Mobile Home Park Investing Newsletter

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.

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.

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.

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).

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.

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.

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.

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.

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].

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.

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.

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.

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.

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.