The 28th of November is known as “Thanksgiving”. The Thanksgiving holiday tradition is traced to a sparsely documented 1621 celebration at Plymouth in present-day Massachusetts, and was prompted by a good harvest. The whole town shared in a communal meal to celebrate the good fortune that they enjoyed. But the Thanksgiving spirit does not have to be limited to simply turkey and dressing. You can celebrate all the good fortune you have had over the past year in many arenas – both personal and business. You can take time to thank those who have helped you or who have shared happy moments with you. You can acknowledge those that have had a meaningful impact in your life. And on that note we would like to thank everyone who has become an extended member of our mobile home park family. The mobile home park business has had a lot of positive developments this year, and we feel very thankful for being in an industry that just happens to be in the right place at the right time, thanks to a booming demand for affordable housing and a shared respect for our sector among lenders and others who are integral parts of the mobile home park ownership process. So please have a great Thanksgiving with your friends and family, and remember that the spirit of thanks is everywhere.
Memo From Frank & Dave
New Court Decision Has Huge Positive Implications For Park Owners
In 2016, the U.S. Supreme Court ruled that cities and counties are legally responsible for ensuring that their ordinances and enforcement on their ordinances does not have a discriminatory effect on “protected classes” of people. The first such case after the ruling was that of a mobile home park in Richmond, Virginia that alleged that the City of Richmond was using selective enforcement of city ordinances against the park due to the fact that the residents are predominantly Hispanic. The mobile home park and its residents won the case – and the rights of mobile home park owners and residents, from coast to coast, has been permanently impacted. Here’s a link to the actual case and outcome https://www.justice4all.org/2016/07/28/h-u-d-settles-richmond-discrimination-complaint/ . So what does this mean for the industry going forward?
HUD is a tough adversary for city government to deal with
Every park owner in the U.S. knows that a HUD investigation into fair housing violations – whether warranted or not – is one of the most terrifying events they have to deal with. The level of scrutiny is extremely high, and just the simple label of having a HUD action brands the park owner as the bad guy even before any facts are obtained. Now cities will have to live with that same terror regarding the treatment of mobile home park owners and residents. In this specific case, the City of Richmond has to be subject to HUD’s oversight and must submit regular compliance reports to the agency. That’s a huge amount of work and risk if they should fail to deliver the reports or be found lacking in them. As the attorney for the mobile home park owner and residents said as they emerged from the courtroom “the agreement has teeth, so we are confident that it will make a real difference in the way the city deals with mobile home park residents, immigrants, and other minorities going forward in terms of fair housing rights and language access.” That was an understatement.
It checks the ego of city managers throughout America
It’s a shame that mobile home park owners have to endure unfair city bias concerning their businesses. While cities will bend over backwards to help real estate investors in almost all other sectors – from multi-family to storage – they often look upon park owners as lesser citizens. And this lack of respect can really manifest itself when the city manager has an overly inflated view of their own importance. This “I’m above the law” vibe may work among city employees who feel insulated from the real world, but their feeling of superiority quickly melts when HUD comes knocking. We can name probably at least a hundred times that a city official tried to deny our property rights, or the rights of our residents. This new ruling by HUD is going to bring a new reality to city officials that think they have no limitations to their power.
It offers one more legal avenue for park owners to get their grievances resolved
In most cases where the city officials try to deny park owners and residents their rights, the only option is to bring in a municipal attorney and threaten to litigate. This is costly and predictable, and the city official figures that the city attorney will protect them from their actions. However, with HUD they have no insider “good-old-boy” pull. This is an aggressive wake-up call for better behavior, and a welcome additional avenue now available for park owners and residents to get mistreatment corrected. There is no city government in America that does not live in fear of HUD. It’s like having a 400 pound bodyguard for park owners and residents.
It battles the inherent discrimination that park owners and residents have felt for decades
We have often said that the only group that has to endure more discrimination than mobile home park residents are the owners. For some bizarre reason, most Americans believe that calling someone “trailer trash” is not a slur, and perfectly acceptable. City officials have also adopted this attitude, often treating park owners as a lower class than all other real estate sectors. While this negative feeling has declined over the years, there is still no question that a mobile home park owner is rarely given the respect and consideration of a self-storage, retail, multi-family, office or industrial landlord. The new ruling helps to level the playing field, and strikes a dagger in the heart of such unfair treatment.
We are very glad that the court has opened a new path to guaranteeing the proper treatment of mobile home park residents and owners. We trust that most city officials will be a little more considerate now that they fact the rebuke of one of the toughest governmental groups in the U.S.
A Primer On Home Setbacks: The Truth And The Myths
Most mobile home parks in the U.S. are about a half-century old. And over those 50 years, the average length of a mobile home has nearly doubled. This has put pressure on the correct way to fit modern homes on classic lots, and one of the main components of this issue is the setback from the street, as well as from the rear of the lot. So what’s the truth about mobile homes and setbacks?
The impact of private property
One of the first things you have to know about mobile home park setbacks is that the rules are different on private property than on the city street. While city streets have extremely confined limitations on setback, which are even based on such items as sight-triangles, there are no such rigid limits on private property streets. In many markets, the law allows you to actually place the home on the edge of the curb. In Oklahoma City, years ago, the city told me I was actually allowed to place the home out in the street, and in several cases I did in order to get 76’ homes on smaller lots. If you are inside private property, the city’s normal rules do not always apply.
The precedent is already there
So if mobile home park setbacks do not have the cookie-cutter rigidity of the outside world, then how can you tell what they are supposed to be? Well, normally it’s not in writing, because the actual ordinance that dates back to the park’s construction has often been misplaced or destroyed over time. But that does not mean that you are lost. Instead, the case law suggests that you can simply go by what’s already around you. If all the homes in the park are four feet back from the street, then that would suggest that four feet is the setback. If that’s not the case, why would the city have green-tagged each home at that setback? It would be hard – if not impossible – for the city to say that all their work for the past 40 years was wrong, and that would certainly not impress a judge. In some states, the rule that precedent outweighs any other fact of law is called “constructive reliance”.
Why inspectors sometimes get it wrong
So if it’s so simple, why do city inspectors often get it wrong? It’s because they were taught that a vacant lot must conform to current laws. They are trained this because 99.9% of all real estate is exactly this way. If you have a vacant single-family home lot, it’s doesn’t matter what year the lot was built, all that matters is what the current law says. But mobile home parks are a grandfathered “use” and, as a result, the lot was technically never vacant. A mobile home park is like a parking lot, and it doesn’t matter if something is parked in the space or not – all that matters is what the rules were when the parking lot was built.
But don’t forget about rear and side setbacks, too
Many park owners are so obsessed by front setback, that they forget to worry about side and rear setback, which can be equally – or more – dangerous. Since mobile homes have expanded in width over the years from 8’ width to now often 18’ width, the net result is that many lots will not be able to hold large, new homes and maintain the required distance between homes that is created by the Fire Marshal. And rear setbacks often get held accountable to utility easements. So don’t just focus on front setbacks, but think about side and rear, as well. Fire Marshal and utility easements – unlike front setbacks – are not a grandfathered right, so those need maybe even more consideration.
Setbacks determine what size of home you can put on a mobile home park lot. Since size does matter when it comes to desirable housing units, you need to get a tight handle on what those setbacks are.
Westland Is The Park Owner’s Wonderland
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.
Where Did All The “Trans-Camaros” Go?
Years ago, you could drive through virtually any mobile home park in the U.S. and uncover at least one classic muscle car. Some were $30,000 items, like a Corvette, and others nearly $100,000, such as a Plymouth Barricuda Hemi and even a SuperBee. Many were in meticulous condition (although you could not see what was under the hood). The only explanation was that many mobile home park residents were really into muscle cars, and put much more into their hobby than they did their homes. Or maybe these cars were bought slightly used in the 1970s and 1980s and the owners were too cheap to replace them over the following decades – without any knowledge that they were becoming collectible. These cars were called Trans-Camaros” as those were the two most common cars you’d find: Trans-Ams and Camaros. Regardless of the reason for their existence, the bigger question is “where did they go”?
I remember that I read an article about 15 years ago that focused on car collectors starting to prey on classics in Cuba. Apparently, there are more classic cars in Cuba than any other spot, having been trapped there for decades following the revolution. A car collector was trying to work a deal to trade all those luxury classic cars from the 1920’s, 1930’s, 1940s and 1950s for brand new cars built in Russia (the only way to get around the fact that the country was communist). However, the plan was eventually scuttled. But I’ve always wondered if that same group didn’t realize they did not have to travel across the ocean to find valuable cars in weird settings. Maybe all those Corvettes and SuperBees disappeared into collector’s garages, or maybe classic car dealerships. Wherever they went, it’s quite a loss, as it offered extra fun when driving through mobile home parks. Today, you have a better chance of finding a 1950’s classic trailer than a 1950’s convertible.
Why Smart Community Buyers Are Using MJ Vukovich For Financing
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 debt” 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.
Why You Sometimes Need To Think In Very Simple Terms With Park Managers
I was driving mobile home parks recently, and stopped into a McDonald’s drive-thru, which is a pretty common event. I ordered some chicken McNuggets with honey-mustard sauce. To my amazement, the worker could not even figure out what sauce to put in the sack – he put in one honey-mustard and one honey. McDonald’s feared this would happen, so they made the cover design of the two sauce packets completely different. But despite this, the employee got the order wrong. While I just ate it anyway, you can imagine what would have happened if it was a bigger ticket item. Given that many park managers are not highly focused on your business, how do you make sure that even simple tasks are done properly?
Break each task into simple steps
McDonalds has attempted to make each task bite-sized and simple. You should do the same with your mobile home park tasks. Think about each item you need done, and then break that into the most simple and basic pieces. To make McDonalds’ French fries, for example, you open a pre-cut bag of potatoes, pour them into the deep fat fryer basket, and pull them out when there is a tone. The machine even has instructions on how to salt them, and a pre-measured canister of salt so they don’t have to guess at the amount. Essentially, the consistency of their fries is the result of very simple, controlled steps.
Don’t set yourself up for failure – you need to have simple systems of oversight
The definition of disappointment is when things don’t turn out as you expected them to. By assuming your park manager will get the job done properly, you often set yourself up for unhappiness. Remember the old adage “to assume is to make an ass of u and me”. It’s better to expect the worst and then get happily surprised. And the only way to expect the worst and still get acceptable management is to have effective, simple systems. For park owners, the five most effective management systems are “no pay/no stay”, “no play/no stay” and “B/A/D”. These are easy to administer and easy to follow.
But give the best people more latitude
Over time, you may find the ideal manager; one that is bright and independent and has really good judgement. Don’t micro-manage these type of folks with easy systems. Give them more flexibility to do things their own way. Employees that have superior skills are very unhappy when they have to follow systems that are designed for the lowest common denominator. When a park manager displays better ability, give them some additional rope and let them see where they can go with that. This is particularly true in situations that require creativity. The best mobile home parks are those that have managers that can personalize the property using their own style and talents.
McDonalds is a great example of simplistic management steps and performance tracking. However, even they can have fails. But the best thing you can do as an owner is create simple steps and easy-to-follow management tools to ensure that your managers – both good and bad – are taking the necessary steps for success.
Here’s Your Copy Of This Month’s Manufactured Housing Review
If you enjoy this monthly newsletter, then you will certainly also like the Manufactured Housing Review – the industry’s only monthly magazine that covers many different industry topics. Edited by our friend Kurt Kelley of MobileInsurance, MHR offers many insights and opinions that reflect current events in the affordable housing industry, with no topic taboo.
To view this month’s issue, click here!
In A World Of “Deal Killing” Attorneys, Dave DiMarco Is A “Deal Maker”
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.
Is It Really That Hard To Do Professional Grade Signage? Some Tips On How To Do It
This is a sign that I saw in a mobile home park recently. Not exactly what you’d call professional. And the sad truth is that these signs are not hard or expensive to make look correct. So how do you do it?
Sources of professional-grade signs
One of the best sources of professional-grade signageFFF are such providers as FastSigns and similar outfits. They have the design and implementation skill to build signs that are top-of-the-line. They also have the necessary taste to know what colors to use, and how big the words need to be. If you believe in specialization – which you should – then you should realize that a professional sign shop is much better at this than you are.
What holds it up is as important as what it says
What makes the sign in the photo look so bad is not simply the sign, but what’s holding it up. The proper way to hold up a sign is with a frame with stakes on it, or a simple stake. Some park residents will nail or tape the sign to anything from somebody else’s sign (that has been covered over with a marks-a-lot) to a coat hanger. Since a sign is the complete package of both words and presentation, what holds up the sign is extremely important.
Make the letters large
There is no purpose to any sign that you cannot read the words on. So they have to all be large. The larger, the better. The sign should simply say “For Sale” or “For Rent” and a phone number. Not such things as “large bathroom” and “great condition” – those are things you can tell the prospect when they call. And don’t forget to put the phone number on the sign using a thick, black marker, so it can be read easily from the street.
Choose the right colors
There has been a huge amount of study done on the subject of color theory. Here are the conclusions. First of all, contrast is essential. Second of all, you should never fail in the first rule. In many tests of viewers, it was found that the top three color combinations for contrast are 1) black and yellow 2) black and white and 3) white and red. There’s no reason to go beyond these three. That’s why all the standard “for sale” signs out there are in these colors.
Great signs are not hard to accomplish. There’s no excuse for bad ones. It takes about the same time and cost to do a bad sign as it does a good one.
Doublewides And Mobile Home Parks: An Interesting Relationship
Doublewides and mobile home parks have a complicated relationship. Owners love having them in their parks, but yet rarely buy them to fill vacant lots. What’s at issue is the simple fact that doublewides cost nearly twice as much and often take up two lots, yet rarely rent for anywhere near double that of a singlewide. So their purpose, in most mobile home parks, is purely as decoration. Because of their extra visual appeal, most community owners will let them occupy two lots and only pay for one. They look at this as investment spending, as that one doublewide may be just visually appealing enough to influence the appraiser to lower the cap rate a tiny bit. In effect, doublewides serve the same purpose, in most parks, as decorative fencing and landscaping.
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]
When Good Television Becomes Bad Reality: The Saga Of Tiny Homes In The Real World
Tiny homes are a big hit on television. There are at least five shows that focus on this new housing option, and at every newsstand you will find endless articles on the new appetite for “living small”. But there are some problems with the business model of the “tiny home” and it’s starting to be discovered, as described in this recent New York Times article regarding the tiny home movement’s quiet setback https://www.nytimes.com/2017/10/06/realestate/where-can-you-park-a-tiny-home.html .
Nobody bothered to check the laws before the cameras started rolling
Tiny homes make for exciting television. But it might have been a smart idea to check the Federal, state and local laws before you start the cameras rolling. The problem is not in the building of tiny homes. All Americans have the freedom to build anything they want in their shed, yard, or commercial building. But the problem comes in where you can place such a creation. Because under HUD code, no “manufactured” home (a home that is not on a permanent foundation) can be installed in most any city limits without the HUD seal, and these creations are not HUD compliant. So basically these tiny homes you see on television fall under the RV statutes, which do not allow you to place these things in mobile home parks. But you can’t put full-time housing units in RV parks, either. So there’s really no legal place to park these things.
And nobody addressed the problems when they first became apparent
Those who pretend that these eventuality is a complete shocker are not being truthful. The fact that tiny homes are not legal has been well known in the industry for years. But the builders, customers and TV audiences just wanted it to turn out different, so they refused to accept that reality. If you Google around, you’ll see that various tiny home customers have been refused a permanent placement for their creations for years. But the reality has been largely ignored. And there hasn’t been even an attempt at starting the process to legally solve this crisis – mainly because there isn’t really a legal avenue.
So what do they do now with tiny homes?
At the Tunica mobile home show last year, I was shocked when I ask a tiny home builder where I could put their product and they said “you could park it in your parent’s back yard, or in a driveway in somebody else’s yard”, as those are both completely illegal options. Another builder told me “you know there gonna change those laws any day now” even though there is no such pending legislation. It reminds me of what bootleggers must have said during Prohibition.
I get calls from people periodically asking me “so where can I put a tiny home?” and they never like my answer. That industry is in a total crisis, and I’m waiting for the litigation to begin between the builders and customers. It’s worthy of note that Clayton and other manufacturers are working on actual HUD-code tiny homes, so there is a solution on the horizon. But the concept of some builder making a custom creation for the customer may prove to just be a tiny home fantasy.
About The CASH Program From 21st Mortgage
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, call Candice Doolan at 800-955-0021 ext 1735 or email her at [email protected].
How Much Horsepower Does Your Mobile Home Park Have?
Every automobile engine has a maximum output. This is normally called “horsepower” and it predetermines what the potential speed of the car will be. In the same manner, the “horsepower” of a park is the maximum amount of net income it can derive at peak potential, and it determines the top-end amount of cash flow that the investment can derive, based on the price you bought the park for. So how can you tell, in advance, what the “horsepower” of a mobile home park is?
What Is the indicator of “horsepower” for a mobile home park?
The “horsepower” of a mobile home park is the amount of EBITDA it can produce – which stands for “Earnings Before Interest, Taxes, Depreciations and Amortization’. This is the true net income for the mobile home park, not including any below-the-line items. However, the horsepower is not the cap rate, as that’s a component of the price you pay, the same as cash-on-cash, which is derived from what your down payment is.
What can be done to maximize that?
Just like a hot rod enthusiast or a NASCAR mechanic, most mobile home park owners are always on the prowl to boost the “horsepower” of their park. The top ways to do so are to 1) raise rents 2) sub-meter and bill back water and sewer to tenants 3) fill vacant lots and 4) cut costs. Of these, raising rents is the most important, as it is 100% profit and most parks in the U.S. are woefully behind the times in rent levels, given the median home and average apartment cost. In addition, rent levels increase annually, so the horsepower increases constantly in this regard.
How much does it cost to make those modifications?
You can turn a 300 horsepower engine into 700 if you are willing to spend big bucks. The good news for most park owners is that to increase the EBITDA, the actual cost required is negligible. Raising rents is a 50 cent stamp, and cutting costs is just firing someone or re-negotiating a bill. The big item is the cost of bringing in homes, which can be $20,000 to $40,000 per unit. And while raising rents rarely misfires, filling vacant lots can sometimes cause big problems if the market won’t support the credit requirements of buying new and used homes.
How long does it take to fine-tune?
While some can see huge increases in EBITDA within a few months, most parks take around 3 years to see giant increases in EBITDA. But you know this going in, as you have already done the comps on rent levels and utility bill-backs. While cutting costs is quick (assuming the contracts have expired), filling vacant lots is the most time-consuming.
Every mobile home park is like a car engine. Analyze the maximum “horsepower” that park can produce, work towards maximizing it every day, and put your NASCAR hat on, as the good landlord is the one that is always thinking “now what more can I do to increase EBITDA?”
Why Is Daytime Television Fascinated With False Stereotypes Of Mobile Home Park Residents?
What is it with daytime television’s hatred of mobile home parks? Why do they delight in advancing a stereotype that they know is false – and why do viewers get so excited about the potential of any program that features “trailer park” residents in it? It is a commentary on our society, or a universal love of discrimination by the masses, or simply an easy title to continue to “milk” viewership, like a bad sequel to a popular movie? The answer is all three.
Television audiences love loud screaming, sex, violence, anger and drama
The average American’s attention span is very short. To keep them interested, you have to bombard them with a steady stream of sex and violence – and deliver that in a montage of anger and drama. Audiences are fixated to their screens when bouncers have to keep guests from beating each other, or there are endless crazy, expletive-laced, tirades. While the demographics of daytime TV are less than impressive, these shows are required to sell ads or cease production altogether. That’s just the nature of their business model.
Television audiences feel that this is a big part of every “trailer park”
But what’s wrong is that the average TV viewer thinks that mobile home parks are the #1 source of these type of individuals. While it’s true that there are some horrible mobile home parks in the U.S. – and we’ve all driven by them – that’s a tiny microcosm of the actual industry, like maybe 1%. Roughly 99% of mobile home parks would bore the average daytime television audience to death. But it’s that violent, nutty, rough, tiny minority of parks that keeps the myth alive.
How to cure this misconception
The media has trashed our industry for decades, with everything from “8-Mile” to “Myrtle Manor” and from “Trailer Park Boys” to “COPS”. The damage has been done. The only way to fix this is to 1) acknowledge that there are some really horrible mobile home parks out there but that they are a tiny minority and 2) continue to re-educate Americans on the truth about the average mobile home park. A good example of this education process is the recent Clayton “Have It Made” commercial that aired during college football games. Or the recent Time magazine article “The Home of the Future”. But it’s not nearly enough and not fast enough. Out industry is so far behind the 8-ball, and that we’ve got to really ramp up the discussion because we have so many people to convince. The bottom line is that it’s going to take some time.
Daytime television audiences are not well-educated. The media has created a stereotype to attract audiences, and they will continue to do so until Americans fail to think of the average mobile home park resident as a thug or a nut case. Let’s help to end this unfair portrayal by continuing to educate the American public on our real product and customer base. When these shows have the special “apartment” edition and not the “trailer park” one, then we’ll know that we won.
Mike Renz Is The Source For All Things Related To Environmental Pollution
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.
Interesting Facts From A 1972 Book About Mobile Homes And Parks
I recently obtained the 1972 book titled “All About Mobile Homes” by John Scherer. While I’m a huge history fan of the industry, this book had some data which is extremely useful in understanding how the industry has developed. Here are some of the items I find interesting, and what they suggest.
Lot rents that never kept up with inflation
In the book, it says that they average lot rent in better parks in 1972 was $85 per month. If you inflation-adjust that number to 2017 levels, you’d end up with an average lot rent of $499. However, the U.S. average is a little more than half of that number. So what happened? Moms and pops never kept their rents in-line with inflation. Why not? My bet is that they grew up in an era with virtually no inflation, and it was just not part of their business model to raise the annually. In addition, once their mortgage was paid off, they did not feel any financial pressure to raise them. More importantly, I think many park owners got personal satisfaction in artificially keeping rents low, as they considered themselves more “friends” of their tenants as opposed to “landlords”.
An actual star rating system that worked
The book explores the rating system for the industry, which was established and enforced by Woodall’s Directory. It describes how 32 inspectors comb the national annually and rate the 27,000 member mobile home parks with a 1-star to 5-star system. I found the description of a 1-star requirements interesting: “a neat overall appearance with patios on all lots and lawns. The streets must be in good condition and the overall appearance must be neat and clean, with laundry rooms and restrooms clean and sanitary.” That’s a far cry from what most people consider a 1-star park to be today. Of course, the real problem is that Woodall’s abandoned the rating system in the 1980s, and today the star system is simply a joke.
Celebrity ownership of mobile home parks
The book has an entire section on the large number of celebrities that own mobile home parks in 1972. The list includes Lawrence Welk, Fess Parker (Daniel Boone), and Art Linkletter. Here’s why they own them, according to the writer: “one would have to be somewhat gullible to believe that celebrities own mobile home parks for money-making purposes alone…there is a prestige to owning a multi-million dollar mobile home park.” Times have changed. There are no entertainment celebrities today that own mobile home parks, to my knowledge. But there is always Tony Hsieh, who owns and lives in Airstream Village in Las Vegas, which he purchased with a tiny part of his $800 million fortune from selling Zappos.com to Amazon. But I’m not sure that even Tony is in it for the “prestige”. I think that moment has come and gone.
I will be sharing more tidbits from this book in future newsletters. It’s amazing how the industry has changed over time, as well as our perception of it.
Why Colorado Is A Great State For Mobile Home Parks
Dave has lived in Colorado virtually his entire life, and our management company is based in Denver. However, that’s not the reason we buy so many parks there. The real reason is that mobile home parks in Colorado have a long track record of success. So what makes Colorado such a great mobile home park market?
Huge demand for affordable housing
The median home value in Colorado is $337,900, which is up 8.8% over the past year and Zillow predicts it will rise an additional 3.7% within the next year. The median list price per square foot in Colorado is $215 and the median price of homes currently listed in Colorado is $399,500. Meanwhile, the average two-bedroom apartment rents for $1,396, and a three-bedroom apartment averages $1,744 per month. The net effect is that the demand for affordable housing in Colorado is huge – there are virtually no housing options at all for those who are in the bottom third of earning capacity.
Attractive to lenders
Lending has its popular favorites, and making loans in Colorado is extremely attractive to most banks. This allows park buyers to obtain loans easily, as well as find plenty of willing sellers later on, who can also share in easy financing for their purchases. Why do lenders like Colorado so much? We’ve found that many lenders base their decisions on past experiences, and few have had loan defaults or losses in Colorado. Since the state has grown rapidly and stayed on-course economically, there have been very few loans go into receivership.
Few natural disaster risks
Another unique item about Colorado is the near-virtual absence of natural disaster risk. It’s too far inland to worry about hurricanes, and too mountainous to be a tornado magnet. It’s not prone to wildfires and has never had a major earthquake. The only risk for Colorado mobile home park owners is a home being pulled by the repo man, or a major water leak.
Solid demand from other park buyers
Colorado has an excellent reputation with park buyers, ranging from those who own one park to giant portfolio owners. This attraction has come from a track record of success – from rough, urban parks to fancy five-star. This popularity has resulted in a constant state of liquidity for anyone who owns a mobile home park. When properties go on the market – assuming they are priced right – they rarely sit for long.
Huge population growth
Colorado is the second fastest growing state in the U.S. It’s population growth is twice the national average. This has benefitted all real estate – not only mobile home parks. The housing market, in general, has rocketed forward. But this growth in prices has simply pushed lot rents to ever-higher levels, and increased demand and occupancy.
Good employment sectors
The average unemployment rate in the State of Colorado is 2.1% -- less than half of the U.S. average of 5.2%. This strength is the byproduct of a great diversification of employment, and a concentration in sectors that are recession-resistant and fast-growing. The largest employment sectors in the State are government and education with 430,100 employees, followed by healthcare with 329,000, tourism with 177,700, food and agriculture with 173,000, high-tech with 149,400, and defense with 73,100.
Colorado is a great state for mobile home parks. Always has been, and always will be (assuming there are no big changes in its trajectory). Dave’s first parks were in Colorado, and our management company is based there. We own parks throughout the state. It’s one of our favorites.
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The Dream Resident: How To Attract And Retain Them
We’ve all seen that one home in the mobile home park that is lightyears nicer than any other. And every park owner has thought “if I only had all my residents who were as good a customer as this one”. So how could you do that? How can you attract and retain those “dream residents”?
What is the “perfect” resident?
Obviously, it all starts with paying rent on time and obeying the park rules. But the “perfect” resident is much more. They make home improvements, build carports and nice outbuildings. They landscape. And they demonstrate an enormous sense of “pride of ownership”, which is that ingredient which excites appraisers and lenders, and serves as an inspiration for their neighbors.
What do they look for in a mobile home park to move into?
If you want these type of residents, then the first step is to make your property the type of place they would like to live. Sure, their home looks great – but what do they see? What is the condition of the homes and yards that they see out their windows? It is imperative that you not only enforce the rules, but go the extra mile and invest time and money is making repairs to homes you don’t own to keep a minimum streetscape aesthetics level. You can’t let tenants disobey basic mandates like skirting and painting and mowing and expect to attract the best residents.
What scares them away?
What would scare you away? These customers most closely resemble most owner’s tastes and judgement. If you are not proud of your community – outright willing to put your name on the sign – then you will never attract these type of residents. Some owners tend to let their community be less than they could be, simply through a lack of interest or pursuit of perfection. But you’ll never get these ideal customers with the attitude of “it’s just a mobile home park” and not pushing it to continually be better.
How to deal with complaints
These residents rarely ask for much. But when they do, you better take their issues to heart immediately. Recently, a top resident asked for some additions to their driveway so that their classic Corvette would not ground-out when going up their parking pad incline. The cost to do so would be around $500. Would I refuse? Absolutely not. There was a study that showed that a customer who has a complaint – and then has the problem solved – is more loyal than a customer who never had a complaint. So look upon these moments as an opportunity to build a life-long customer.
One of the most precious commodities in any mobile home park are the landmark residents that serve as the ultimate example for other neighbors to imitate. Every park owner should do everything in their power to attract and retain these individuals.
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