that has less protections in our “politically correct” U.S. environment. So why are mobile home park residents subjected to defamation and slander, and why is nobody standing up for them?
The one group that has seemingly no protections
Why can a single word or slur bring the Justice Department into immediate action, yet you can scream “trailer trash” at mobile home park residents as much as you want and nobody cares? Jeff Foxworthy made a career of slandering park residents, and yet not one group even stepped up and cried foul. It seems odd that nobody champions the cause of mobile home park residents, even though there are roughly 8 million Americans who live in mobile homes. This hypocrisy is alarming, and shows that perhaps much of American political correctness is based on just that: politics. Since mobile home park residents don’t have much voting power – and don’t donate much to political candidates – nobody really caters to their votes and cares much what’s said or done about them as a result.
The universal fear of poverty
Or maybe it’s the universal fear of poverty that makes people poke fun at mobile home residents as a coping mechanism against their own insecurities. And this, again, ties back to false impressions about mobile home park residents. Sure, many have low earnings but, as the New York Times found in our park in Pontoon Beach, Illinois, others drive Porsches and are fairly affluent. Although it’s an anomaly, the founder of Zappos.com – worth around $800 million – lives in a mobile home park in Las Vegas. Many people who put down “trailer trash” may find that the folks in the mobile home park are actually richer than they are.
Stereotyping at its worst
Can there be any group more stereotyped than mobile home park residents? Stick-built homes, apartments, townhomes – they are all assumed to be occupied by a variety of people with different demographics. But mobile homes are thought to be occupied only by folks of lower demographic status, lower education, and lesser employment. I shared that same opinion before I bought my first park, Glenhaven. Then, about a week into managing the park, I met a guy that lived in the park who looked and acted nothing like what I imagined a park resident to be like. He wore a blazer and smoked a pipe. He had combined two singlewides into the shape of an “L” and then put a heavily landscaped courtyard in the center of the “V”. I asked him what he did for a living, and he told me that he was an engineer and owned an engineering firm. He lived in the park because he moved there when he got divorced on a whim and decided to stay. I was suddenly brought to the correct conclusion that people who live in mobile home parks are not at always what the stereotype mandates.
The role of the media
Who’s really responsible for the stereotyping? The media, of course. They love to sensationalize the concept as they’ve compressed what makes for great TV into one soundbite: sex, violence and slapstick comedy, with just a dash of dark humor. Just the mere mention or image of a mobile home on a commercial, and the audience is assuming a combination of the Playboy Channel, Animal House, and the Gunfight at OK Corral.
The U.S. public should be ashamed of the way they have ruined the reputation of those who live in mobile homes. Hopefully, this stereotype will dissipate as more Americans become better educated on affordable housing, and micro housing becomes helps gray the distinction between haves and have nots. But it’s going to take decades probably to undo the damage.
Why We Fill Our Parks With So Many Homes Under The CASH Program
We recently received another award from 21st Mortgage and Clayton Homes, the “Platinum Builder Award” for hitting $1 million in sales. We have been the largest originator of CASH home sales for a couple years now, and the largest purveyor of CASH homes in the U.S. So why do we put CASH homes on so many vacant lots in our parks? There are several reasons:
- It makes us a ton of money. Every lot we convert from being vacant to occupied makes us $20,000 to $40,000 in value. Every 30 homes or so that we do with the CASH program makes us around $1 million in equity.
- The ability to fill lots with 100% leverage. No other manufacturer offers a program to fill lots that requires nothing our pocket. If the program works in your park, you can effectively fill all your vacant lots with $0 of your own money.
- A great product that customers love. Clayton builds a terrific home that everyone finds attractive. The Clayton section is the highlight at any home show. They employ the best designers in the business.
- Great customer service. We enjoy working with CASH because they are professional, and we appreciate that. And our customers appreciate their timely response to warranty repairs and payment questions.
For more information on this program, call Candice Doolan at 800-955-0021 ext 1735 or email her at [email protected]
The Boot Camp’s Youngest Attendee
Katelyn is an 8th grader. Like any 13 year old, she enjoys cheerleading and hanging out with her friends. But she also has the distinct honor of being our youngest Boot Camp graduate. Her dad owns several mobile home parks in the southeast, and wanted her to attend to learn more about the family business. But for most 13 year olds, that would only result in looking disinterested and playing on their iPhones. Instead, she was profoundly interested and asked great questions. Could she be the next Sam Zell? Only time will tell, but she does have about a 40 year head start.
Don't Miss Us In Denver, CO On June 3rd-5th
We still have a few spots left at our upcoming Mobile Home Park Investor's Boot Camp in Denver, CO on June 3rd-5th. You’ll learn how to identify, evaluate, negotiate, perform due diligence on, re-negotiate, finance, turn-around and operate mobile home parks. It’s a three-day immersion weekend, with over 30 hours of instruction both in the classroom and outside in real mobile home parks. Learn why the New York Times raved about the quality of our Boot Camp, and the instructor, Frank Rolfe. Frank, with his partner Dave Reynolds, is the 6th largest owner of mobile home parks in the U.S. and the New York Times described him as “having a virtual PhD on the habits of trailer park residents”. With over 180 parks and 19,000 lots, Frank can tell you virtually everything you ever wanted to know about buying and operating a mobile home park. And you also receive a ton of valuable items, such as the Park Evaluator software and every form and contract you will ever need.
New Parks for Sale on MobileHomeParkStore.com
The Worst Due Diligence Mistakes We’ve Ever Seen
We frequently get calls from people who have bought a mobile home park without doing any due diligence and don’t know what to do. Sometimes they get lucky and sell for a profit. Sometimes they are able to escape with their money back. But sometimes their mistakes are epic in size or stupidity, and here are four of the world-record worst due diligence mistakes we’ve ever seen anyone make.
Wired $100,000 cash without even knowing the park’s address
We received a call one day from someone who had wired $100,000 to someone who was supposedly going to buy a mobile home park with them on a 50/50 basis. The only problem is that they did not know the name of the park, or the address, or even the full name of the person they wired the money to. So not only had the person ran off, they had no information to track them down. And if they did, they apparently had sent the money without even having a signed document describing the partnership or even what the money was to be used for. They simply talked to a stranger on the phone and wired them the money without knowing a thing about this person or the deal itself, and nothing on paper to even define the transaction. While it’s O.K. to take a leap of faith on a $5 raffle at the fair, this was an insane amount of risk that could have been readily solved with even a minimum of due diligence.
$10,000 per day fine on septic that can’t be fixed
We received a call from a woman who had a problem with their septic system. Apparently the park had about 30 lots, and they all ran into a giant septic tank that the mom and pop seller had “invented”. When the tank ruptured and started leaking sewage shortly after closing, the owner was contacted by the EPA, who began to fine them $10,000 per day for endangering the environment. The owner hid from the EPA, and racked up $900,000 in fines. Meanwhile, they went to the city and found out that they would not be allowed to replace the giant tank as it was not legal to begin with. The park owner told us that they had not even realized that the park was on a septic system before they bought it. Of course, this catastrophe could have been easily avoided if the buyer had done simple due diligence. They would have discovered that the park was indeed not on city sewer, and then had a professional look at the system and report that it was illegal. They would have then walked from the deal, leaving the mom and pop owner to clean up the mess themselves – literally.
Orlando $5 million becomes $400,000
We received a call one day from a bank in Florida that wanted us to fly out and look at a park that they had made a loan on that had gone into REO. So we went down to Orlando and was given a tour of the park by the lender. Then they asked “what’s it worth”? I told them “you need to put a fence around it, non-renew and remove all the tenants, and then demolish it before you get caught with all the laws you are breaking – there’s raw sewage and water leaking out of every trailer and extension cords on the ground to power them. This thing is only worth the value of the land (which turned out to be $400,000)”. We had simply confirmed what they had already been told by another expert. So what happened here? Apparently, the buyer had paid $5,000,000 for the park without even visiting it. He relied 100% on an appraisal. The park was just as illegal and screwed up when he bought it. So he turned a $5 million investment into a park worth $400,000 as raw land. Had the seller simply done some due diligence on this park before he pulled the trigger, he would have passed on this park in a second. Instead, he lost over $4,000,000.
A big public company didn’t measure the lots and it cost them dearly
A well-known public company – that is no longer in business – went on a wild buying spree in the early 2000s. In one particular park they bought, they intended to kick out the existing residents and to bring in new homes and to double the lot rents. But there was one small mistake; they didn’t bother to measure the lots. The lots were only 50’ long. Their homes were 76’ long. So after they kicked out all the old, small homes, they found the park would only hold half of the homes they had planned for – so they were off on their budget by 50% in revenue. Had they only done a little due diligence and measured the lots, this embarrassing outcome could have been avoided.
Benjamin Franklin once said that “diligence is the mother of good luck”. That also means that the absence of due diligence is the mother of bad luck. In all four of these cases, decent due diligence would have allowed the buyer to avoid these catastrophes. It’s one thing to have bet on market conditions that changed without notice. But when you fail to measure lots, visit properties, check on water and sewer systems and even obtain a contract before wiring money, you are just asking for trouble. These are the type of calls that we hate to receive. We wish that everyone would conduct diligence on mobile home parks before closing on the transaction.
Pop Quiz: Which Park Has The Higher Lot Rent?
These are two parks that we own. They are in the same city and about a mile apart. The one on the bottom is much nicer in appearance. And its lot rent is around $100 per month less than the park on the top. So how is it possible that the nicer mobile home park has a lower lot rent?
The inefficiencies of park rents
Park rents are all over the map in almost city in America. Why? Because there has never been a collective reference tool for rents. Apartments have nice, thick catalogs of apartments and rents that every owner can peruse and use as a pricing guide. They’re on every street corner, and on-line. But mobile home park rents have no central clearinghouse, and even getting comps is difficult at best, as many moms and pops don’t even bother to answer their phones.
The effect of home mortgages
It’s a fact that a customer with a mortgage on their mobile home has less ability to pay a higher lot rent, as you have to add both costs together. In the park on the left, the average home is from the 1990s and has at least some type of mortgage payment. In the park on the right, the average home is from the 1970s, and there are no mortgage payments. Because of this one factor, parks with older homes often have higher lot rents than parks with newer homes.
The impact of trying to befriend your tenants
Another factor that weighs into what a mom and pop charges is how far they want to push rents – or even if they increase them at all. Some park owners prefer to hold rents low in order to help their tenants out. Many Americans give significant sums to charity, and some park owners prefer to do their giving close to home. As a result, many parks have lot rents that are far too low not as a result of poor information, but 100% on purpose.
Just because a park is older and has less amenities, don’t assume that it has a lower rent than a newer park with newer homes. Because the level of rents is not scientific but often completely random, and there are economic reasons involved that go beyond simple math.
The Importance Of Having A Great Attorney
Of all the alliances you have to forge in successfully buying and operating a mobile home park, one of the most important is your attorney. There are many different attorney profiles, and you must select the one that is best suited for the task at hand. The most common occurrence, for most park buyers, is the attorney to read and protect your interests regarding loan documents and questions that come up on title and contract issues. Like anything else in life, if you chose a bad advisor, you will have a bad outcome. So how do you find a terrific lawyer well-versed in mobile home park law and issues?
The best corporate lawyer we have ever used is Dave DiMarco at Woods Oviatt Gilman, LLP. We have used him exclusively for 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. How many attorneys have you had to nag, or even worse, call 100 times to get them on the phone? With Dave DiMarco, you don’t have to worry about if he’s making progress – he’s typically bugging you to push you along on your part of the equation. We have given Dave some extremely complicated, time-sensitive tasks and he has successfully completed them on-budget and on-time. He also has terrific people skills and can take charge of a rogue bank attorney and bring them back around both in speed and complexity. Our success rate with Dave DiMarco has been 100%. We get calls all the time from people looking for a good lawyer, and we always tell them to call Dave. If you need a lawyer to represent your interests in a transaction, then you will be well served to call Dave DiMarco 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.
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]
Dave Ramsey Chimes In On The Necessity Of Raising Rents
Dave Ramsey, the veteran talk-show host on financial topics, has weighed in on the importance of raising rents. In a recent interview, when asked by a caller if she should raise the rent on her properties, he said the following:
“Raise the rent every year. You’re renting the properties for $2,400 and $400 a month. Here’s the problem—you’ll look up in five or 10 years and the rent on the first should be $3,500. Then when you go to raise it just a little bit, they’ll have a fit because you haven’t done it for a few years.
You don’t have to raise it much. On the $400 property you could raise it 10 or 20 bucks if you want. I just want them knowing that this is a moving thing. I don’t want them thinking this is locked in. When I do that, I explain to them that you’ve looked around in the market and it looks like if they were to move out you could rent this for about $450. So you could raise their rent to $450 but they’ve been great tenants and you’re really glad they are there, so you’ll only raise it to $410. Don’t raise it to the full market.
If they don’t think it’s fair, tell them you are raising it to less than what you can get for it. If they move out, you’ll make more. You don’t want them to move out, but you want to keep up with what the market does, even if it’s just a little bit. Because that keeps the conversation going and it gives you the opportunity to go back in and tell them you appreciate them.” Sounds like Dave Ramsey would make a good mobile home park owner.
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.
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 - 86.10
Sun Communities - 86.46
UMH Properties - 15.01