Overview of Mobile Home Park Lenders

Agency Lenders

For 4 or 5 star parks there are Government Agencies – Fannie Mae or Freddie Mac can provide some of the most desirable loan terms. Notoriously picky: parks must have 50%+ double-wides, curbed streets, not more that 5% park owned homes, etc. and locations near major metro areas. Most parks don’t manage to qualify. Loans are nonrecourse and have yield maintenance prepay penalties but are assumable. Look for rates in the 3%s on 5 year and 4%s on 7 or 10 year fixed, 30 year amortization and 75% LTVs.

National Banks.

A handful of lenders are cautiously active about how and where and to whom they will lend: mostly in larger metro areas, 3+ star parks, limited tolerance to park owned homes, RVs, non-city services, etc. LTVs are 65-75%. Typical rates are 4.00% for 5 year fixed and 4.50% for 7 year fixed on 30 year amortizations. These types of lenders will mostly only do similar parks the Agency Lenders would, but with a bit more flexibility. A couple of national banks break the mold with super low rates and can be the best alternative if they can do the deal.

Regional and Local Portfolio Lenders (local banks- most MHP loans are done this way)

Service a few states or locally within a geographic area and will only lend to either or both properties and/or borrowers in their “footprint”. Loans are held and serviced by the lender. For greater US markets: 70% (usually) up to 75% LTVs, 20 to 25 year amortizations and usually 7 year maximum fixed rate periods at typical rates of 4.75%-5.00%. A few regional lenders offer lower rates of 3.80%, 5 year and 4.25%, 7 year fixed periods and 30 year amortizations. Full personal guarantees required and global income ratios evaluated and overall credit profile (680+ FICO) and net worth equal to or exceeding the loan amount with liquidity of 10% of loan amount and experience in RE investment is needed to qualify.

CMBS Lenders (for everything else)

Conduit loans are expensive – with $35k upfront deposits for 3rd party reports, legal and lender fees. But the fees are the industry standard costs of qualifying the loan for inclusion into the portfolio of mortgages that will be securitized and sold as bonds. What do you get in return? 75% LTV, 10 year fixed rates at about 4.50% currently (3/15/15) on 30 year amortizations. The loans are also nonrecourse. Underwriting is thorough but more liberal than Agency or Regional Lenders for operating structure. Loans can handle large portion of park owned homes (must have adequate lot rent income to support the loan), investor owned and homes sold on contract are not a problem. They can handle unusual ownership structures like co-ops and some condominium hybrids. They can loan most anywhere in the country to 2 star + parks with all single-wides and some RVs. The loans carry “defeasance” prepay penalties. Loan amount minimums are now down to $1.2Mil with our lender.

For a Confidential Review, Call or Email David Harley
(415) 250-5300 ● dharley@bluepointcm.com
BRE 01334092

BluePoint Commercial Mortgage ● 655 Redwood Hwy, Ste. 311, Mill Valley, CA 94941● www.bluepointcm.com

PRESS RELEASE: The Madison Group Facilitates a $1,095,000 Non-recourse Commercial Loan for a MHP in Channelview Texas

PRESS RELEASE: The Madison Group Facilitates a $1,095,000 Non-recourse Commercial Loan for a MHP in Channelview Texas
Feb 2015

The Madison Group, a commercial broker and loan consultant, has facilitated the financing for the purchase of an 84 pad manufactured home community in Channelview Texas, within the Houston MSA. The purchase was deemed a true value-add-potential for the buying entity. The park had shown reasonable income over the course of time, but was in need of updates and capital improvements. The Madison group was able to source a transaction that facilitated a nonrecourse loan to a tight knit group of investors.

The $1,095,000 loan was sized to 64% of the loan to value. The borrowers received aggressive terms of 4.38% with a 10 year term and 25 year amortization. The nonrecourse loan allowed them to have an entity be the borrower with no recourse to individuals in the LLC other than standard carve outs. In addition, future increased cash flows will allow the entity to increase their return on investment.

“All parties involved worked diligently to price and size a loan that made sense for the investors and the lender, said Director of Finance Jeff Meierhofer. “Sourcing the right lender from the beginning that understands the product type in the geography of the asset made for a timely closing.”

The financing was arranged by Jeff Meierhofer, Director of Finance at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including: multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States. Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital. TMG works efficiently and effectively to get the transaction closed and funded.

TMG and Jeff Meierhofer can be reached at 435-785-8350 or by emailing jeff.m@madisongroupfunding.com

ARA’s National Manufactured Housing Group Executes Sale of 798Site Valley Brook Estates FourStar Community Sits Minutes From Indianapolis International Airport

ARA’s National Manufactured Housing Group Executes Sale of 798-Site Valley Brook Estates
Four-Star Community Sits Minutes From Indianapolis International Airport

Indianapolis, IN (March 02, 2015) — Atlanta-headquartered ARA, the largest, full-service
investment advisory brokerage firm in the nation focusing exclusively on the multi-housing
industry, is pleased to announce the sale of Valley Brook Estates, a 798-site community
located in Indianapolis, IN.

ARA National Manufactured Housing Group’s Andrew Shih based in Austin, TX, Todd
Fletcher and Jon Shay, based in Denver, CO represented Southfield, MI based seller Sun
Communities in the transaction. The buyer in the transaction was Denver, CO based Casa
Feliz LLC.

“Just a few years ago, it was very difficult to find financing for communities like Valley Brook due to its
lower occupancy; however, today it qualifies. With over 60 conduit shops in the market looking to
finance manufactured home communities, the terms are very attractive.” said Todd Fletcher. “We are
seeing owners around the country looking to shed non-core assets and buyers coming in with fresh
equity, conduit money and new business plans,” added Todd Fletcher.

“Although there were 146 community owned homes included in this transaction, almost all of them were
occupied with quality tenants,” said Shih. “We think the buyer will be very successful in improving
performance as they plan to add homes to the community to increase occupancy,” he added.

Constructed from 1973 to 1998 in phases, this mobile home community is located just 13 minutes south
from the recently developed Indianapolis International Airport and just 15 minutes from downtown
Indianapolis, the state capital of Indiana and 13th-largest US city with a population in the MSA of nearly
1.8 million. Several large companies are headquartered in Indianapolis including Eli Lilly, Brightpoint,
Wellpoint, Marsh Supermarkets, Finish Line and hhgregg. The unemployment rate in Indianapolis for
October 2014 was 5.0%, well below the national average of 5.7%.

Valley Brook features an outstanding amenity package including a clubhouse, two swimming pools, two
basketball courts, two playgrounds and RV storage. Public bus transport sits a short fiveminute
walk from the property and will take passengers directly to downtown shopping and entertainment with no
transfers. The local elementary, middle and high schools are all within walking distance of the property.

Occupancy at the time of sale was around 52%.

To schedule an interview with an ARA executive regarding this transaction or for more information
about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com , 404.990.4900 or Amy
Morris at amorris@ARAusa.com , 404.990.4902; locally, Eva Coffee at ecoffee@ARAusa.com
or 512.637.1216.

ARA’s National Manufactured Housing Group Executes Sale of Western Reserve MHC

ARA’s National Manufactured Housing Group Executes Sale of Western Reserve MHC
Buyer Acquires a 152SiteFamily Community in Madison, OH

Madison, OH (February 09, 2015) — Atlanta headquartered ARA, the largest full service investment advisory brokerage firm in the nation focusing exclusively on the multi housing industry, is pleased to announce the sale of the 152 site Western Reserve Manufactured Home Community in Madison, Ohio.

ARA National Manufactured Housing Group’s Andrew Shih based in Austin, Texas, and Todd Fletcher
and Jon Shay based in Denver, Colorado, represented the deceased Owner’s Trust in the transaction. The
buyer was a private investor from San Diego, who has been building a small portfolio of manufactured
housing communities primarily throughout the Midwest.

“Unfortunately, our seller passed away during the marketing of the property,” said Shih. “He was a
longtime owner but the property needed some work and a new capital infusion will greatly help the
property operations,” commented Fletcher.

Western Reserve is conveniently located just steps away from the shores of Lake Erie in Madison, Ohio,
which has a population of over 3,000. This community is located within the Madison Local School District, which received the “Excellent Rating” by the State of Ohio’s Board of Education. This sizable
community is also in close proximity to several retail and entertainment destinations including the
Madison Plaza Shopping Center, which is home to Great Lakes Outdoor Supply, Walgreens, Rite Aid,
Sports & Sports, Giant Eagle and Radio Shack, along with several other restaurants.

The city of Madison is conveniently situated off major thoroughfare Interstate 90, which leads to
Cleveland, 45 miles to the southwest and Ashtabula, Ohio, 16 miles to the northeast. Cleveland is also
home to the corporate headquarters of companies such as Applied Industrial Technologies, Cliffs
Natural Resources, Eaton NACCO Industries, Sherwin Williams, and KeyCorp.

To schedule an interview with an ARA executive regarding this transaction or for more information
about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy
Morris at amorris@ARAusa.com , 404.990.4902; locally, Eva Coffee, at ecoffee@ARAusa.com ,
512.637.1216.

ARA’s National Manufactured Housing Group Executes Sale of 25-Site Fran Kirk Mobile Home
Park

Well Maintained Community Located Just Over a Mile Outside Tulsa, OK

Broken Arrow, OK (February 09, 2015) — Atlanta-headquartered ARA, the largest privately held,
full-service investment advisory brokerage firm in the nation focusing exclusively on the multi-housing
industry, is pleased to announce the sale of the 25-site Fran Kirk Mobile Home Park, located in Broken
Arrow, Oklahoma.

ARA National Manufactured Housing Group’s Jon Shay and Todd Fletcher based in Denver, Colorado
and Andrew Shih based in Austin, Texas, represented the Broken Arrow, Oklahoma based Trust that
sold the community. The buyer in the transaction was Park Street Partners from Southern California.

“Park Street Partners was buying in the area so they were a natural fit for Frank Kirk,” commented Todd
Fletcher. “In spite of several bumps along the way, both buyer and seller came together to make sure this deal made it over the goal line,” Jon Shay said.

Constructed in 1962, this mobile home community holds 25 mobile home sites as well as 1 single family
home structure and features an attractive, well-manicured,low density landscape. Fran Kirk Mobile
Home Park is 1.5 miles outside of Tulsa, Oklahoma, which was ranked the 14th fastest growing MSA in
the country regarding 2011 per capita personal income. The Fiscal Times in 2011 ranked Tulsa the
fourth best city in the country to find a job, and in 2012 data from the Bureau of Labor Statistics ranked Tulsa eighth among the largest U.S. cities for growth in manufacturing jobs. Due to bolstering job growth reports in the area, many high profile businesses have recently announced plans to locate in the Tulsa region including Macy’s, Verizon, Mid-states Petroleum and Garmin International.

Fran Kirk Mobile Home Park is located within walking distance to Broken Arrow High School, the only
high school in Broken Arrow to receive an A+ rating on the Oklahoma State Department of Education
Accountability Report.

To schedule an interview with an ARA executive regarding this transaction or for more information
about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy
Morris at amorris@ARAusa.com , 404.990.4902; locally, Eva Coffee, at ecoffee@ARAusa.com or
512.637.1216.

About ARA
Atlanta-headquartered
ARA is the largest privately held, full-service
investment advisory firm in the
nation that focuses exclusively on the brokerage, financing and capital sourcing of multi-housing
properties including conventional, affordable, distressed assets, notes sales, seniors, student &
manufactured housing and multi-housing land. ARA is comprised of the country’s top investment
professionals who leverage a unique and fully integrated cooperative business platform of shared
information, relationships and technology driven solutions. ARA’s unified enterprise approach ensures
that clients are delivered the broadest asset exposure, effective matching of buyers and sellers, and the
shortest transaction timeframes in the industry. The combination of resources, unparalleled market
expertise and nationwide presence in the multi-housing marketplace has resulted in an annual production
volume of more than $10.2 billion in real estate transactions in 2013. For detailed information on
ARA’s extensive multi-housing investment services, visit www.arausa.com .

Mobile Home Park Investing Tips – 21 to 24

Our Weekly Mobile Home Park Investing Tips.  Along with comments from investors.  Enjoy!

 

Mobile Home Park Tip #21

Keeping in Contact with your Manager:

I have to admit that I have made some mistakes in the past with communicating with my onsite management. For the most part, I let the managers run the park and assumed that if I did not hear from them, everything must be going well.

This approach has come back to bite me a couple of times and I have since resolved to have myself or someone in my office talk with the manager at least once per week. I have adopted the following strategy and it appears to be working.

Each week, I have the manager write down any problems or issues in the park, and then fax them or email them to me every Monday morning. This is working great so far and now I have a paper trail of everything important that is going on in the park.

Then on Thursday or Friday of every week, we call the manager just to see how things are going. The managers like to know that we are thinking about them and appreciate these calls. In the past, I had some managers that we talked to only once per month when there was a problem. It is much nicer to talk to them now and find out that there are no major problems.

 

Mobile Home Park Tip #22

Types of Mobile Home Parks to Consider:

When deciding on purchasing a mobile home park, you can basically look at four different types:

Building a New Park:  This is starting from scratch and will take time, money, and patience.  This is usually the riskiest and drawn out option but can be potentially a great opportunity.

Buying a Stable Park:  These parks usually have low vacancy, are operating smoothly and have rents at or near market.  You are buying a cash flow that should increase as rates increase over time.  You will pay a premium price for this type of park.

Buying a Park that is mainly filled up but is not running efficiently.  In these types of parks you want to buy them based on the current income and expenses and then increase the value through such things as raising rents to market, collecting rents, sub-metering utilities.  This is the type of park that I am on the lookout for.

Buying a Turnaround Park:  In addition to increasing rents and reducing expenses this is the type of park that is either half vacant and needs rent to own homes or the type of park that the owner has forgot about and is run down.  This type of investment usually has the best potential to increase in value for existing parks but will take the most time, money, and efforts.  Make sure that the extra time and efforts will be worth it.   Turnaround parks are often better deals as the owner may have lost interest or is having financial difficulties.  The opposite is true of the stable parks.

 

Mobile Home Park Tip #23

When looking for a park, you can basically choose:

Large Metro Areas:  There is usually more competition here from investors but they are generally regarded to have greater stability and less market fluctuation.

Small Cities & Rural Parks: There is generally less competition here from investors and you will usually be able to buy the parks with a higher cap rate.  These parks will typically have a larger risk due to dependency on one or two major employers.  However, in the right cities and markets these will often represent great investments.

Adult & Senior Parks:  These are usually more desirable as your tenant base willl have greater stability and tend to care for their homes and lots better and pay their rents on time.  However, many of the residents in these parks will have a lot of time on their hands and require more amenities and offer more resistance to rent increases.

Most REIT’s (Real Estate Investment Trusts) and larger mobile home park investors are looking to purchase parks that are in the 150+ site range so the competition and pricing is generally higher for these larger communities.  I would suggest you focus on the parks that are in the 25 to 150 space range.  Lower than 25 spaces if you live nearby and are able to manage the park yourself.

Any size of park can be run efficiently and profitably.  Some 10 space parks are easier to run from a distance without a manager than one that is 100 spaces with a full time manager.  There are many factors.  Some parks require weekly visits, monthly, yearly, or whenever you are bored.

When deciding what type of park to buy, you need to decide on your investment goals, evaluate the amount of time you have, talk to others in the business about the time requirements for your potential purchase and then begin your search for parks that will fit with those goals.  Make sure your goals are reasonable.  It is not likely your are going to buy a 100 space park in a good market operating well for a 15 cap and it is not likely you will find a park operating well in a good market that will be purchased for no money down, etc.

 

Mobile Home Park Tip #24

The Double-Wide Two Step:

What to expect when one half of a multi-section home is destroyed.
By Kurt Kelley of Mobile Insurance in Texas

When one section of a manufactured home is destroyed, the question becomes -”What is the extent of this loss? Half the home or the whole home?” The destruction of one-half of a multi-section home can be more traumatic to the home’s owner than the destruction of the whole thing.

Today, in most circumstances, manufacturers refuse to build a replacement section. Manufacturers report that if they rebuild one section of the home it will not match the remaining section(s) like it would have if built at the same time. Carpet colors, paints, etc. can vary slightly and create product quality and image concerns. Furthermore, sections may not match-up at the marriage line accurately.  Nevertheless, the retailers that own a home which has had one section destroyed, and their respective insurance companies, only want to pay to replace half the home, not the whole thing. To make things more interesting, many manufactured home physical damage policies only offer to pay for the physical damage to the home.

Thus, if an insurance company pays to replace a destroyed section, the insurance company may have technically satisfied its policy obligations, whether or not the home owner can actually replace just one section of the home. This leaves the home’s owner with a large uninsured loss. In the battles over the years between insurance companies and manufacturers on whether to build a replacement section to home, both have prevailed.

To protect yourself from a large uninsured loss, make sure your insurance policy has specific language in it stating that if one section of a home cannot be rebuilt, then the home will be considered a total loss.

Furthermore, you should demand that all hired transporters carry a “cargo insurance policy” that includes a “pair and set” or “multi-section” clause.  If you do these things, you may not limit your time on the dance floor doing the double-wide two-step, but at least you know you will have a chair when the music stops.

(For a copy of a model Transporter/Installer agreement, visit www.MobileAgency.com  and go to the forms section).

Contact Kurt at 281-367-9266 or email Kurt@mobileagency.com

 

By Dave Reynolds and Frank Rolfe

Dave Reynolds and Frank Rolfe are mobile home park investors and together own and operate over 100 parks. Frank also leads regular Mobile Home Park Investing Bootcamps through www.MobileHomeUniversity.com.

 

The Madison Group Facilitates a $1,650,000 Non-recourse Commercial Loan for a MHP in Huntsville Alabama

The Madison Group, a commercial broker and loan consultant, has facilitated the financing for a 173 pad Class C manufactured home community in Huntsville Alabama.  The park was only 72% occupied at the time of origination. The $1,650,000 loan was sized to 75% of the stabilized value so that additional lease up could occur. The borrower received cash out loan to pay down current park models, thereby, increasing cash flow.

TMG facilitated a non-recourse cash out loan at 70% loan to value with a fixed rate of 5% with a 10 year term and 20 year amortization. The nonrecourse loan allowed them to have an entity be the borrower with no recourse to individuals in the LLC other than standard carve outs.  In addition, to increase cash flows, the borrower was able to pay off previous money put into the community for park model units.

This MHP has both pad rental and multiple units that are owned by the park and rented to tenants. This was a challenge for previous lenders, but TMG was able to find a lender to meet the needs of the borrower.

“There were multiple moving parts on this transaction which had caused previous lenders issues, said Director of Finance Jeff Meierhofer. TMG’s team was able to work at a high level to verify income from all sources in the park.   Our staff also worked to mitigate some survey issues and income from park owned units, thereby facilitating a smooth funding.”

The financing was arranged by Jeff Meierhofer, Director of Finance at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including:  multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States.  Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital.  TMG works efficiently and effectively to get the transaction closed and funded.

TMG and Jeff Meierhofer can be reached at 435-785-8350 or by emailing jeff.m@madisongroupfunding.com.

The Madison Group facilitated the $3,100,000 cash out loan on a MHP/RV Park in Mesa Arizona.

The Madison Group, a commercial broker and loan consultant, has facilitated the financing for a MHP/RV Park in Mesa Arizona. The borrower secured a nonrecourse loan with a 10 year term and 30 year amortization.  The loan was fixed at 4.5%.  In addition, they received some cash out. The borrowing entity was a group of investors, so the nonrecourse nature of the loan was important.

Nearly 40% the income is derived from combination of seasonal and annual RV rental. This created extra challenges to be able to prove income for overall debt service coverage. TMG processing team worked closely with the park manager to be able to break out the income in a way that would satisfy the underwriter. This took a good deal of time and effort, but ultimately the borrowing entity got a loan to fit their needs. The previous loan had a prepay that opened up on December 1, 2014.   Everyone involved was determined to fund on that date. The loan funded on time, meeting the clients timing.

“We like MHP and RV financing, even though they have some inherent challenges in proving income,” said Jeff Meierhofer of The Madison Group, who originated the financing.  “The borrower’s needs were to secure a 10 year term so they would not have to redo the loan in a few years.  Getting a nonrecourse loan done in a timely fashion required our experienced staff to work closely with all parties.”

The financing was arranged by Jeff Meierhofer, Director of Finance at The Madison Group.

The Madison Group (www.madisongroupfunding.com) is a commercial loan broker and consultant specializing in financing for investor properties nationwide. TMG provides flexible and reliable capital for real estate acquisitions, refinances, and re-capitalizations for a variety of property types including:  multifamily, mobile home parks, credit tenant NNN net lease, office, retail, industrial, self-storage and other commercial properties in the United States.  Established in 2001, The Madison Group’s intention is to provide highly competitive loan products through its superior capital market expertise and quality sources of capital.  TMG works efficiently and effectively to get the transaction closed and funded.

The Madison Group and Jeff Meierhofer can be reached at 435-785-8350 or by emailing Jeff at jeff.m@madisongroupfunding.com.

ARA’s National Manufactured Housing Group Executes Sale of View Vista Village in Montana

First Time Buyer Acquires All Age Community in Livingston, Montana

Livingston, Montana (November 17, 2014) — Atlanta-headquartered ARA, the largest privately held, full-service investment advisory brokerage firm in the nation focusing exclusively on the multihousing industry, is pleased to announce the sale of View Vista Village in Livingston, Montana. The community has 46 manufactured home sites and 30 apartment units.

ARA National Manufactured Housing Group’s Andrew Shih (based in Austin, TX), Todd Fletcher and Jon Shay (based in Denver, CO), represented the Seller, a private owner based in Colorado. The purchaser was a first time private buyer based in Montana that plans to continue having View Vista Village provide an attractive affordable housing option for the area.

“There was significant interest from in and out of state investors,” said Fletcher. “Since our platform brings both to the table, we were able to provide our client with some options,” added Fletcher.

“With our group’s combined experience brokering over $1B in deals, we were able to use that know-how of vetting investors to get comfortable with this first time buyer,” said Shih. “We also paid the Buyer’s broker, which was in our client’s best interest and helped him achieve his goal of selling this community to the best buyer.”

 

The apartment component was originally constructed in 1925 and the manufactured home community was added later. The property is an all age community with public utilities. The tenants of View Vista Village enjoy beautiful views as Livingston sits next to the Yellowstone River and is surrounded by three mountain ranges: the Crazy, Absaroka and Bridger mountains.

 

View Vista Village is conveniently located within walking distance of downtown Livingston, Montana, which is a more affordable place to live than nearby Bozeman, and is only an hour away from Yellowstone National park – home to Yellowstone Lake, the Old Faithful Geyser and the Yellowstone Caldera. Montana is known for its world class hunting and fly fishing; local businesses in Livingston lead guided elk and deer hunting trips, and the Yellowstone River, popular for its fly fishing, runs right through the center of town. Downtown Livingston offers entertainment and small town charm with many local cafes, restaurants and bars, and a growing art community. Accessing these amenities is easy, as the town’s infrastructure is bike and pedestrian friendly. In addition, the community is within walking distance of the local schools, two parks and the Livingston Golf Club. The unemployment rate in Montana is significantly lower than the national rate and is trending down. Major employers in the area include Livingston Healthcare, employing 250-499 people, Albertsons, employing 50-99 and the Livingston Enterprise, employing 20-49 – all of which are within ten minutes of the community.

To schedule an interview with an ARA executive or for more information about ARA, nationally please contact Lisa Robinson at lrobinson@ARAusa.com, 404.990.4900 or Amy Morris at amorris@ARAusa.com, 404.990.4902; locally, Allison Blount at ablount@arausa.com, 512.637.1229.

 

 

Why Mobile Home Parks Are Wowing Wall Street

It comes as no secret that mobile home parks are finally receiving the type of respect they deserved years ago. Because of the ridiculous stereotype that the media created for “trailer park” residents, many professional investors avoided the asset class altogether. Recently, however, even the largest private equity group in the U.S. – the Carlyle Group – has started to invest in mobile home parks. Few people realize that Warren Buffet is now the largest owner of mobile home manufacturing and financing, and that Sam Zell is the largest owner of mobile home parks. So why is Wall Street so impressed with the mobile home park business?

Steady Revenue

The word “mobile” in “mobile home” could not be farther from the truth. The actual statistic is that 98% of mobile homes never move from the spot that they are originally delivered. And how could they? It costs around $5,000 to move a mobile home (in some cases, more than they cost) and it is a risky business, in which there is no guarantee that the home can make the trip in one piece. As a result, the mobile home park occupancy never varies.

Recession Resistance

Mobile home parks focus on the lowest earning demographic group in the U.S. – those that earn from minimum wage to around $15 per hour. 60% of all new jobs created in the U.S. since the “Great Depression” of 2007 began are minimum wage. Affordable housing gets even more in demand during times of economic hardship. It’s the same concept that is propelling Dollar Tree and Dollar General past their rivals.

Ability to Push Rents Aggressively

Mobile home parks are the least expensive form of housing in the U.S. As a result, there is always room to push rents higher, as even a 100% increase in most markets maintains the status of being cheap. The average apartment rent in the U.S. is $1,030 per month. The average mobile home park lot rent is $250. Need I say more?

Low Operating Expense Ratio

Mobile home parks have an enviable expense ratio that runs typically 30% to 40% of gross. This is the lowest of all real estate sectors. One key driver to this is that mobile home parks are all about renting land, and land does not require any repair & maintenance, or expensive capital upgrades. There are no toilets to fix or roofs to replace with mobile home parks.

No Future Supply Competition

While you can develop a new apartment complex, retail center or self-storage facility virtually anywhere, there’s not a city in the U.S. that allows new mobile home park development, except in rare cases. Why? Nobody wants a mobile home park going up next to their house or business. That’s one benefit of the “stigma” that mobile home parks have been saddled with – the destruction of future competition. With supply and demand, having no future new supply always makes values high and rising.

Incredible Yields

The number one attraction for Wall Street investors to mobile home parks is simple: money. Mobile home parks have the highest returns of any form of real estate. Why is this? Probably because there are more sellers than buyers thanks to decades of the “stigma” scaring off widespread investor interest. Another reason is that most mom & pop owners are extremely unsophisticated and don’t know what the real value of their mobile home parks are. It is not uncommon to buy parks at 10% cap rates and cash-on-cash yields of 20%+.

Conclusion

Nothing has much changed in the mobile home park industry over the past 50 years. That is, except for the perception of the industry. Wall Street is suddenly waking up to the amazing advantages of investing in mobile home parks, and the rest of America cannot be far behind. If you’ve thought about buying a mobile home park in the past, you better hurry while prices are still low.

 

By Frank Rolfe

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 10th largest community owner in the United States, with more than 13,000 lots in 20 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. To learn more about Frank’s views on the manufactured home community industry visit www.MobileHomeUniversity.com.