Why I’d Rather Own a Property in Nebraska Than One in Nevada

There seems to be confusion on what makes for a good manufactured home community market. Investors who migrate in from the apartment and retail backgrounds
are focused on sexy regions that have high levels of population growth and flashy run-ups in housing prices (typically followed by an equally impressive collapse). Personally, I’d much rather own a manufactured home community in Lincoln, Nebraska than
Las Vegas, Nevada. Why? For a number of reasons.

Affordable housing supply vs. demand
A recent article in the Washington Post focused on the fact that the demand in Nebraska for affordable housing is so large that employers are unable to hire workers because they can’t find suitable housing https://www.washingtonpost.
com/news/wonk/wp/2018/06/06/we-try-to-solve-the-greatnebraska-mobile-home-mystery/?noredirect=on&utm_term=.4e6c0519df1f . While Nevada also shares a need for affordable housing, it’s no where near that hot. The housing vacancy rate, according to BestPlaces.net. is 5% in Lincoln but 14.33% in Las Vegas. That means that Lincoln housing has 70% less vacancy, and that means demand far exceeds supply compared to Las Vegas. This one statistic alone would make me favor Lincoln over Las Vegas. But there’s still much more.

Steady economy
Turn to the unemployment rate section of BestPlaces.net. The unemployment rate in Lincoln is 3% while Las Vegas is 7.2%. That’s a 100% difference. Why is Lincoln so much stronger economically? It’s the way that the economy is constructed (and this is true of virtually all parts of Nebraska). The top ten employers in Lincoln are 1) State of Nebraska 2) public school system 3) University of Nebraska 4) Bryan Health 5) the
Federal Government 6) City of Lincoln 7) St. Elizabeth Hospital 8) Burlington Northern Railroad 9) Madonna Hospital and 10) Duncan Aviation. This exactly fits with our ideal employment base, with the majority of jobs coming from the recession-resistant
industries of government, education and healthcare. Meanwhile, Las Vegas is built around tourism and gambling, which collapse at every recession. While the shows are better in Vegas than Lincoln, the folks in Nebraska are better suited to pay for the tickets.

Few peaks equal few valleys
There is no question that median home prices in Las Vegas are higher than Lincoln. The Las Vegas median is $201,000 and the Lincoln median is $154,200. And I would be the first to bet that Las Vegas homes will hit $300,000 before Lincoln ever will, But I also remember when, during the Great Recession, those same home prices fell by 50% in Vegas while they didn’t budge much in Lincoln. Just as a rocket plunges back to earth after liftoff, I prefer markets that are known for stability over fireworks.

Less Competition
Although I love watching a close NBA finals, I don’t appreciate competition in my business. Very few people ever think about investing in Lincoln, while few people don’t think about Las Vegas. One of the key reasons that Las Vegas has insanely high levels of competition is simple geography: Nevada is very near to California, which is where more real estate investors come from than any other state. At the same time, Nebraska is thought of as only having one investor: Warren Buffett. The cap rates are much lower in Las Vegas as a result – around 20%+ lower than in Lincoln. This translates to much
higher deal prices in the land of the Las Vegas strip.

More stable residents
And let’s not forget one of the big differences between manufactured home communities in Lincoln versus those of Las Vegas. We’ve owned both, and the residents are much
more transient in nature in Las Vegas. There are many possible causes for this. Lincoln is all about steady jobs in government, education, healthcare and basic industries like agriculture and manufacturing. In Las Vegas, on the other hand, here’s the list of top ten employers 1) MGM Resorts with 54,250 2) Caesar’s with 27,860 3) Station Casinos with 13,000 4) Wynn with 11,729 5) Boyd Gaming with 9,350 6) Sands Casino with 8,630 7) Walmart with 6,475 8) Cosmopolitan with 5,330 9) Valley Health System with 5,267 and 10) Supervalu with 4,024. That means that the Las Vegas economy is all about nothing more than tourism and gaming. Since the longevity of our customers is the hallmark of low operating costs and high levels of pride-of-ownership, then Lincoln beats Las Vegas on this point hands-down.

Conclusion
While it may seem odd to many, I would much prefer to own a manufactured home community in Lincoln, Nebraska over one in Las Vegas, Nevada. The market and residents are more stable, and the law of supply and demand is much more in your favor. While Rod Stewart may never do a show there, you can more than afford to buy a Vegas weekend from your higher Lincoln profits.

 

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.

 

Thoughts on Mandatory Market Population Levels

In over 20 years of buying and operating manufactured home communities, I’ve been able to determine some important points on market selection. And one of the big ones is the necessity and complexity of proper population levels. Here
are my fndings.

Quantity
While giant markets sound great, the truth is that all you have to hit is around 100,000 population to have it all: an active Chamber of Commerce, a robust jobs market, big box retail, every franchise known to man, and plenty of demand for affordable housing. If you really think about it, those huge populations of 1,000,0000 and more are really nothing more than a bunch of 100,000 communities that abut. So while big
markets may sound exciting, they are completely unnecessary.

What happens as you get smaller
As markets decline in size lower than 100,000, certain things change. It’s similar to what happens with aircraft. Big planes have multiple back-up systems in the event of a problem. Engine goes out? No problem, they can keep flying on the other two. But smaller markets are like private airplanes. They can still fly fine but they have more limited defenses against problems. So you have to be more careful about markets as
size declines. That doesn’t mean that you can’t do great in a market of 25,000 – only that you have to be more careful in your selection.

Quality
Market size is not everything. There is also the issue of the “quality” of the market. A smaller market in Colorado, statistically, is infinitely better than a larger market in
Mississippi. It all revolves around the science of the housing market itself. In a Colorado market with median home prices of $300,000, the demand for affordable housing – and the potential for higher rents – is infinitely higher than a market in Louisiana where the median home price is $60,000. That’s why we have invested in so many smaller markets where there are high home prices.

Positive and negative growth observations
Don’t be overly swayed by past and future rates of population increase or decline. There is an unusual phenomenon in the U.S.: in many markets there is very little population growth for the simple reason that there are few children being born.
While this is extremely important in many industries, such as the restaurant trade where their revenue is based on total number of meals served, out industry is more reliant on filled housing units, not on how many people are in each home. We get the same lot rent whether the home as five residents or one. Watch for vacant housing rates that are in-line or lower than the U.S. average of 12.45% as shown on Bestplaces.net.

The example of a cup with a hole in it
One reason that many investors from the apartment and selfstorage industries panic around smaller markets is that they have been trained to fear markets in which the population is not growing at enormous rates. That’s why they congregate in the Southwest, where high birth rates give rise to high levels of population growth. But here’s the problem with that concept.  You can’t build any new manufactured home communities.  So you don’t have to have a constant rise in population to keep the existing ones full. With apartments and self-storage, there is a never-ending supply of new developments opening constantly, and you have to have enough new people coming on-line to have a prayer of occupying all of the new product and old product. It’s like a cup with a hole in the bottom, and if you don’t have the tap on full blast, there’s no way to get a drink. But when supply is shut down – as it is in our industry – there’s no hole in the bottom and you can fourish with zero new entrants into the market. It’s kind of like Warren Buffett’s concept of a “moat” on steroids.

Conclusion
I am very comfortable with smaller markets, and not that impressed with giant ones. There is more to great markets than sheer numbers alone. That being said, you have to do terrific due diligence on any market to make sure it has the raw material you need to succeed. But manufactured home communities can thrive in markets that apartments and selfstorage would fail miserably in, so keep an open mind and stick with science and not urban legend.

 

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.

STAR gives local mobile home communities an upgrade.

Riding the current trend1 and touting the tagline, “Improving neighborhoods one house at a time,” Second Time Around Realty Inc. (STAR)2 has brought its proven methodology for breathing life into neglected and under-served communities into central Wisconsin’s mobile and manufactured home communities (MHC).

 “We’re on a mission!” says Mark Roeker, the managing partner and creative genius behind STAR. “We believe that everyone deserves a peaceful, safe and well-maintained home at an affordable cost. That’s what a manufactured home and these communities are all about.”

Handling the demands of an entire community, however, requires skills and abilities beyond those of managing the single-family homes and duplexes that STAR has been overseeing in Milwaukee for nearly a decade.  For example, after acquiring Sunshine Estates (now Maizefield MHC)3 outside of Mosinee, WI in early 2017, an immediate cleanup was needed to remove 17 dumpsters of household waste, over 500 used tires and 30 overgrown trees. Other challenges involved working with a variety of contractors to repave roads, renovate eight homes and install a state-of-the-art water filtration system4 for the community before the bitter cold of winter set in. What couldn’t be foreseen was the existing underground plumbing system for the park going down that winter. When that happened, STAR employees and contractors responded quickly to find solutions and provide advanced levels of customer service to the residents. Managing the repair process included negotiating partnerships with various businesses as well as the alignment of the local municipality, the Fire Department, the WI Department of Safety Services and also the WI Department of Natural Resources.5 Completing the repairs at Maizefield MHC quickly, correctly and for the long-term benefit of its residents has led to a safe and consistent level of water quality unlike the community has ever experienced. It has also earned STAR praise and appreciation from several of its longstanding tenants6 and the agencies involved.

Maizefield MHC is one of several communities that STAR manages.  Others are located near Plover, Wisconsin Rapids, Chilton and Marquette. Each community is undergoing renovations of its own to bring it up to STAR standards. Lyndsey Wilson, Tenant Relations Manager for the MHC Department, says “Our communities are being designed as a perfect choice for budget-conscious individuals, or families, that want a fresh start or an opportunity to build credit. They’re also great for retirees living on a fixed income.”

Navigating the complex demands of mobile and manufactured home communities to encourage and promote a sense of safety, privacy, community and ownership is not easy. Second Time Around Realty Inc. is demonstrating that they are in it for the long-haul and this makes them a welcome addition to the Central Wisconsin area.

  1. https://www.realtor.com/news/trends/mobile-homes-next-prefab-affordablhousing-trend/

         http://time.com/4710619/the-home-of-the-future/

  1. https://www.starpropertymgmt.com/
  2. Website – http://maizefield-mhc.com/
  3. Video – https://www.dropbox.com/s/dwx0xybxfmwha5g/Maizefield%20Advertising.mp4?dl=0
  1. http://waterpurification.pentair.com/en-US/product/fleck/2510/

US Water – https://www.uswater.com/

  1. Joe’s Home Improvement

France Sales and Service – http://www.francesalesandservice.com/

PGA, Inc. – https://www.pgainc.net/

Ferguson – http://www.fergusonbrothersexcavating.com/

Town of Knowlton Fire Department, Tim Meiser

City of Mosinee, Mosinee High School

Menard’s

WI Department of Natural Resources – https://dnr.wi.gov/about/divisions/EM/

  1. Testimonials – http://maizefield-mhc.com/for-rent

 

Article Author: David Bertnick

Company Contact: Mark Roeker

 

Second Time Around Realty Inc.

3121 W WISCONSIN AVE STE 3

MILWAUKEE WI 53208

(414) 539-6255 Office

(414) 755-0792 Facsimile

info@starpropertymgmt.com

 

STAR’s Mission Statement

At Second Time Around Realty Inc. we are proud to work as a team to achieve a return on investment for our partners by providing quality residences for our tenants at a fair price while improving neighborhoods, being leaders in the housing / rental industry, and being responsive to the needs of the community.

Which Alternative Property Sectors Hold the Most Promise for Investors?

In the first quarter of 2018, the manufactured housing, self-storage and industrial sectors were the stars of the REIT show, as real estate investment firm PGIM Real Estate noted in a market review.

NREI: What’s behind the strong performance of the manufactured housing sector, and what do you think will happen with manufactured housing REITs going forward?

Marc Halle: It’s a really great sector and has been in the public markets for 20-plus years. Over the past few years, it’s really become more institutionally acceptable. These are just cash cows that tend to be recession-resilient; they’ve got bond-like income with good growth. It’s not been institutionally acceptable for many years because of the lack of a “sexy” factor. You didn’t want to put a manufactured home community on the cover of your investor report.

It’s difficult to build manufactured home communities, it’s difficult to create competition, it’s one of the biggest NIMBY sectors, and it’s an industry with very limited supply and good demand. These are no longer the mobile home parks of a TV sitcom. These are professionally run communities where the landlords develop the land, they put in the utilities, the tenants bring the homes in and they pay rent, and they pay rent on time with very low unpaid receivables….

Read the complete article here.