The Very Serious Business of Higher Lot Rents By Frank Rolfe

It is well known in the industry that our lot rents are ridiculously low. Most owners are raising them annually in an attempt to get them up to economically justifiable levels. But as these rents go up, there’s a very serious obligation on the part of community owner to justify these rents on a macro level.

Why rents must go up
There are to side-effects of low lot rents – and both are punishing to the residents. The first is the simple fact that all property in the U.S. has the option of a variety of uses, and manufactured home communities that don’t provide healthy returns get bulldozed and converted into more profitable uses. How many communities can you think of that have been torn down over the past decade to make way for that new Home Depot or apartment complex? I can think of at least a hundred. Some of these – certainly not all – would still be there today if the lot rents had been higher. It’s just basis economics. The higher the net income the harder it would be to knock the community down and replace that income with a different land use. The other problem with low lot rents is that the community owner has no money (or reason) to inject significant capital into the
property to make needed capital repairs. If your community is struggling to pay the mortgage, it’s unlikely the owner is going to be able to afford a $200,000 road re-paving.

How we got in this mess in the first place
There are many reasons for lot rents in the U.S. to be ridiculously low. Probably the two best are 1) moms and pops never kept rents up with inflation (a $50 lot rent in 1960 would be equivalent to a $405 lot rent in today’s dollars – yet the U.S. average is maybe $250) and 2) since mobile home parks have not been built in any meaningful quantity since the 1970s, there’s no new construction to remind owners of what the rents should be. In the apartment industry, for example, there is a constant flow of new Class A apartments and the older Class B, C and D owners line up behind those rents with discounts for the age and desirability of their properties. They are given a constant market rent reminder of the going rents. Unfortunately, our industry lost its way when cities effectively banned new construction decades ago.

An idea of the scale of the problem
Charles Becker, an economist at Duke University, estimated in a recent paper that lot rents are roughly 20% or so too low. But that was based on rent information mostly from REITs and larger professional owners. When you factor in the initial lower rents of moms & pops, that number is more like 50% or more. Going back to the above example, a $50 lot rent from 1960 that’s now at $250 is about 40% lower than the inflation-adjusted base rentof $405 per month. It seems like a huge amount of money to fix, but the truth is that it’s simply having to make up for decades of inflation in a short amount of time. If the mom & pop owners had simply increased the rents annually in-line with inflation, there would be no issue at all.

How to justify higher rents
When the community owner raises the lot rents, they reach a certain level in which they must provide more value for the customer. We have found that most residents have no problem with higher lot rents if it means more professional management and maintenance of common areas. But there has to a be a healthy give-back by the owner in term of increasing the quality of life. Most conflicts with residents occur when the rents go up but the quality of the community does not. People want a safe, clean place to live that is also desirable and enjoyable – and they are willing to pay more for that type of environment.  A new entry sign and landscaping coupled with nice roads, clean common areas and strict rules enforcement creates the rationale behind higher rents.

The real safety valve that keeps rents in check
But what’s the limit on how high rents can go, and how fast? The answer is one that escapes many media outlets yet has been around for decades. And that’s simply that properties that offer a bad value to the residents frequently find themselves raided by other community owners. These neighboring owners will offer to move residents for free to their vacant lots. This – not any type of legislation – is what keeps communities in check on rent increases. And it’s the best way as it’s purely free-market. The concept that residents are “stuck” in any property is a complete fantasy. When people are unhappy with the value their community provides they will simply leave and the owner will realize their mistake.

Conclusion
The issue of higher lot rents in the U.S. is a thorny one. But if all sides realize the necessity of these increases, as well as the mandatory value enhancement that they require and the builtin safety valve, it should become more apparent that these increases need to be embraced for the good of the residents themselves. Every time I drive by a community that has been torn down I think “what would the lot rents have had to be to keep this community alive”? Hopefully the industry can begin a narrative on how to boost rents and value at the same time, as well as educate residents on the need for higher rents.

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.

How to Bring Holiday Giving to Your Community Year-Round By Dave Reynolds

People like to do nice things during the holidays. They give money to the Salvation Army representative at the grocery store. They buy gifts for neighbors. They donate to charitable causes. But why does that have to end in January? We have found a new way to make this spirit of giving extend year-round and it’s a huge win/win.

Be the catalyst to improve the community
There is a lot of demand out there for special projects that help those in need. Think about how many charitable groups there are in the U.S. and in each market your manufactured home community is located in. Since your property probably has some residents that need help in maintaining and upgrading their home, it’s an obvious match-up. All you have to do is to be the match-maker. But without you acting as the catalyst, neither of these two groups will ever get together.

Organize charitable groups
If you tell the charitable groups in your area – ranging from non-profits to church groups and even college groups – you will find a wide assortment that would love to do some type of event to help people in your manufactured home community.  Their mission includes helping those in need and they are more than willing to wield a hammer and paint brush – as well as yard shears – to make people have a higher quality of life.

Provide the supplies
Besides bringing the groups together at your property, you’ll also be responsible to provide all supplies for the event. This will include both tools and materials. Before you get nervous, remember that most of these supplies are not that costly and that you are benefiting both the residents as well as you as community owner, since a nicer property will be worth far more at appraisal time, not to mention greater retention of happy customers.

Make it an enjoyable undertaking for all involved
In the events that we have organized we have tried to provide not only all the supplies, but also a communal meal for all that attend. Again, this is a small price to pay for the benefit to your residents and property. Our largest gathering brought in around 60 volunteers and cost us about $600 in food and drink. That would equate to the labor cost alone on painting one single home. That’s obviously a bargain and a win/win for
all. If you are a really good organizer, you may even get the local restaurant to provide the food and drink at a reduced price or even for free.

The net effect
We started this program at the end of this year. To date, we have done roughly three large events. In the process we remodeled a large number of customer-owned homes,
with work ranging from skirting to painting to carpentry and landscaping. We were able to get the home of a disabled veteran completely remodeled, and an elderly woman’s deck re-built. There were many needy people who got a second lease on life through this program. Meanwhile, the volunteers had a great day of successful ventures in providing assistance, as well as a great bonding experience with their peers. And, of course, the communities now look drastically better than they did before. There are too many stories of our residents to list – as well as photos – but let’s just say that each project was an absolute success and we were extremely proud to have organized them and to have provided the seed money to get them off the ground.

Conclusion
We learned a lot from our new program of organizing volunteer groups to aid those in need in our communities. It’s one of the best win/win concepts I’ve ever witnessed. It’s a
way to provide good deeds through the year – not just during the holidays. And it’s one that other community owners will hopefully adopt in the New Year.

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.

Tomorrow’s Home Foundation!

Tomorrow’s Home Foundation (THF) is a non-profit organization in Wisconsin that provides critical home repairs to low-income manufactured homeowners.

The main qualifications of THF grant programs are: The applicant must own the home and have lived there for a year or more, and the home has to be a 1976 model or newer.  There are also income qualifications, but if the applicant is only receiving social security or disability, they will likely qualify.

Tomorrow’s Home Foundation has two grant programs right now, one specifically for damaged and/or nonfunctioning water heaters, furnaces and (medically necessary) air conditioners and another for all other critical home repairs.  For the Heating & Cooling Assistance Program, the recipient is responsible for at least 10% of the cost of repairs, with a maximum grant of $2000.  For the Helping Hand Assistance Program, the recipient is responsible for at least 10% of the cost of repairs, with a maximum grant amount of $2500.

If you need assistance or would like to make a donation, please go to www.tomorrowshomefoundation.org or call Laurie at Tomorrow’s Home Foundation at (608) 255-1088.

Download the Complete Article from THF

 

The Parallels Between the MH and Fast Food Industries By Frank Rolfe

Nearly 4,000,000 Americans work in the fast-food industry. It’s a $200 billion revenue sector, which has grown from only $6 billion in revenue in 1970. It’s the fastest growing
industry in the U.S. And it’s a dominant force in our everyday lives. That’s why I find it interesting that the manufactured housing and fast-food industries have so much in common.

A focus on delivering a great product at a low price
One of the largest similarities between fast-food and manufactured housing communities is our dedication to delivering a great product at a low price. We both do what seems impossible, whether it’s delivering a $1 burger or a 3/2 home with yard for $600 per month. This is the result of a concerted focus on cost containment, understanding the power of volume, and being realistic about what our customers
can afford to spend.

Endless – and stable – demand
Our average manufactured home community gets around 20 calls per week from customers looking for an affordable place to live, whether we advertise or not. Some of our properties get several walk-in customers per day, even when we have no homes to rent or sell. That insatiable demand is also true at fast food restaurants across America, where drive-thru lines never dissipate – even when open 24 hours per day. Of course, the reason both fast-food and manufactured housing enjoy such demand is that a huge amount of the U.S. population is focused on value and on not wasting money, and these are goals that never go out of style.

A huge part of any property’s employment – and a great partner
While there are no available statistics on this statement, I would suggest that fast-food is the most dominant employer of manufactured home community residents. You can see the proof of this declaration if you watch your residents stream out to their cars in the morning wearing the various uniforms of the main fast-food companies. And this is a great industry to hold such a concentration of your customers. These jobs are
stable and pay decent wages with an average base pay of over $26,000 per year, or $52,000 on a two-income household. We have helped many a fast-food worker obtain home ownership in a brand-new 3/2 home through lending programs such as
21st Mortgage.

Frequent (and respectful) neighbors
Perhaps it’s because there are so many fast-food companies, or maybe because so many of our properties are located on busy thoroughfares, but our most common community neighbor is a fast-food establishment (for some reason it’s normally McDonalds). We respect the fact that they keep their property up to a decent standard, properly mowed and well-painted. We are always excited when we pull up to a potential acquisition and see that there’s a fast-food restaurant nearby. To us, it’s an affirmation that the location is solid and the area will be well maintained.

Always finding ways to update and perfect the business model
Before I was in the manufactured home community business, I owned a large billboard company. And I had every fast-food emporium as advertisers, from McDonalds to Arby’s to Dairy Queen. These franchisees would proudly show me their latest developments to increase the rate of speed of food delivery by a couple seconds, or the reduction in the cost of lettuce by a couple pennies. McDonald’s even has “Hamburger U” to focus on how to take the business model to the next level. In the same vein, manufactured home community owners are constantly trying to improve operations despite just a handful
of variables to work with. Such new improvements as Metron high-tech water meters (that read water usage every 20 minutes and report leaks) and “cable bundling” (in which you buy cable TV, phone and internet for your residents at a greatly reduced
package price) are the result of a tight focus on improving operations and costs.

A happy feeling
Let’s face it, fast-food is comfort food. Eating a Big Mac is as much fun today as it was when you were 10. Anyone who can eat Jack-in-the-Box tacos and not be excited must have never gone to college. And manufactured home communities also offer a degree of nostalgia, whether it’s seeing a pink flamingo in the yard or a football team flag in a window. Fast-food and manufactured home communities are strictly American institutions and steeped in culture all their own. I want in a Cracker Barrell recently and they had T-shirts that proclaimed “Home Is Where You Park It” and RV Christmas Tree ornaments.

Conclusion
The fast-food and manufactured home community industries have a huge amount in common, both as business models as well as sharing employees and customers. It’s great company to keep, and we look forward to a long relationship together.

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.

The MH Industry Has Much to be Thankful for This Year By Dave Reynolds

Thanksgiving is the time of year in which we all gather to give thanks for our blessings. And the entire manufactured housing industry has a great deal to be thankful for in 2018! So while you’re cutting up the turkey and setting the table, consider the following.

Huge demand for our product
It’s unbelievable how much demand there is for affordable housing in the U.S. I find it amazing that nobody bothered to give it serious attention in the single-family and multi-family sectors and essentially gave us that entire segment of housing by default. I would much prefer selling homes for $30,000 than $300,000, particularly given the unstable climate of interest rates and the direction of employment demand. And the dependence, by the multi-family niche, in government assistance to provide lower rents is a dead-end street given the future of our national deficits.

Stable legislative environment
Thanks to the concerted efforts of our state manufactured housing associations, we have continued to enjoy a period of relatively little negative legislative bias, and we continually win grandfathering and property rights issues on the judicial level. I remember how things were in the 1990s – when it was the regular course of business to have city hall harass community owners and threaten their extinction – and I like it much better these days. I believe that part of our success has been a sudden acknowledgment that affordable housing is .

Low interest rates
Sure, rates are up from where they used to be. They had to go up, as quantitative easing had driven them to levels that had never been seen in U.S. history and were completely nonsustainable. However, they are still relatively low and stable. Banking is in good shape, and that’s a huge blessing for anyone in real estate (do you remember the 1980s?). Although rates may still go up another point before the increases end,
that’s still in line with historical norms and we are in an industry where a single rent increase can solve those issues. Remember that it’s stability that the lending world cherishes, and we’re in a very good place right now.

Positive media coverage
Although there were no major articles about the industry this year (the last one was “The Home of the Future” in Time magazine in 2017) equally important is that there were no negative ones. I remember just a few years back when our industry was pummeled on a weekly basis by COPs, Jerry Springer, Trailer Park Boys and Myrtle Manor. Fortunately, the whole industry fake stigma has lost favor with Hollywood, and
we are now free to go about our business without the public being bombarded with fake stereotypes about “trailer parks”.

Friendly people with a common purpose
We are perhaps the only industry in America where neighboring property owners can brainstorm and share notes without being frightened or hating each other. That’s
because our customers rarely move around and we’re not concerned about competition (it’s hard to get too scared when your phone rings 100 times per week from potential
customers desperately searching for affordable housing). As a result, our industry is somewhat like a fraternity in which all owners see themselves as sharing a common purpose. This is a very powerful relationship, as we are able to find new home remodelers and evictions attorneys and many other facts from or neighboring community owners, and our collective sharing of information allows us to leverage off one another and to protect each other by vetting vendors. Have you ever met a mean, unpleasant community owner? That’s about as rare as someone who doesn’t like turkey and dressing.

Conclusion
2018 has been a great year for the industry – one of the best of all time. It’s amazing how what used to be a “goofy” sector of real estate has blossomed into the only source of affordable housing when the nation’s need for what we do has grown into one of America’s greatest challenges. I would also like to take this opportunity to thank each and every person that we work with on a regular basis as well as all those who share the common purpose of offering safe, clean, affordable places to live. Have a Happy Thanksgiving everyone!

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.