The Importance of Population Size in Market Selection By Dave Reynolds

One of the most important elements of any manufactured home community is location. On the micro level that includes the surrounding neighborhood and such items as the proximity to schools and shopping. But on a macro scale, one of the most important components is the physical size of the metro market. Selecting the right metro market is an essential step in ensuring that your manufactured home community acquisition is a success.

Understanding how a “metropolitan statistical area” is derived

Webster’s defines a metropolitan area as “a region consisting of a densely populated urban core and its less-populated
surrounding territories, sharing industry, infrastructure, and housing”. However, these areas are not subject to speculation.
MSAs are defined by the Office of Management and Budget (OMB) of the U.S. Government and used by the Census Bureau and other federal government agencies for statistical purposes. Since you have no input in what the metro area of a property is, you must make sure that you get the correct information. One of the best sources of the metro area for any zip code is www.bestplaces.net.

Making sense of how a large metro differs from a smaller metro

In my 20+ years of experience in this industry – buying and selling over 300 properties – I have learned that there is
relatively little performance difference in a metro area of 100,000 and a metro of 1,000,000+. If you look at the map of
any large metro, you will see that it is basically formed from abutting smaller metros. Dallas, for example, hits a metro
population of over 7,000,000 by adding in many cities of 100,000 or so, such as Grand Prairie, Arlington, Plano, Allen,
etc. Basically, once you exceed 100,000 in metro population, it’s overkill. In a metro of 100,000 or so, you will have a very
strong Chamber of Commerce, a very capable City Hall, solid infrastructure with reliable water and sewer, a dependable
school district, every big box retailer and franchise, and a diverse blend of employers – everything you need for a successful acquisition.

Housing dynamics and employment sectors are more important than sheer size

I would much prefer a smaller metro with a median home price of $160,000 and an average three-bedroom apartment rent of $1,200 per month to a much larger metro with half those housing stats. Since we are all in the affordable housing business, you have to have high prices to even need affordable housing. High housing prices makes your phone ring off the hook and customer retention rates extremely favorable. Another key driver is the construction of the economy. We have found that the most important employment sectors in any metro area are 1) education 2) healthcare and 3)government. Markets that have high levels of these types of employment are what we call “recession-resistant” since you can’t really make staff reductions in these sectors regardless of the direction of the national economy. For example, we have a high level of holdings in Champaign-Urbana, Illinois. Even when the U.S. hit the Great Recession in 2007, this market had low unemployment thanks to the fact that it’s the home of the giant University of Illinois, as well as related healthcare centers. While Champaign-Urbana is not a giant
metro – 238,984 in total metro population – I would stack it up against any metro ten times larger in terms of a successful market for manufactured housing.

An example of a small metro being more desirable than a large one

Let’s look at two different metro areas: Durango, Colorado and Jackson, Mississippi. Durango has a metro population of 54,688, and Jackson has a metro of 578,777 – over ten times larger. Durango has a median home price of $341,200, a three-bedroom apartment rent of $1,453 per month, and an unemployment rate of 3.6%. Meanwhile, Jackson has a median home price of $131,700, a three-bedroom apartment rent of $1,029, and an unemployment rate of 5.8%. Despite the fact that Jackson is the State Capital of Mississippi, I would still choose Durango any day over Jackson. The moral is that size isn’t everything when it comes to successful metro areas to buy manufactured home communities in. It’s one piece of the puzzle – an important one for sure – but by no means the sole ingredient to success.

Conclusion

Understanding metro areas is an important part of any manufactured home community buyer’s arsenal of analytics. It’s very hard to do well unless you can select good metro areas that can deliver the type of environments in whichmanufactured home communities flourish.

Dave Reynolds has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. He is also the founder of the largest listing site for manufactured home communities, MobileHomeParkStore.com. To learn more about Dave’s views on the manufactured home community industry visit www.MobileHomeUniversity.com. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

Why the Clayton “Have It Made” Advertisement is an Industry Game Changer By Frank Rolfe

I keep watching the new Clayton “Have It Made” ad over and over, because I feel like I’m watching the first volley in the
manufactured housing revolution. In case you haven’t seen it on college football, here it is (link to ad). It’s one of the most
powerful one-minute public relations pieces that the industry could possibly hope for. And I believe that our sector will never
be the same, if it can follow up on many of the concepts offered in the ad.

Smart word choice

I used to be criticized all the time for using “mobile home” in my articles, as everyone would like you to use “manufactured home” as the official label, despite the fact that it is a total disaster based on Google analytics. A better option than “manufactured home” has always been the simple word “home”. I’ve been writing articles on that fact for several years, as I’ve never understood how adding the word “manufactured” helps in any regard. If you are not seeking Google analytics, then “home” has as much pull as “manufactured home” but without any stigma. Clayton obviously thinks the same, as the advertisement does not – even one time — use the word “manufactured” but simply “home”. They even avoided the “manufactured” label when showing the assembly line, opting instead to say “built indoors” and “built to order”. Does that mean that the word “manufactured” is going the way of the buffalo? I certainly hope so, for the sake of the industry. While “mobile home” is still required to get your property to pull up on a Google search by a customer, for all other occasions the best wording to describe our product is simply “home” and Clayton nailed that.

Powerful indirect persuasion

There are two ways to try to convince someone of your position:

1) direct persuasion and 2) indirect persuasion. Direct persuasion is when you say “my product is the best and here’s why”. Indirect persuasion is when you tell a story and the moral of the story is“and that’s why my product is the best”. For too many decades, the industry has stuck with direct persuasion, and it’s been a total failure. Studies have shown that you can only do indirect persuasion when trying to convince a hostile audience. And let’s face it folks, we do not have a great image with the average American. After watching endless episodes of Trailer Park Boys, COPS, Myrtle Manor and Eminem’s film 8-Mile, the average U.S. consumer has a negative stigma against the industry from day one. Up until this ad from Clayton, the industry has focused on telling this already hostile audience “hey, we’re the best” and they ignored the message before it began. But by using indirect persuasion, the average American is drawn into the story because they don’t know where it’s heading, and that gives them the ability to be persuaded. I’m betting that a huge percentage of viewers Googled up more information on Clayton products and pricing immediately following the commercial.

Embracing history

I love the fact that the commercial proudly embraces the history of the industry. I’ve never understood why some people are so afraid to talk about the past. I think one of our strengths is that Elvis lived in our product in two movies (“It Happened at the World’s Fair” and “Speedway”), that Lucille Ball and Desi Arnaz lived in the “Long, Long Trailer”, and that Frank Lloyd Wright designed his own model. I hate it when people declare “it’s not a trailer” because it all ties together in a historical perspective, and that’s like somebody refusing to acknowledge their heritage – and a proud heritage at that. The advertisement also is based on a historically interesting marketing format, with the same structure as the classic “they all laughed when I sat down at the piano… but when I started to play” which was one of the most effective headlines in U.S. history, used by the U.S. School of Music in 1926. You’ll find it in most marketing textbooks under the section “the most effective headlines of all time”.

Professionalism

From the casting to the cinematography, and from the copywriting to the editing, this advertisement has one key feature: “class”. It is a terrific and strong statement on the state of the industry, and the fact that most people don’t have a
clue of what our product is all about. Of course, you wouldn’t expect any less from Clayton, who has already dominated the
Louisville and Tunica shows with the best merchandising and marketing in the industry. But even then, this advertisement, in
my opinion, is the best marketing piece they have ever created – and that’s saying a lot. Let’s see if the rest of us can keep up their standard in our own marketing with the American public.

Conclusion

I love the Clayton ad. I am excited to see if this is truly the industry image revolution I’ve been hoping for. If you like it, too, then let them know. Email Clayton Homes and say ‘great ad- thanks a lot’. Let’s keep the momentum going by supporting those who take risks and bring forth game changers that support our great industry

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 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. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

How To Create A Sense Of Community: Ideas From Tony Hsieh’s Airstream Village By Frank Rolfe

I was recently given a private tour of Tony Hsieh’s Airstream Village in Las Vegas, Nevada, and was impressed with
the dedication to the concept of creating a sense of community among all residents. There’s a lot to be learned
for all manufactured home community owners by the unique initiatives that Hsieh is embarking on with this property.

Background on Airstream Village

Just down the street from Airstream Village is the high-rise condominium building that Tony Hseih lived in when he
hatched the idea to create a utopian community of Airstream trailers and tiny homes. He owned a vacant manufactured
home community as part of his nearly $350 million investment in land and buildings near Freemont Street in downtown Las
Vegas, and that was to be his canvas. There are about 30 units in Airstream Village, one of which houses Tony Hsieh, who
is the founder of Zappos.com and on the cusp of being a billionaire thanks to the sale of the company to Amazon.

The importance of building “community”

A Time magazine article titled “The Home of the Future” raved about the fact that manufactured home communities are like
“gated communities for the less affluent”. While Tony himself is a huge exception to that rule, the property is dedicated
to this concept of “community” – and that might prove to be the greatest amenity that our industry provides. A property
with “community” will attract and retain residents that seek a support network and sense of family. And it’s important to
note that you can’t just buy such a great amenity – you have to build it from scratch.

Creative structure of common areas

One of the first things you notice about Airstream Village is its unique look. After entering the gate, you are in a tunnel made
of arching tree branches that are strung with white Christmas lights. This dead-ends into the central congregation area
which features a prominent stage, fire pit, and a large amount of seating. There is an outdoor ping-pong table and outdoor
billiards table. And immediately behind this area – flaking the fence line – are metal storage container buildings that
feature a laundry area and business center. The trailers and tiny homes are clustered together on a fully paved parking lot,
with the common area sitting on astro-turf. There is no parking inside the fence and gate – all parking is in a central parking
lot next door.

Goal of total participation
Tony Hsieh’s goal is that all residents socialize at all times except to sleep. The trailers and tiny homes are seen
as simply bedrooms, and the living area is this central congregation point. He has tried to jumpstart this concept
of total commitment to community integration by providing something for every possible interest in his common areas.
You can sit by the fire, enjoy a nightly concert, write and print a report in the business center, do your laundry, play table
tennis or pool, eat, and converse. It’s very reminiscent of an upscale RV park with an edgy beat – and you can imagine that
most every resident would have no problem spending their weekends and evenings in this format. It’s also interesting to
note that Airstream is not only about adults, as there are four children that live there, as well.

Coop of skills

One interesting feature of Airstream Village is the requirement that all residents contribute a skill to the greater community, as well as pay rent. These skills range from gardening to painting to playing music – even smoking meat. With a collection of
30 skills, the general community is able to provide some real creative and interesting options that forge even moreenjoyment for all residents. One resident, for example, is in charge of all community cookouts. Another organizes the acts
for the stage. Then there’s the resident that paints murals and signs announcing upcoming events. There’s even a resident
that takes care of the property’s mascot – Tony’s pet alpaca which roams freely at all times.

Leading the charge on making manufactured home communities chic again

You can easily see how this type of living arrangement would be very attractive to millennials and others who would be happy
with living smaller and more active. That’s the very power that attracted Tony to leave his large penthouse condo behind and
exchange it for a small Airstream. And if a near-billionaire can elect to live in a manufactured home community, then it’s a
great advertisement for a new chapter in the industry in which our product becomes chic again. The industry had Elvis in the
1960s, when he lived in a mobile home park in the film “It Happened at the World’s Fair”, and now it has Tony Hsieh.

And he’s still learning and adapting

Airstream Village – as cool and creative as it is – is about to move across the street. Tony Hsieh has purchased Ferguson’s
Motel, a simply two-story, abandoned motel with tile roof and brick walls. The plan is to introduce this structure into in
the common area, offering air conditioned, indoor spaces and perhaps even some retail and restaurant venues. It’s important to note that the current Airstream Village has no indoor venues, and with 115 degree summers it seems that may be one lesson learned. There will also be more room for creativity, as the new property is roughly twice as large. And that’s a canvas that Tony will surely do a masterful job with. He’s already purchased a sculpture for the entrance, a giantmetal one that came from the famous Burning Man event.

Conclusion

One of the hottest topics in the industry going forward is how to create a stronger sense of community, and harness that as
the largest amenity in every manufactured home community. Tony Hsieh’s Airstream Village is a great role model for this very important quest. Many of the ideas he’s creating can be adapted to most every property and the result will be a happier and more loyal resident base.

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 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. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

WHY WE LOVE INVESTING IN COLLEGE TOWNS by Dave Reynolds

Many people get excited about college football. We get excited about college-town manufactured home
communities. These properties display unique characteristics that provide greater stability and investment quality
than virtually any other attribute. Warren Buffett owns only one commercial real estate property: a strip center
across from NYU. He has said many times that the main reason he bought it was that college towns have
superior real estate performance. So why do we love investing in college towns so much?

Recession-Resistant Economies

If you look at the unemployment rate and general economic condition of college towns following the 2007 Great
Recession – when U.S. unemployment rose to around 10% — you’ll find that most college towns had around half
the national average. How did they do so well? It’s because colleges are not really affected by economic cycles.
Most parents are going to send their kids to college regardless of whether or not the stock market is booming or
collapsing. And there are plenty of student loan programs in case parents are struggling. Meanwhile, students
are subsidized from home so it isn’t a necessity to spend money – they are insulated from the real world and so
are those businesses that cater to them. In our opinion, there are three main employment drivers to a recessionresistant
market: 1) education 2) healthcare and 3) government (federal, state, county and city). And if we could
pick just one, it would be education, as colleges are catalysts for economic vitality.

Create Employment by Association

Colleges provide well-trained labor for some specialty industries. Many high-tech companies are located in close
proximity to major colleges with superior computer and engineering departments (such as Stanford and Google
as well as Hewlett Packard). Similarly, many healthcare concerns are located next to colleges to take advantage
of trained medical students (such as Barnes Hospital and Washington University in St. Louis). Equally important
is that many of these industries are high-growth and represent cutting edge technology, which has the power to
potentially shape an entire region (such as Silicon Valley). College towns are basically strong job creators that
are extremely prolific.

Stable Housing Markets

College towns are strong economic engines; therefore, housing prices are extremely stable and typically high.
Elevated median home prices and apartment rents create a strong need for affordable housing, making the
mobile home park one of the few solutions. Additionally, college towns are typically upscale, which creates a
living environment that offers superior public schools and other attributes that make people want to live in the
area, even if they work elsewhere in the metro. University Park, Texas – where Southern Methodist University is
located – has a median home price of $1,427,000. For those who think that’s the most extreme example in the
U.S., you will find that the median home price in Palo Alto, California (where Stanford is located) is $2,562,600.

GI Bill Legacy

At the end of World War II, the U.S. government offered returning soldiers the “G.I. Bill” which
essentially provided college at low or no cost. As a result, the government relocated the roughly
500,000 mobile homes they had purchased during the war (and used for base housing) to college
campuses nationwide. Mobile home parks became common fixtures that, over time, transitioned
from G.I. Bill to simple affordable housing. Virtually every college town in the U.S. has a selection
of mobile home parks, many of which have all the right features as far as city utilities, paved roads
large lots and strong locations are concerned.

Examples
We are the largest owner of mobile home communities in Champaign-Urbana, Illinois. We have a
large investment there because Urbana is the home of the University of Illinois, one of the largest
public universities in the U.S., with over 44,000 students. The metro area has a population of
238,984, a median home price of $129,000 and an average three-bedroom apartment rent of
$1,038 per month. And that’s why these properties do extremely well. We also have large holdings
in Austin, which is the home of the massive University of Texas, with over 50,000 students and
24,000 faculty and staff. The Austin metro is 931,830, with a median home price of $299,400 and
an average three-bedroom apartment rent of $1,610 per month. Again, this is the perfect market
for mobile home parks. But even in markets with smaller colleges, these same fundamentals will
often be found.

Conclusion

College towns are great locations for mobile home parks. When you see properties located in
these areas, you should definitely stop and take a further look. While college football is fun to
watch, college-town mobile home park checks are fun to deposit. That’s why we love college
towns!

Dave Reynolds has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. He is also the founder of the largest listing site for manufactured home communities, MobileHomeParkStore.com. To learn more about Dave’s views on the manufactured home community industry visit www.MobileHomeUniversity.com. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

HOW TO SUCCEED WITH SMALL MANUFACTURED HOME COMMUNITIES By Frank Rolfe

It’s often been said that the best things come in small packages – and that’s often true of manufactured
home communities. While large properties tend to be the most often discussed and written about, there are
thousands of smaller mobile home parks in the U.S. that are worthy of investment, and often offer
outstanding financial returns with much lower risk. So how do you succeed with these smaller communities?

Less competition often leads to lower prices

One reason that smaller parks often have such high rates of return is that there are very few buyers
seeking them out. Like anything else, supply and demand is a fundamental equation is how high asking
prices can rise. Not many people are looking for smaller properties, therefore you can often get a really
good deal. How good? My second park purchase was a 15 space community in Lake Worth, Texas that I
bought for $60,000 – and that included a three-bedroom brick house. I was the only one who ever
contacted the seller about buying it, and he named the price.

Seller financing commonplace

That $60,000 deal had a unique structure: I put down $5,000 and the seller financed the other $55,000 at a
low interest rate. Indeed, seller financing is very prevalent with smaller parks. This has grown out of
necessity, as it gets progressively harder to finance a deal with a traditional bank as the loan value drops –
particularly on loans under $250,000. Since seller financing is the best debt imaginable, this is a huge
asset to creating a successful small park purchase.

Often great locations

Small parks have some of the best locations in the industry, namely because they are typically from the
1950s and 1960s (although some date from the 1930s), and occupy sites that would never be approved for
a mobile home park use today. I can think of a park in Austin that is right off the downtown area, and
another in Dallas that is right across from the Arboretum. Most small properties are from a different
moment in time, and those locations that were not impressive in 1950 can be in between two office towers
today.

Typically city utilities

Most of the smaller mobile home parks in the U.S. are on public water and sewer. There are two reasons
for this. First of all, most small parks are right in the heart of the city, where public water and sewer lines
are abundant. Second, most small properties simply don’t have room for water wells or private sewer
services to be built. As city water and sewer is preferred, this is a great thing for small parks.

A priceless education

One benefit to small parks that some buyers seek out is the ability to learn the business on a small scale before
making a larger purchase – kind of like a real-life case study to learn from. My first park was kind of that way. I
bought it for $400,000 with only $10,000 down and a non recourse seller loan. My theory was that I could always
get out of it if I hated it, and only have a small loss. This gives many initial buyers greater piece of mind.

But the positives are also negatives in the future

Although smaller parks have some great things going for them, many of these same benefits become
disadvantages down the road. When you change from a buyer to a seller, you experience the same issues that the
person you bought from faced, such as not many buyers to choose from and the difficulty in the buyer obtaining a
loan and, as a result, asking you to carry the paper.

Try to hit $500,000 or more in “finished” value

One way to improve your position – to really harness the potential power of a small mobile home park – is to buy it
when it’s “small” and make it “large”. To many investors, a “small” park is not about the number of lots but the overall
deal size. Nobody considers a $500,000 mobile home park to be “small”, so if you can buy a mobile home park
for $200,000 (which is considered “small”) and increase the value to $500,000 or more when you go to sell it, then
you escape all those negatives that a small park owner often has to accept. So how do you do that?
By buying properties where you can greatly increase the net income as a result of increasing the rents, cutting
costs, renovating and filling vacant homes, and filling vacant lots. If you buy a small park that has little upside in
pushing the net income, then this mission is virtually impossible. So the best small parks to buy are those with
lots of room for improvement.

Some examples

Let’s look at the results of that 15 lot deal in Lake Worth, Texas. I bought it for around $60,000, and put down
$5,000, with the seller carrying the paper on the balance. I sold it as commercial land for around $120,000 about
seven years later, which was twice what I paid, but more importantly 12 times my down payment. But I was unable
to make it into a “big” park. However, I did another small park deal in Lake Worth that had an even better ending. I
purchased a run-down 24 space deal on the lake front for around $100,000. I cleaned it up, renovated and filled
vacant park-owned homes, raised the rents substantially and filled vacant lots. I sold that park for around $400,000,
which allowed the buyer to get a bank loan and me to have a great return on investment.

Conclusion

Small parks can be terrific investments, if you play the game properly. Use their advantages to the fullest, but
remember that the best deals are those that can take the property from “small” to “large” in net income, value and
return on investment.

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 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. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

The Top Three Things I Learned from Greatest Generation Community Owners By Dave Reynolds

I’ve been working with members of the Greatest Generation for my entire career. These are the people that literally built this nation and it’s been a great advantage to spend so much time talking and learning from these legends. Here are three of the most important lessons I’ve learned from these mentors.

An unbelievable work ethic

I have never seen as much energy as many community owners can produce in their 70s and 80s. While others look at retirement as a time to take it easy, many community owners have no interest in such ambitions. I have been to properties where the community owner – although well past retirementage – is still mowing the entire property, fixing any water or sewer issues themselves, and still finding time to collect the
rent and make repairs to community-owned homes. Theyliterally work from dawn until dark seven days a week. I’ve learned never to complain about my own workload, as I can’t hold a candle to some of these owners and their desire to get the job done regardless of personal sacrifice. Every time I’m working on buying a deal or reading a lengthy report in the middle of the night, I think about what those Greatest Generation guys would say, and I know it would be “quit complaining – I’d be doing this and mowing the property at the same time, you big baby”.

A focus on cost containment

Greatest generation community owners are fantastic at keeping costs down. They examine every project and try to find ways to shave each line item. While younger owners may be fast and loose with spending, the Greatest Generation realizes that “a penny saved is a penny earned”. For example, let’s assume that you need to paint the laundry building. A younger owner would just go down to Lowes and buy some green paint. Total cost $100. The Greatest Generation owner would take ten minutes to call three stores and see who’s got the best paint prices, and that one ten-minute delay might save $40 – which comes out to $240 per hour. On top of that the Greatest Generation owner would point out that that $40 savings is after tax, and you’d have to earn $60 to net that much. If you talk to the original builders of these communities, they typically did much of the “grunt” work themselves to save considerable funds, such as digging the trenches for the plumber and cutting down trees. This thrift is an important lesson that has saved me a fortune over time. Every time I spend money, I think “what would those Greatest Generation owners do?” and then I pick up the phone and start calling around to shop for the best deals.

Honesty and integrity

This is one of the biggest takeaways from a career of working with Greatest Generation owners. It’s their unwavering adherence to the fundamental laws of honor. Their words truly their bond. If a Greatest Generation owner tells you something – and a better deal comes along shortly thereafter – they’re still going to honor their commitment with you. And they’re also going to go out of their way to help others, even if there’s no financial gain involved. This is a lesson that is lost on a lot of younger community owners. Years ago, I sold a community in Oklahoma, but the funding was not until the next day. Overnight, the community was destroyed by a tornado. In the morning, I could have collected my money and saddled the new owner with an extremely difficult situation, but instead I chose to give them their money back – even though it made no financial sense – and to go out and fix the disaster myself. I think that what influenced me to take this
extraordinary step was my lesson learned from these Greatest Generation owners that there’s more to life than money, and that being a good person is as valuable as any financial gain.

Conclusion

One of the biggest losses we will all have over the years ahead is the loss of the Greatest Generation of community owners. It will be hard to even explain the lessons learned from them to the younger generation, as they will not believe such people actually existed. I’m glad that I’ve been able to learn so much from them.

 

Dave Reynolds has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. He is also the founder of the largest listing site for manufactured home communities, MobileHomeParkStore.com. To learn more about Dave’s views on the manufactured home community industry visit www.MobileHomeUniversity.com. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

A Duke Economist Confirms that Manufactured Home Community Lot Rents are Too Low. So How Do We Increase Them Without Straining Our Residents? By Frank Rolfe

Charles Becker is a Professor of Economics at Duke University. He’s also the first economist to study the manufactured home community industry. We have been working with him for years now, providing data and insight as he worked on various industry topics. His latest paper is sure to grab enormous attention. He presented it on an MHU Lecture Series Event a few days ago: https://www.mobilehomeuniversity.com/emails-and-events/interviews/charles-becker/recording.php. The problem is not with the findings (which we all know are true) but with the manner in which we all take action on them.

Becker has found that manufactured home community lot rents are at least 30% to 40% under-market.

Through exhaustive research, Becker has determined that manufactured home community lot rents are roughly 30% to 40% beneath the levels that they should be at. Essentially, when compared to single-family and apartment rent levels, mobile home park lot rent levels are significantly lower than what makes sense from a strictly economic standpoint. Of course, we’ve been saying that for years. Why, for example, are lot rents in Austin $1,000 per month less than apartment rents? The culprit, of course, has been the “quantitative easing” of rents by mom and pop owners, who derive their return on investment by not only financial levels but also the affection of their residents. This has kept manufactured home community lot rents from being priced by market forces and has disrupted the natural state of things.

Educating residents on the necessity – and benefits – of higher rents

There are three basic problems with keeping lot rents artificially low. The first is that it does not allow owners to make necessary capital expenditures. Things like road re-surfacing and tree shaping and removal cost significant capital, and low rents leave no room for these improvements. That’s one reason that there are so many communities with low rents and low quality of physical structures. The second problem is that low rents equate to low management salaries, which leads to often poor management. But the biggest problem with low rents is that it frequently coincides with community re-development, as there are many other uses for land than a manufactured home community. It’s worthy of note that probably 90% of all manufactured home communities that get re-developed are turned into apartment complexes (which have a national average rent of around $1,200 per month per unit).

Finding ways to lower other costs to offset rent hikes

So if higher rents are a necessity, how do we approach this situation with residents? One way is to find methods to lower the cost of other parts of our residents’ budgets, so that higher lot rent does not add to their overall monthly expenses. For example, we have been aggressively educating our residents on the benefits of buying their homes as opposed to renting, which typically saves them $100 per month. We also recently completed a bundled phone and internet deal that saves our residents over $100 per month. We’ve also been working on initiatives to lower utility costs by making homes more energy efficient. We all need to think through each line item of our residents’ budgets and brainstorm ways to lower them.

Providing a better value for residents

We have found that most manufactured home community residents are more concerned about “value” than simply “price”. They are not seeking the lowest rent they can find, they’re looking for the best deal. That means that they are willing to pay more for a community that’s safe, clean and attractive. To accomplish this, we all need to continually upgrade our property’s environment and bring it to a higher standard. When the New York Times writer lived in our Illinois community in 2014 and wrote his article, he found that not one resident was anything less than thrilled by the value of their housing choice. What he didn’t know is that we had raised the lot rent by around 50% over the prior half-a-decade, while at the same time re-paving the roads and cleaning up the property. It really is all about the value.

Higher lot rents, going forward, are a given. They are rooted in simple economics and make complete sense. They are in the best interests of the residents, as they ensure good management, capital expenditures and the longevity of the land use. Although this is an unpopular topic with our residents and the media, the fact is that we can all take steps to lessen the blow and create a terrific value that is reflected in more than just price.

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 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. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

The Madison Group Arranges $5,800,000 loan for the purchase of a Mobile Home Park

The Madison Group (TMG), a leading source of mobile home park financing nationwide, arranged the $8,000,000 purchase of a mobile home community in Oklahoma. The parks income was largely derived from park owned units. TMG secured the financing with a 5-year fixed rate of 5.5% with a 7 year term and one year of interest only payments and a 25-year amortization at 77% loan-to-value.

The property, which is located in a nice residential area and has good access to the freeway, is fully occupied. The only current vacancies are empty lots. The mobile home park consists of 200 lots on 35 acres. The park owns 160 homes of which 34 are lease-to-own units. The borrower needed to accommodate an IRS 1031 tax-deferred exchange on another park that was sold in Tulsa. This purchase met the borrower’s goals.

Some challenges TMG faced in securing this finance package include the fact that parks with more than 35% of the homes owned by the park are more difficult to finance. This park also had declining income due to earlier poor management and increased collections. Additionally, the client lives out of state, but has been very successful in this market with another park.

The Madison Group was able to secure financing through a regional bank that was comfortable lending on the park and the operations as a whole. The borrower is very experienced with this property type and owns a large portfolio of parks.

“We were able to work with the right lender and third parties to get this loan closed within the 1031 timeline. We were also able to secure a high LTV loan for the client.” said Angela Kesselman, TMG’s associate director of Finance.

The financing was arranged by Angela Kesselman 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 can be reached at 435-785-8350 or by e-mailing Kesselman at angela@madisongroupfunding.com.