Mobile Home Park Investing Newsletter

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September 1st, 2019

Memo From Frank & Dave

In September 1923 Rocky Marciano was born in Brooklyn. He won his first Heavyweight Boxing title in 1952 and retired in 1956 as the only undefeated Heavyweight Champion in U.S. history. So what made him so good? He is best known for relentless effort, in which he never gave up and which garnered him a 87.76% career knockout percentage. His style was described as “crude, wild swinging and awkward”, and he was the inspiration for the Sylvester Stallone movie “Rocky”. As strange as this sounds, we see “Rocky” types all the time as park owners – people who don’t really have the capital to get into the business but battle their way to success, or who take on mobile home parks in terrible condition – seemingly hopeless sometimes – and bring them back to life through sheer personal force. And this has been true in the industry since inception. Many mom and pop owners tell the story of how they built the mobile home park from scratch in their spare time and on weekends, shoveling the concrete themselves and working three jobs to pay the mortgage payment. There is no substitute for human effort, and it’s reassuring that our industry is truly fair to all – anyone can succeed if they simply have the drive and desire. So keep swinging.

How A Mobile Home Park Is Technically Just A Parking Lot: And The Impact Of This Fact

parking lot

Of all real estate sectors in the U.S., there is none that is a closer cousin to mobile home parks than the simple American parking lot. But while this is a very simple business model, it also leads to some more complicated issues in several areas.

The implications on zoning and grandfathering

One group that has huge problems in understanding that mobile home parks are technically parking lots is city government and, more particularly, the planning and zoning department. Here’s the issue. Most mobile home parks in the U.S. operate under a “legal non-conforming” status, also known as “grandfathered”. This classification means that mobile home parks are not required to meet any statute more modern than the day they were built – often a half-century ago. On single-family homes, multi-family, commercial structures – virtually every other sector of American real estate – when a property is grandfathered and has a structure removed by demolition, fire or other weather mishap, the grandfathering status is lost. However, the only property right that is grandfathered in a mobile home park is the simple use as a parking lot. As a result, structures can come and go – just like cars parking in parking space – but it has no impact on the grandfathered status. Many planning and zoning departments lose sight of this simple issue, and take the posture that when a mobile home leaves a lot (parking space) that a new one cannot go back on that lot. This issue has gone to a state Supreme Court no less than five times, and the park owner has won all five cases. Texas even went a step further and amended the state law to make clear that all mobile home park lots can be used without city intervention as long as they were built legally at time of construction.

The implications from a capital repair standpoint

Parking lots do not have many capital issues to worry about. It’s all about the land itself. And that theme holds true for mobile home parks, as well. In a mobile home park, the structures are owned by the residents who are responsible for their own respective repair and maintenance. A mobile home park is only responsible for the roads, utility lines and sometimes real property structures such as a clubhouse. This makes the required budgeting for repair and capital upgrades much lower than any other form of real estate.

The implications for re-development

Mobile home parks are very simple to re-develop, as they are just basically raw land with minimal improvements. The difficult part of re-development (the relocation of the mobile homes) is the burden of the residents and not the park owner. In many cases, there are vacant lots in other mobile home parks in the market that can happily receive these homes, and in other markets it’s much more difficult. Unlike most real estate sectors that have real property on top of the land that requires demolition, mobile home parks require very little. On top of that, cities do not view mobile home parks as the highest and best use of the land, since they are only on one level and have much lower density than modern uses. As a result, cities are more than happy to give out approvals for any use that removes the mobile home park from the city.

The implications from a public relations standpoint

One of the most ridiculous things about mobile home parks is the fact that most Americans do not understand that the park owner only typically owns the land and not the homes. A typical media mistake that happens frequently is when the news source complains that the homes are “hideous and poorly maintained” only to later learn that the homes are owned by the residents and not the park. The same is true with many city governments, who will try and cite the park owner for lack of maintenance on certain mobile homes, only to find later come to the realization that the park owner has nothing to do with these issues, and any related citation must be dismissed and re-directed to the home owner.

Conclusion

We have always been huge fans of the “parking lot” model of real estate, as it creates stable revenue with low cost of operations. We prefer, however, the parking of mobile homes more than automobiles, as while cars may come and go daily, mobile homes really can’t be moved – either by law or by cost – which makes them a much more dependable income stream.

A Resident Battling Cancer Receives A New Bathroom

mobile home bathroom remodel

One of our residents in Lincoln, Nebraska was on hard times. Evelyn is battling cancer, while her husband is recovering from a second heart attack. The bathroom in the home they owned was in very poor condition with the flooring unsafe, the fixtures crumbling and very poor cosmetics. Our manager tipped us off to the facts and we sprung into action. While they watched in awe, we replaced the bathroom with a new upgraded look and full functionality. We recommend that all mobile home park owners watch for these win/win opportunities to do good for our residents while elevating the sense of community throughout the property.

How M.J. Vukovich Can Help You Build An Empire By Re-Using The Same Capital

vending machine

There’s an old concept of tying a string to a dollar bill and buying each item in the vending machine and then yanking the dollar back out and using it again. That’s illegal in most applications, but not in buying mobile home parks. The way mobile home park owners yank the dollar back out is in the form of cash-out re-financing. To accomplish this, you need to obtain a conduit or Agency loan that allows for this to occur. And the master of putting together this type of debt product is M.J. Vukovich with Bellwether. We have been using him on all of our institutional debt (which means deal sizes of $1.5 million or more). If you are working on park financing on deals $1.5 million or greater, you should give M.J. a call at 720-758-9227 to discuss the options, or email him at [email protected]. The call costs nothing and the results may give you huge cash-out proceeds (which are also tax free as they are technically a loan).

Why We Love Investing In College Towns

University Of Dubuque

We own a mobile home park in Dubuque, Iowa, the home of the University of Dubuque. We also own parks in many other cities where colleges are located. We have long been fans of investing in “college towns” for a huge number of compelling reasons. So what makes college towns great places to own mobile home parks?

Steady recession-resistant employment

One initial observation about college towns is that they are extremely insulated from the “real world” and that includes the risk of recessions and depressions. Even in times of economic uncertainty, parents are going to send their kids to college. And those kids are going to spend money in the local economy. A large university may employ 10,000 people, and this group has no susceptibility to the collapse of the stock market or the closure of a big manufacturing plant. As a result, unemployment rates in college towns are far healthier than any other spot in times of national upheaval.

Typically also the location of major health facilities

One of the byproducts of most universities is that they have a medical department that trains doctors and nurses. This, in turn, requires them to have a hospital to educate them and act as a training facility. Over the years, this university hospital has also come to be a source of state-of-the-art treatments and top-quality labor. The end result is that most U.S. major health facilities are located in college towns, and have a strong affiliation with them. With high-end health services also comes more attraction to living in the market and more community jobs that are insulation from economic stress.

Normally growth markets

Since colleges attract amenities such as dining and entertainment, as well as health services, this makes them typically strong residential markets. Additionally, new college graduates have skills in many disciplines, such as computer programming, and this attracts other employers who are in need of this labor force. In most states, the strongest markets are those in which colleges and universities are located. And that creates good dynamics for affordable housing demand.

Progressive city government

Most college towns are fairly aware about problems in the U.S. and are keenly aware that there is a nationwide shortage of affordable housing. As a result, they rarely harass mobile home park owners who are striving to create safe, clean affordable communities. Additionally, most college towns have ample tax revenue from property tax and sales tax and are not looking at mobile home parks as drags on the local economy or spots for higher-taxation potential re-developments.

Many mobile home parks are located in these areas

The history of the mobile home park industry has a long association with college towns. While the U.S. Army placed the largest order of mobile homes in American history during World War II – roughly 500,000 mobile homes – they moved these units to colleges after the war, as part of the G.I. Bill. As a result, there are unusually high numbers of mobile home parks located in college towns. Over the years, many have been re-developed, but there are still a large number of attractive acquisition candidates in these markets. And many of these are built to a higher level than other parks of that era, since the government was involved and the goal was to make upscale parks for upscale residents.

Conclusion

College towns are great places to own mobile home parks. They have extremely attractive traits that are hard to duplicate elsewhere. From economic stability to future market growth, college towns are unusually attractive for investment. Perhaps that’s why Warren Buffett’s only commercial property purchase was directly across from NYU.

Why Most Smart Park Owner Are Changing Over To Purchasing Platform To Buy Virtually Everything For Their Property

In 2018 we became huge customers of Purchasing Platform – one of their largest. And we suggest any park owner to look at what this new buying service can do in regards to positively impact your community. It’s literally a game-changer.

What is “Purchasing Platform”?

Purchasing Platform is an online GPO (group purchasing organization) and eMarketplace that has been created specifically for the mobile home and mobile home park industries. More than 1,800 MH communities access Purchasing Platform every month to take advantage of their pre-negotiated pricing, single checkout from 40+ vendors, auto expense mapping to their chart of accounts, multi-level workflow approval to provide accountability across their portfolios, etc. They offer 20-30% savings on more than 10 million products and an integrated "Buying Desk" service that acts as a purchasing agent for your community to make sure they always deliver aggregate savings on every order. 

How big do you have to be to use Purchasing Platform? Can you use it with only one property?

The answer is yes – there’s no minimum limit of properties or dollars spent. Some of the largest industry portfolios use them but the majority of their clients own and operate between 1 and 30 mobile home parks. This is not a service that is only available to the largest owners – it’s one that every park owner in the U.S. can utilize.

Why use Purchasing Platform?

In addition to the obvious cost savings on products and services, use of Purchasing Platform drastically reduces the number of trips your manager has to make to retail stores (time spent not managing your property), eliminates the need for expense classification and receipt transcription while also providing valuable oversight to the owner with workflow approval. They also allow members to load their own catalogs to make sure that managers only can order what they want them to.

Summary of benefits

Here are the main reasons that we have become huge users of the Purchasing Platform:

  • Easy to use interface. Not hard at all for any manager to master.
  • Single checkout from more than 40 of the industry’s largest vendors.
  • Huge savings on more than 10 million products.
  • Price Match Guarantee: if you can find it lower somewhere else, they’ll match it.
  • Create your own custom catalog.
  • On-Demand Buying Desk feature gets you immediate support for volume quotes.
  • Comprehensive Workflow Approval functionality to keep you in control of all buying.
  • Maps out all expenses to your Chart of Accounts.
  • Integrates everything seamlessly into your property management software.

You can try Purchasing Platform at no risk for 90 days

Purchasing Platform allows all park owners to try their system for three months with no obligation to continue. That’s how we got started – we gave it a try and liked it. So if these advantage look good to you (which they certainly should) we recommend you contact Purchasing Platform today at 312-622-6552 and [email protected] and get set up on a 90 day trial.

We think you’ll find this to be one of the big improvements in your operation for 2019.

The Issues Regarding Bringing Old Properties Back To Life

downtown street under renovation

This is a photo of a downtown area that is being completely re-developed in Ohio. Block after block has been fenced, and all tenants – both commercial and residential – displaced. These old buildings will one day be fully renovated with new occupants at much higher rents. The city will celebrate the improvement in the aesthetics and tax base, and the general community will applaud the fact that this area has been brought back to life. And it’s the same thing that mobile home park owners do all the time, but with no such fanfare.

It’s a natural process in real estate and has been for centuries

The first professional real estate investor in the U.S. is considered to be John Jacob Astor. He bought up much of Manhattan Island in the late 1700s and early 1800s, yet knew that the land would be continually re-developed over time, so he elected to simply lease the land to others to build and re-build structures that met their needs and desires. The concept that any real estate development is never going to require any further updating is incorrect. Tastes change and things wear out. Bringing old mobile home parks back to life is a big part of our business model.

But there are winners and losers

When you bring old mobile home parks back to life there are many different issues that occur as a result, some of which are beneficial and others more challenging. Here is the list of who the affected parties are and how they are impacted.

Winners

  • Residents. The biggest winners when you bring old mobile home parks to life are the residents. They receive a much greater quality of life, higher re-sale value of their homes, and more pride-of-ownership.
  • Neighbors. As the mobile home park improves in aesthetics professional operation, this enhances the quality of life or neighboring property owners who see their real estate values climb and their quality of life improve.
  • Greater community. Even though they don’t live right next door, all who live in the community will benefit from a more positive development in their borders, as well as the greater interest of new development in the city that may have been scared away by the former blight.
  • Property owner. Another key beneficiary of bringing old mobile home parks back to life is the property owner. They benefit from more professional management and structure, utilities and roads in better operating condition, and higher values.

Losers

  • Residents who were living marginally and need social program housing or help. In many mobile home parks that are subject to needing full restoration there are typically some residents – but not always – that are unable to live in the absence of governmental assistance. This has often been true for years, but the mom & pop owners have allowed them to remain rent-free and without abiding by the general rules of the property. Upon renovations and installation of professional management, these residents can no longer function in an environment where rent is due monthly and minimum rules compliance of home and yard condition is enforced. This is where the government needs to step in and find these residents housing that meets their particular needs through programs such as Section 8 housing assistance – however, these programs are effectively broke and can no longer take in new applicants. But this is a governmental responsibility, not that of the park owner.
  • Criminal enterprises. Many mom & pop owners have no formal screening process of residents, as well as no rules enforcement or even on-site management in some cases. This allows mobile home parks to often harbor undesirable tenants with frequently criminal associations. Upon bringing these parks back to life, these criminal enterprises are displaced through a lack of tolerance of criminal behavior.
  • Those who can’t live within the rules as a lifestyle choice. There is a whole additional category of those who refuse to live within rules as separate from those who can’t due to financial problems or sometimes even mental illness. These residents actually take pleasure in bothering their neighbors with loud music at night, wild parties, and general disregard with the basic tenets of being a good neighbor. Those who refuse to follow the rule of the park are also displaced as part of the turn-around initiative.
  • Those who wanted the mobile home park to be torn down and redeveloped. It is well-known that there is a fair amount of hostility against “trailer parks” by the average American, and when you bring a mobile home park back to life it ruins the possibility of total destruction and new greenfield development. We have purchased parks that had other bidders that included neighboring business with the purpose of total destruction of the property.

Conclusion

Old mobile home parks are being constantly brought back to life across America. It’s the same process as in every sector of real estate. The winners far outweigh the losers, and it’s always in the best interests of the majority.

Fresh Ideas To Jumpstart Resident Pride Of Ownership

nice mobile home

One of the biggest moments in the evolution of any mobile home park renovation project is the moment in which “pride-of-ownership” returns to the resident base. This may simply be the planting of a rose bush, or the installation of new shutters on the home. But the impact is huge – a turning point – in your knowledge that the park is heading in the right direction. So how do you jumpstart this important trait?

All-community clean up event

We call these “Spring Clean-Up” events, but you can do them at any time of year. All you have to do is have an organized event with a dumpster brought out, simple tools like paint, brushes, trash sacks and safety gear, and a communal meal organized. In just one day you will be amazed at how much can be accomplished by even a small group of volunteers.

Monthly newsletter

Sure, we know that writing is often a lost art, but there’s no reason you can’t product some type of newsletter for your residents that could at least be included in your monthly invoices. There are services that offer this item at a low price on the internet. The standard format is to include any key dates, seasonal tips (like keep faucets dripping when it’s cold out), perhaps a recipe (just pick one from a cookbook that interests you) and an article or two on the topic of your choice. It’s not really that hard and the dividends are huge.

Enhancement of existing park amenities

Many old park amenities (such as clubhouses or playgrounds) need some level of updating. And it’s very easy and inexpensive to do so. Henry Ford had a rule that factories should always be freshly painted, as it had a huge impact on employee morale. And the same is true for your park residents. A little paint can go a long way.

Addition of new park amenities

It takes very little to make a nice park amenity. Take any vacant lot or outparcel that you can’t put a mobile home on. Add a couple picnic tables and an outdoor grill or two and you have a great place for residents to hang out and converse. Add a pavilion to that mix and you have a usable space virtually all-year. Or maybe the addition of a soccer goal in a vacant greenspace. These type of efforts are very inexpensive, but they help bring residents together.

A manager with a positive outlook

Even in completed properties where is nothing left to improve, you can still have a lack of pride-of-ownership if the park manager is at odds with the residents. It can destroy their spirit and morale. A good manager has to display many different traits and wear many different hats – and one of these is by being a positive force on the resident base. It’s very hard – if not impossible – for your residents to display pride-of-ownership without the positive energy of a happy manager/resident relationship.

Yard of the month club

Here’s something that is inexpensive and hugely impactful, and that’s a simple “Yard of the Month” award that is given to a different resident every thirty days. We typically give the resident a sign for their yard and a $50 gift certificate to thank them for their efforts. This typically acts as a catalyst to get the residents focused on their own yard and home and celebrates this effort.

Conclusion

Pride-of-ownership is a huge factor in making any mobile home park the best it can be. And it is well within the ability of any community owner to jumpstart this process for the benefit of all residents.

The CASH Program From 21st Mortgage: One of the Big News Stories of 2019

One of the biggest things going in the mobile home park industry is the CASH program from 21st Mortgage. If you own a mobile home park, the power of this program is astounding. You can fill vacant lots with zero out-of-pocket cost. You can get customers approved to buy homes with amazing speed and a “can-do” attitude. You don’t have to get in the middle of financing or the SAFE Act. And you can tap hundreds of thousands – or millions – of dollars sitting there in vacant lots. The demand for affordable housing in the U.S. is enormous, and the only thing holding most parks back from 100% occupancy are new and used homes that your customers can qualify for. With the CASH program, those obstacles can be overcome and your occupancy can soar. We are the largest users of this program in the U.S., and we know how great it is.

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

The Potential Impact Of A Higher Minimum Wage

McDonalds Hiring Sign

There has been much talk in the U.S. regarding raising the minimum wage from $7.25 per hour to a much higher amount – some pushing for twice that rate. With such a grassroots movement taking place, it’s a safe bet that there will probably be some movement in this regard in the near future. But what would be the potential impact of this action on mobile home parks?

More money to meet bills

The first, and most obvious, benefit of a higher minimum wage regarding park owners is the fact that it would create more household income for many residents and, as a result, less financial strain in paying bills. This would lead to less late payments, less evictions, and generally more financial harmony. There is certainly not a single negative to higher minimum wage regarding the positive attributes of having more income.

More money for home and yard improvements

And some of this excess cash flow might well turn up in greater home and yard improvements, such as exterior and interior remodeling as well as the addition of such items as carports and outdoor furniture. Once again, this is a huge benefit for the park owner, as well, as it creates a better looking property and greater display of pride-of-ownership.

More pride in their employment

Higher minimum wage would also give some park residents renewed pride in their work. The concept of people looking down on those who work in a fast food job and have to wear a uniform would be radically changed if those jobs paid $30,000 per year – more than some more skilled jobs such as hospital accounting clerks.

Less labor friction and strikes

A higher level of wages would probably erode and end many potential labor strikes, and that would again be of benefit for the park owner as it removes the sudden terror of a strike at a large local plant, for instance. Having stable, uninterrupted employment is key to stable rent collection.

Mobile home park owners are probably more positively impacted than any other group

The fastest growing industry in the U.S. since 2007 has been fast-food. And fast-food is also thought to be the largest employment segment in mobile home parks. As a result, since more residents of mobile home parks are on minimum wage than arguably any other form of real estate, mobile home park owners are also set to be more positively impacted than any other group. The same cannot be said for upper end apartments, as it’s been noted that many businesses will have to lay off some middle-management positions to pay for the higher minimum wage and balance budgets.

Higher stick-built home prices as labor will quit

As affordable housing is a function of the prices of other housing, and the impact of a higher minimum wage will cause a spike in the price of stick-built houses and apartments. This is because many workers in this group will elect to replace hard physical outdoor labor with air-conditioned, heated job opportunities that are much easier to handle. This will cause builders’ labor costs to escalate as they now have to contend with a whole new employment problem and they have to raise wages to compensate.

Greater ability to bring mobile home parks back to life and maximize their quality of life

The average lot rent in the U.S. is $280 per month. That’s about $1,000 per month less than the average apartment. It’s a well-known fact that U.S. lot rents must go up significantly to allow owners to make capital repairs, to fend off re-development opportunities (typically apartments) and to allow for more professional management staffing. Assuming that higher rents are a necessity (Economist Charles Becker of Duke University suggests lot rents should be around 50% higher) then clearly higher minimum wages and household income is an essential step in that process.

Conclusion

Mobile home park owners stand to gain more from a higher minimum wage than virtually any other group in the U.S. This is yet another megatrend that works in the favor of mobile home park owners.

Things That Every Smart Park Owner Should Standardize

economy hotel

This is a photo of a room in the new Residence Inn in Ohio. We are betting that every single unit in this chain that has been freshly renovated looks exactly like this. Standardization has been a tenet of American business since Henry Ford brought out the Model T. So what items should all smart park owners standardize?

Entry

After over 20 years of experimentation, we think we’ve come up with the ideal entry design (but do have many other people). The secret? White vinyl – and lots of it. Run 3-rail white vinyl fence down the frontage, and then install feather flags every 50’ or so. Install a nice entry sign that is also support by white vinyl posts and caps. For some reason, white vinyl is the perfect look for every mobile home park as it suggests a more “country” feel and is incredibly low maintenance and inexpensive. Figure on about $10 per linear foot on the fence and about $1,500 on the entry sign.

Color palate

Every park owner should have their own individual color palate that ties all their signage, flags – everything – together. Ours is blue, orange and white, but you can choose anything you like. To be safe, find a really nice property you admire and “borrow” their colors.

Marketing signage

We print all of our marketing signage (banners, for sale signs, etc.) from the same source for the sake of consistency. If you let your on-site manager order it, they will make some type of mistake that will always make you unhappy. Design really good signs, print them from one source, and ship them to each property. Don’t let any other chefs in the kitchen.

Street signage

We suggest white vinyl posts and caps as the supports for all signage on the property. It looks great, matches your entry, is inexpensive, and lasts forever. You can buy attachments for street signs that look very professional, and new signs from on-line sources (stop, children at play, etc.).

Road condition and striping

All roads should be free of potholes. All speed bumps should be freshly painted, as should any other requirements (handicap parking, fire lane, etc.). Making the streets back to a dark color using emulsion or sealer is also a great idea.

Office exterior

You should paint all park buildings the same color palate across all properties. For us, that basically means white (typically vinyl siding) but we’ve seen great green, tan and other colors used in other parks. In addition, the office should have at least one feather flag, signage that says “Office”, a locking bulletin board that includes notices (including anything required by law), the hours of operation and a sign that says “open”.

Office interior

We have worked really hard in recent years to even standardize the interior of our offices. We try to have a bulletin board that says “welcome to the community” and various marketing materials, as well as a table to sign contracts with ample pens and forms. Where you make money with an office is in retaining current residents and signing up new ones. It should be geared up for that purpose.

Amenities

Like all park owners, we have been trying to establish a common park amenity package. That being said, no two mobile home parks are alike, so this is a tough item to make truly uniform. However, the key amenities that we’re trying to have across all parks are 1) picnic tables and grills for outdoor enjoyment and 2) a professional-grade playground for small children who need frequent activities and can’t drive to greater community offerings.

Resident communications

If you don’t have a newsletter, then start making one. It’s inexpensive, easy to farm out to a virtual assistant, and sets a great tone to the customers. Also take advantage of posting positive information on a locking bulletin board (all-weather) that can be either by the mailboxes or the office (based on where the rent is given).

Resident programs

We think every park should have an annual “Spring Clean Up” event. We think every park should have a “Yard-of-the-Month” award given to one resident. We have also been having great success in linking non-profit groups together to focus on an intense weekend of service to those in need.

Conclusion

Standardization is not only for the hotel industry. It’s good for park owners, too. Come up with your best ideas and then roll those out in your full original vision. Everyone will benefit.

The Power Of Agriculture As An Employment Source

crops by business park

This is a scene out of an office window in Nebraska. On the one hand, you have new industrial businesses, and on the other are fields of crops. Although the Chamber of Commerce can probably tell you the name of each of those rooftops, it’s unlikely anyone could even tell you what type of crops those are.

A giant industry that gets little attention

So why does the agriculture industry get so little attention? Maybe because it doesn’t buy ad space. Or maybe because in an era of excitement over the internet it has not been fresh and new for over 2,000 years. But here are the facts. There are roughly 22 million people employed in the agriculture industry – which represents roughly 11% of the entire U.S. workforce. In addition, the total value of all agricultural product sales in the U.S. is over $1 trillion per year – the largest single industry (and roughly five times that of oil and gas production). Here’s a full report on the statistics, which is fascinating https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/ag-and-food-sectors-and-the-economy/ .

A fantastic backstop to the economy

Not all America is actively engaged in agriculture. While there is a portion of each state that has agricultural production, the bulk of it is in two regions: 1) the Great Plains and 2) the Midwest. In addition, there is substantial agricultural production in some parts of California. In these areas, agricultural employment and revenues are a really big deal, and this forms a terrific backstop to the local economies in times of economic upheaval. For example, during the 2007 Great Recession, while the unemployment rate in the U.S. was more than 10%, the employment in Iowa (a major agricultural state) was less than 4%.

What does it all mean?

While there are many items that influence the success of a mobile home park investment, one of the most important is a steady employment base. That ensures that you will always have demand for housing and the money to pay for it. And there’s no questions that certain regions of the U.S. favor agricultural employment and, therefore, are effectively “safer” in times of U.S. economic peril. Not that being in an area that produces agricultural should be the only component for buying a mobile home park, but it’s definitely an asset nevertheless.

Conclusion

Prior to 1900, over 50% of U.S. employment was in agriculture. In the ensuing years, the nation has forgotten its roots in this arena, but quietly the power of agriculture is far greater than the average American realizes. And it’s a powerful tool for park owners.

Is Your Attorney a “Deal Killer” or a “Deal Maker”?

How many deals have you seen go down the drain because your attorney stacked up a million roadblocks to even the simplest problems, and then failed to offer any path to solve 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. 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.

What Banks Want

banks

The only reason you can hit higher than normal rates of investment return in real estate is the existence of sensible leverage – the ability to borrow typically around 70% to 80% of the purchase price using debt. As a result, all mobile home park owners should have their first and foremost allegiance to the desires of the banking community, because without their support it would be impossible to hit financial targets. So what do banks really want to se in mobile home parks?

An appraisal that is in-line or greater than the purchase price. The first item any banker would want to see is confirmation that the price being paid is reflected in the value calculated by a third party.

A debt coverage ratio of 1.2 or higher. The bank typically wants to see that the borrower has a “safety cushion” of cash flow that is 20% greater than the mortgage payment.

A solid business plan. The bank is interested not only in the current numbers but in your plans for the future. They want the complete picture of future occupancy goals and rent level goals. They want a plan that they can believe in, and that is conservative in nature.

Few rental homes. Banks look at park-owned rental homes as liabilities and a distraction from the more important business model of just renting land. Even though it is essential to bring in homes to fill lots, banks want you to focus on selling these to the customers, not renting them.

City utilities or private utilities in good repair. Without utilities, the park cannot rent its lots. So banks are very concerned that all utilities have no risk of an end to their operation.

A larger metro. You can never be in a metro that is too big. However, banks don’t require you to be in markets of only 1,000,000+ population either. We would suggest that most banks are looking for a metro population of roughly 100,000 and above.

High single-family home and apartment prices. To have demand for affordable housing you must first have expensive housing. Most banks want to see home prices of $100,000+ and apartment rents of around $1,000+ per month.

A parking plan. Some mobile home parks have two-car parking pads for each lot. Others have defined on-street parallel parking for each home. But that’s not important – what’s vital is that you have one or the other. Cars are a reality and there has to be a parking plan for them. Parking up in your yard is not considered proper parking.

Solid roads. Banks like asphalt or concrete roads. But they will even tolerate gravel roads in certain circumstances. But potholes are never good.

Valid permits. Any mobile home park you purchase must have one of two classifications: 1) legal conforming (you could build it again today) or 2) legal non-conforming (grandfathered). But no bank will lend on a mobile home park that is illegal. If there are also annual permit required by city, county or state statute, those also have to be up to date.

Clean Phase 1. Environmental pollution is a huge issue in American real estate. Any mobile home park must have a clean bill of health related to pollution.

A clean survey and title. The bank is taking as collateral the property it is lending against. Only a clean survey and title means they have that collateral.

Good quality records from the prior owner. We put this last because it’s not 100% percent required but can definitely hurt lending with some banks. And that’s the seller having good and accurate records. Many moms and pops lack these and that gives some banks a huge concern. However, some lenders assume that mom & pop seller records have flaws anyway, and put much more weight on the appraisal and your business plan.

The best thing that you can do when you are looking at obtaining a loan is to put yourself in the banker’s shoes. This list will get you started.

Why We Like Pennsylvania

Pennsylvania

We are big fans of Pennsylvania. We own parks there and visit frequently. So what makes Pennsylvania a good market for mobile home park acquisitions?

High home prices

The average home price in Pennsylvania is over $180,000. And the apartment rents are similarly high. This creates the fundamental need for affordable housing. If there was one key criteria you need in any market to succeed, high home prices is #1.

High lot rents

Mobile home park lot rents in Pennsylvania are higher than in many other parts of the U.S. While the average lot rent in America is around $280 per month, the average lot rent in Pennsylvania is more around $400 per month – which is almost 50% higher. With this higher price comes much greater potential profit – it’s as hard to manage a park with $280 rents as with $400 rents.

Physical barriers to all forms of housing

Pennsylvania has rugged terrain – lots of hills and mountains. This means that the buildable land is greatly reduced. This has historically created a physical barrier that has kept housing prices high. And it also means that mobile home parks were extremely difficult to build and therefore have greater value from a replacement cost perspective.

Lots of run-down parks that need total restoration thanks to the “rust belt” era

We are all aware of the problems that Pennsylvania encountered in the 1970s and 1980s which led to the “rust belt” nickname (due to its extreme exposure to steel production). Because of the economic collapse of that era, a huge number of mobile home parks were driven into the ground and have not fully recovered, despite the fact the economy has reinvented itself admirably. This gives park buyers much more raw material to work with.

Reasonable ordinances and laws

Pennsylvania has relatively landlord-friendly laws and regulations, as compared to states such as California, New York and Oregon. Although Texas would probably be considered the #1 most landlord friendly state, Pennsylvania is more toward that line on the meter than it is of Oregon. This would be in relation to the laws regarding grandfathering and evictions.

Solid economies

Pennsylvania has rebuilt itself from its “rust belt” reputation of nearly 50 years ago. The modern Pennsylvania has worked hard to diversify away from strictly steel production. The top five industries in the state are 1) industrial machinery and equipment manufacturing (12%) 2) Fabricated metal products (11%) 3) Food products (11%) 4) Chemical products (9%) and 5) Printing and publishing (7%). Pittsburgh, in particular, is a virtual oasis of healthcare and education employment – a far cry from the economy of decades past.

Conclusion

Pennsylvania has many positive traits for park ownership. It displays a solid workforce, strong housing fundamentals, and high lot rents, plus a physical barrier to new housing construction of all types.

Need A Phase I Environmental Report? Mike Renz Is Your Man For The Job!

The New York Times called Frank a human encyclopedia of all things mobile home park and, if that’s true, then Mike Renz is the human encyclopedia of all things under the ground. You see, when it comes to Phase I Environmental Assessments, nobody in the industry is more knowledgeable than 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.

Does Anyone See A Mobile Home In This Photo?

white shoebox home

A highly esteemed architectural magazine recently had an article on a small home designed by George Muche and called Haus am Horn. It was built in 1923 and is considered a minimalistic classic. But does nobody see the similarity of this structure to a mobile home – one that would be found in many of our mobile home parks every day of the week? My point is that mobile homes never get any credit from the design community, and this is despite the fact that even Frank Lloyd Wright designed a mobile home prototype called the “Americana Usitonia”. The intense negative media that surrounds the mobile home industry – a function of a push for ratings by linking the words “trailer park” to sex and violence – has resulted in many people who know better to shun the original site of minimalist home designs: the mobile home park. If you are ever near Elkhart, Indiana, you should drop by the MH/RV Hall of Fame and Museum which displays roughly 30 mobile home designs from the 1920s to the 1950s. You will quickly realize that there is a rich architectural heritage in the industry that gets little credit. Which, at a time in which Americans are obsessed with the concept of “tiny home living”, is pretty sad.

Properly Insuring A Mobile Home Park Is More Complicated Than It Looks

Mobile home parks are a unique asset class of real estate. And their insurance needs are equally unique. You have to make sure you properly protected against a number of factors including liability, property damage, employee practices, flooding and fire – it’s a long list. Your typical insurance agent at State Farm will not even be able to populate this list, and their rates would be far too high if they did. You need a specialty lender who is completely focused on mobile home park insurance. That agent is Kurt Kelley at Mobile Insurance. He has spent most of his working life focused on the needs of park owners throughout America who are wanting to get the right insurance at the lowest price. We’ve been using Kurt for over two decades, and we heartily suggest you think about doing the same.

You can contact Kurt Kelley at 800-458-4320 ext. 17 or [email protected]

Mobile Homes Have Not Always Been One Story

2 story mobile home

A friend recently sent us this photo that they found in a book showing a multi-story single-wide mobile home. Indeed, there was an era in the 1950s through 1960s in which mobile homes are often more than one story high. Of course, these were not truly two-stories high, but rather a story and a half. Typically, the master bedroom was the upper story and there was another bedroom or den beneath it that did not have full-standing headroom. I have toured several of these models over the years and while it was a creative idea, the lower room is fairly claustrophobic. In some of the advertisements from that era you will see photos of the happy couple dressed in black tie and evening gown having a martini in their 5’ high lounge area. It captures a time in American history which is now long past on both fronts. That’s not to say that they don’t make a two-story mobile home today, but it’s two real stories high, requires construction with a crane, and costs about $100,000. And at that price, the occupant may well still own a tuxedo.

Listening To Our Residents

mobile home park resident

I’m proud to live in Evergreen Village and to be a home owner of which I take much pride. I have found it very affordable and a place to call my own.

I feel safe and secure in our village. So many nice people and neighbors that are always ready to help if needed.

It’s so nice now to walk around the park and seeing it looks so nice and to see our park filling up with available homes and someone else will be able to call it home.

Happy to be living in Evergreen

-Laurene Leuth

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 more parks. City utilities preferred, but septic will be considered. Price range from $750,000 - $5.0 Million. 30+ Lot, flexible on location. Wholesalers and brokers, please send me your deals. Also, any investors looking to invest passively in MHCs, please contact me. We have few LP's slots available.
Member Name: Mike BothaPhone: 808-478-1479
Seeking to buy parks - Montana, Wyoming and Idaho We are seeking to acquire Mobile Home Parks in MT, WY and ID. Our target park size is 20-80 lots, with city water and sewer. We may consider other areas or opportunities. We are actively pursuing opportunities in these markets, and have the resources to make offers and acquire parks immediately. Please contact us if you own, or know of a park that meets this criteria in these areas. We are happy to work direct with sellers or brokers. Thank you Mike
Member Name: Jonathan CohenPhone: 516-523-6205
Anyone like or looking to buy in NY or the northeast?
Member Name: Ian FisherPhone: 646-431-8783
Hi - I'm an investor in the single family residential space with a $35MM rental portfolio, and would love to hear from MHP investors who are looking at deals and open to discuss potential joint venture opportunities. Ideal deal has significant value add and needs at least $1-2MM of equity. Equally, I am always on the hunt for attractive deals in other real estate sectors and would welcome anyone interested to reach out to learn more - I am currently offering a small top-off piece of equity in my single family rental portfolio.
Member Name: Lori GoodPhone: 619-933-1828
Distressed North Carolina park approximately 30 minutes north of Fayetteville. 28 spaces with 16 park owned homes that are in rough condition (rated F for rehab), 6 tenant owned homes, 6 vacant lots. Current rents are below market at $160. This park can be re-developed and bring in up to 125 spaces. The front 20 acres are all pine and owner would consider offers on this. Although it provides a nice cover area to maintain that country setting community feel. $234,000.00. Email: [email protected]
Member Name: Harrison HelmerPhone: 910-391-4993
Looking to purchase Mobile Home Park's in the Fayetteville,NC and the surrounding areas [email protected] [email protected]
Member Name: Major HillardPhone: 804-314-1788
Hello there. Six years ago I stopped investing in apartment complexes and completely invested my life/company to Mobile Home Park Investments. My wife quickly joined my efforts and now the MHP business has become the family business. Every property in our portfolio has been a value add park at purchase. Each property has more than doubled in market value and initial investment cashed out within 24 months. Currently we are expanding and in need to invest/work with new equity, passive, and active partners. Check out our website at MHESTATESLLC.com. Feel free to call at anytime. South East MHP Specialist (VA, NC, SC, GA, TN, AL, LA).
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 million , with about $1.8 million of debt or larger. Have about $930,000 cash as part of a 1031 exchange. Need to identify a replacement by Sept 25th, 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: Steven JuelkePhone: 970-308-5571
UNIQUE 10-15 CAP NICHE MARKET DISCOVERED !!! Hands on Contractor/investor seeking funding partner to take advantage of huge housing shortage in a high rent market ($1100-1300 for 2- bedrooms) where park owned homes are extremely profitable and used inventory is available!
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: Young KimPhone: 310-948-1256
We have a buyer who is looking to 1031 exchange in California, parks ranging from $2-5Mil purchase price. Looking for off market opportunity only. Happy to pay referral fee at closing. Time sensitive. Thank you
Member Name: Brian LamPhone: 415-816-0514
Looking to meet other investors in the space which may result in future partnering as deals arise. Our target is $1 - $3M parks in the Midwest on city utilities. We're interested in meeting like minded people who can deploy /partner at $100 - $500k increments.
Member Name: A. Baker MontgomeryPhone: 469-551-3851
My group is looking for parks up to 10MM in Texas, the Southwest and Midwest. Please feel free to contact me anytime, more than happy to pay finder's fee. Thanks
Member Name: Todd MulhollandPhone: 239-450-1523
Seeking a business partner with hands on mobile home rehab experience in FL preferably the Central FL area. I have a fairly good business model, financial backing and customers ready I just need a dependable partner with actual mobile home rehab and construction experience preferably in the Central FL area to start but I'm looking to take this program at least state wide. I will also entertain offers from independent contractors as well looking to work together to rehab homes. Please contact me if interested.
Member Name: Ferdinand NiemannPhone: 816-806-1849
We are experienced operators looking to buy parks with 50+ lots in MO/KS/IA/IL/NE, in metropolitan areas with at least 100,000 people. Public water and sewer preferred. We will pay referral fees or provide a minority ownership interest for a deal you have under control or solid leads for off market deals. We have significant equity available and can close quickly.
Member Name: Andy NissenPhone: 614-456-5391
- 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: 408-206-8998
We are willing to pay a commission or finder's fee for off-market deals. 40-150 spaces, more if part of a multi-park portfolio. We have capital and MHP operating experience. Please call me at 408.206.8998 or [email protected] www.genuitycap.com
Member Name: Joan ProbertPhone: 604-985-8788
I am a Canadian investor looking at parks in the in the following states: Arizona, Nevada, Washington, Oregon, Idaho, Montana. My business partner and I are heading out on a road trip at the end of October and are keen to meet other investors on the way. We'll also be looking for great recommendations on where to stay and what to discover. We're looking forward to meeting other MHU investors along the way! If you have some ideas please reach out to my business partner Liza Rogers as she's planning the route! [email protected] 250 532 1625
Member Name: Kenneth SwearengenPhone: 301-465-9110
I'm looking for a small (20-30 lots) MHP to purchase in PA, MD, DE, WV, or VA. I'm open to every type but anything with lagoons.
Member Name: Mike TrilloPhone: 425-246-4785
Attn MHP Owners: we are interested in buying several parks! Attn MHP owners with large portfolio: If you need to offload your smaller parks, please call me! Attn newbies who want to birddog or assign deals: I’ll pay you up to 5% referral fee on any deals you send my way! Attn Realtors: I have a very healthy incentive commission plan with any deals you send my way! I’ve got the cash to close the deal from $500k to $5M, 30-200 lots, within 40 miles of a growing metro area of 100k+, public or private utilities (WA, OR, ID, NV, UT, CO, WY, MT, ND, SD, NE, KS, MN, IA, MO, WI, IL, MI, IN, KY, OH, PA, VT, NH, MA). Please contact me (425-246-4785), [email protected] or visit us at www.GreaterCauseRealtyGroup.com. Looking forward to hearing from you! :)
Member Name: Cindy Tucker-DavisPhone: 970-987-7523
Thank you to everyone I spoke to regarding a manager position. I learned so much from you! If you are in need of a manager, let me know and we can talk. Thank you! Cindy
Member Name: Nick VrscakPhone: 919-880-4086
MHP Owners & Brokers I am interested in purchasing a Park in NC (1M-1.5M) preferably in the Raleigh Durham Metro. Park criteria is 50 – 100 spaces, paved roads, city water, city sewer. However I do know that there can be potential elsewhere so I am willing to consider other deals in other markets with a good economy. Please do not hesitate reaching out to me if you have anything. Nick Vrscak (919) 880-4086 [email protected]
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: Jason WilsonPhone: 661-978-9039
Looking to buy and manage our first mobile home park in East TN or northeast to south central TX. 30 - 100 sites with city water and sewer preferred. Willing to work with brokers or sellers. Purchase price 1.2 million or less. Open to updating or performing mild renovations.
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.

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