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.

 

Why You Should Join Your State Manufactured Housing Association By Dave Reynolds

When I got into the business over two decades ago, I didn’t even know that Manufactured Housing Associations (also known as MHAs) existed. Back
then there was no internet to speak of, and most community owners were not that social. But then I found the TMHA (the association for Texas) and I knew that I had found lasting friendship. I have remained a loyal member for over a decade.
So why should you join your state MHA?

They do great things for the industry

In the case of the TMHA, they have literally re-written the laws of the State to the betterment of community owners. Take for instance the revisions to grandfathering law that were passed a couple years ago. If you own a property in Texas, the city now has no power over you to utilize all of your lots. And they succeeded in fending off the HUD desire to take over home installations and cost all owners around $7,000 in site preparation fees. The list goes on and on. And that’s also true for many other state associations. They are basically the lone group watching out for you on a national stage.

They offer outstanding resources
If you need to know anything from water billing laws to habitability minimums, your state association is the one stop resource. If you need the name and number of a great
municipal attorney, they’ve got it. If you need to know if you can add administrative fees to a water bill, then call the MHA.  From their directories to their simple summaries of state law, they are 100% invaluable. They shortcut the learning curve by years.

They encourage discussion between owners and a sharing of ideas
Have you been to an MHA event? The whole purpose is to share ideas. They have no intention of selling you anything and they don’t care if you own one property or 1,000. It’s simply community owners gathering to share ideas and war stories. We have made many friends through associations, and know you can do the same.

They can be enormously helpful in a pinch
When the chips are down, you need an ally. Your MHA is a great first responder when you have a problem with a governmental agency. We have gone to them many times
with complicated issues and they have helped us solve them.  Having your state association call and support your cause has a real impact on bureaucrats, and having a support network gives you greater peace of mind.

The dues are insanely cheap
For all the reasons above, the dues to join your state MHA are ridiculously low. In terms of value for your money, it’s hard to find a better thing to do. I think that too many people never bother to check out the dues structure and just assume they can’t afford it. It’s seriously cheaper than some newspaper subscriptions. With as much as you have invested in your property, how can you rationalize not joining? How will you be able to explain to forgive yourself for missing out on that law change because you were not in the information pipeline?

It’s the right thing to do
Progress in any industry comes from a collective effort. It comes from investment spending. All the benefits that we have today – all of the advances – come from people years ago deciding to invest their time and money to make them happen. Rome was not built in a day and neither has been the manufactured home community business. The right thing to do is to join in the effort to take our industry to the next level. And that’s what your state MHA does.

I’m glad that Manufactured Housing Review is getting involved in promoting and supporting MHAs
When I heard the rumor that Manufactured Housing Review was changing its format to dedicate itself to the promotion and expansion of the state MHAs I was thrilled as I knew that was the right direction to go. While MHVillage can continue to provide the same old articles and ads with their old-fashioned printed quarterly publication, only MHR can offer real-time internet delivery on a monthly basis of the latest news,
announcements and activities of all state associations.

Conclusion
I’m very proud to be a member of 28 different state associations – one for every state we own properties in. And I’m also proud to be a writer for MHR as it endeavors to become the one collective voice for all the state associations. I’m looking

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 Part of the Rise of the MH Sector is Based on Mistakes by the SF and MF Industries By Frank Rolfe

am firmly convinced that the manufactured home community industry has fallen into one of the most envious positions of any real estate sector in U.S. history. We are literally on top of the world based on every mega-trend. But part of our success has to be credited to the poor performance of the single-family and multi-family industries and their key strategic mistakes. So how did the SF and MF industries blow it?

Failure to position themselves for the sweet spot on housing demand

While affordable housing is one of the hottest sectors of real estate, not everyone got in position for it. A recent speech at the Texas Manufactured Housing Association’s
annual meeting pointed out the fact that it’s fundamentally impossible to build a $100,000 stick-built home today, since the average lot alone in most major markets is
over $50,000. As a result, there’s no way you can build an affordable housing product in the single-family home sector. Meanwhile, with the average apartment rent in the U.S. is well over $1,000 per month, there’s no way that apartments can tap the affordable housing market unless they are subsidized by the U.S. government through Section
8 – and that program’s broke. Apparently, these groups were not paying attention to the entire affordable housing segment. Could it have gone better? Single-family builders
could have put a greater focus on building a smaller home product with more efficient methods and apartments could have followed suit. But they missed out on it completely.
And now it appears to be too late.

Poor property condition in Class B and Class C apartment holdings

While Class A apartments are well-maintained, Class B and C apartments cannot say the same. Many of the largest apartment portfolio owners sell off their oldest and weakest properties to moms & pops who do not have the capital to make needed
repairs. A whole bunch of the apartment stock in the U.S. is literally falling apart. These poor conditions push residents into looking for alternative housing that offers a better value: and one of the best alternatives are manufactured homes. We give the resident amenities that no apartment can, namely 1) no neighbors knocking on walls or ceilings 2) the ability to park by the front door 3) a yard 4) a sense of community and
(perhaps most importantly) 5) the ability to be a homeowner and not a renter.

Not finding a way to limit supply or build a “moat”

Probably the feature that manufactured home community possess and other housing sectors most envy is our barrier to entry, which Warren Buffett would describe as a “moat”. We have it because city governments have decided that they collectively don’t want any new community construction. But those same city father’s love more single-family homes and apartments, and that affection is a curse from a supplyside perspective. We’ve always been told that home and apartment builders keep developing new properties until the banks stop them – typically when the cycle is far too late – and that seems to always be the trend. While you rarely see manufactured home communities end up in foreclosure, look what happens to SF and MF all the time. Remember what happened during the Great Recession? And it’s too late to convince city government to offer more restrictive zoning on SF and MF and keep competition at a more reasonable level.  Why should they?

Conclusion

We honestly feel sorry for SF and MF owners. They have business models that are lacking the right raw material for the years ahead. They have peaked and have nowhere to go but down. And their lack of planning and execution has offered a terrific boost to manufactured home communities. Part of our success is how good we are, and part is simply how bad they are. Since neither is likely to change, we’re in a great position
going forward.

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 Benefits of Win/Win Deal Making By Dave Reynolds

There many different strategies that buyers utilize when trying to buy a manufactured home community. Some get these concepts from books they buy at Barnes &
Noble, others from articles on-line. But the truth is that the best strategy when buying these properties is called “win/ win” – the concept that at the conclusion of the transaction both buyer and seller are happy and made a fair deal. So why is this the best way to go?

It’s the only way to construct deals on successful properties
You cannot push around wealthy people. I think that most people would realize this. The typical manufactured home community owner is anything but desperate. They normally
own the property free and clear and have substantial assets.  The most prevalent negotiation style in most self-help books is called “win/lose” and that’s the type of posture you take at a car dealership. The plan is to back the desperate car salesman into a corner by making him waste a ton of time with you and then pretend to leave the dealership without buying so that he’ll drop the price as a final attempt to salvage the situation. And that’s fine when you’re working with a poor salesman trying to pay the rent. But that is clearly not the case with the typical owner and would never work – it would only serve to offend or irritate this individual and destroy your working relationship.

It builds a lengthy list of references
One great attribute of win/win is that it makes every seller a future reference. When you treat people fairly that reputation builds over time, and you develop an impressive list of seller supporters. I’ve given a potential seller a list of others that  I’ve bought from, and they are blown away that I could even do that. Since I’ve bought over 300 manufactured home communities over the past 20 years, you can imagine the benefits this has created.

Brokers will bring you more deals
Nothing irritates brokers more than when they see good deals destroyed by the opportunistic buyer that tries to drive too hard a bargain. If you do that even one time, your likelihood of receiving more deals from that broker is greatly reduced.  Since about half the deals I’ve purchased over the past 20+ years came from brokers – particularly pocket listings – you need this team on your side if you want to build a great portfolio (or buy that perfect first deal).

You never have regrets about “what could have been”
They say there’s nothing worse than having regrets about missed opportunities, and when you engage in win/win deal making you eliminate this fear. You give every deal your best shot, and you leave the bargaining table knowing that there’s no way you could have offered more. Although I’ve not succeeded in buying every property I’ve negotiated for, I do have the peace of mind that I tried hard and there simply was no way to construct something that was beneficial for both parties.

It’s just the right thing to do
I have the utmost respect for the sellers I’ve worked with. I believe that taking advantage of older Americans is just not morally right. That’s why I’m glad that I’ve spent my life using only win/win strategies. If win/lose deal making was the only
way to succeed in this business, then most people would say to themselves “I’ve made money but not without feeling bad about it”. But the great news is that the only successful negotiating strategy is also simply the right thing to do. It’s nice those align.

Conclusion
I am absolutely convinced that any buyer who wants to do well in this industry will embrace a win/win negotiating strategy – one in which both parties get a fair deal and walk away from closing happy. Whether you’re buying a single park or a large portfolio, win/win is the technique that gets the job done. You can throw that negotiation book from Barnes & Noble in the trash now.

 

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 Cities Often Get the “Grandfathering” Concept Wrong By Frank Rolfe

There are three types of manufactured home communities out there: 1) legal conforming 2) legal non-conforming and 3) illegal. Of these, by far the majority fit into the classification “legal non-conforming”, which means that the property was built in conformance with the law, but not longer meets the modern standards. Another name for “legal nonconforming” is “grandfathered” which Wikipedia defines as “actions taken before a specific date that remain subject to the old rules”. While it’s a pretty simple concept to grasp, there are many times that community owners can become at odds with city government due to their lack of understanding of the legal requirements. Why does this happen so frequently?

How inspectors are classically trained
With most real estate sectors, both the structure and the land are real property. The way that grandfathering works is that the removal of the structure on the land results in the loss of the “grandfathered” rights. Here’s an example. A single-family home was built in 1920 at a lot coverage ration of 70%. In 1968, the law changed and a home cannot exceed 50% of lot coverage. That 1920s home does not have to meet this new criteria as long as it stands. But in 2017 the home burns to the ground. The home cannot be re-built on that lot now unless it is reduced to 50% lot coverage, because its grandfathered
rights were lost. This holds true for duplexes, apartments, office buildings, hotels –everything the inspectors are used to seeing.

But we are essentially parking lots
But a manufactured home community is basically a parking lot for manufactured homes. Our homes are not real property and are not even included in what has been grandfathered. They are simply personal property that falls in the same classification
as a car. A grandfathered parking lot (and most of them out there are under that format) has the full right of cars to come in and out of the spaces at all times. What’s grandfathered here is the actual “use” of the property as a parking lot. But nothing on
the surface has any bearing.

There’s virtually no way to shut down a grandfathered “use”
So here’s the bad news for inspector logic: you can’t really ever find a way to lose grandfathered rights on a “use”. To do so, you have to have zero customers and no marketing or telephone surface for more than six months. The simple act of having a
sign on the property with a working phone number means that the use is still open for business. It has nothing to do with manufactured homes coming in our out, and this confuses and perplexes the inspector immensely, who is often working under orders by their superiors to “get that trailer park out of here”. But cities remain hostile anyway – and they have their reasons. So even though some cities hate the manufactured home
community’s customers, there’s no way to actually enact their evil plan. Why do they persist in this nonsense? I think one of the most logical reasons is the serious economic ramifications of school tuition vs. property tax receipts. If you assume an average manufactured home community has a tax valuation of $30,000 per lot – and the home at $10,000 – the total tax revenue derived from a $40,000 per lot total valuation is $400
in 1% states like Missouri. But, at the same time, the household on that lot has two kids, so the school tuition bill is $16,000.  Even excluding the additional potential costs of medical charges from residents who are not covered under health insurance, the city is losing $15,600 on this sample lot. So do you think they have a vested interest in refusing to let a new home replace that home when it burns down or gets removed?
Sure they do. There are communities out there that probably cost the city $1,000,000 per year in losses.

The only cure is often to use a lawyer
But although the motive is tangible, the law is still the law. But when the city refuses to abide by it, you can’t typically get this resolved without legal representation. You’ll have to find a good real estate OR municipal lawyer to take the lead. It’s typically not a hard issue to fix. Even though the inspector may not be a grandfathering expert, the city attorney will know better and will correct the inspector when there is a lawsuit at stake. We’ve found that many of these issues can be resolved in one phone call – but only when that call is made by a licensed lawyer.

And your success has good precedence
There have been several of these grandfathering cases that have had to go to the State Supreme Court level to get finally cured. The most recent one was the State of Mississippi. In all of these cases, the manufactured home community owner has prevailed. To date, not a single city has ever won. If you were to go to court today, I imagine Exhibit A would be those prior Supreme Court cases. Here’s the Mississippi one https://caselaw.findlaw.com/ms-supreme-court/1701083.html.

Conclusion
Grandfathering is a great protection for the manufactured home community owner. Understand your rights and defend them. Don’t let the city inspector push you around. A good lawyer and a simple phone call will typically cure most misunderstandings.

 

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.

Encouraging Signs From a Younger Demographic By Frank Rolfe

The other day I was driving through one of our communities in Illinois and I noticed a nicely dressed young couple on the deck of a new Clayton home we had brought in. I’m
seeing more and more of that these days, and it’s great news for the industry, as we seem to be attracting a more upscale, youthful crowd all of a sudden. Is this a fad or a permanent trend?

Attraction to smaller living spaces

It’s no surprise to anyone who watches the “Tiny Homes” show on HGTV that young people are willing to live in spaces much smaller than other age groups. Some say that Millennials are the next “Greatest Generation” and, if that’s true, then they are
definitely on the right path regarding housing expectations. Of course, manufactured homes are perfect for those who are seeking small square footage in a detached dwelling. Unlike Baby Boomers – who often have bathrooms as big as some
manufactured homes – Millennials are not that in tune with the concept that bigger is better.

Focus on relationships

About a year ago I was given a private tour of Airstream Village, the manufactured home community that was built by Tony Hsieh, the billionaire founder of Zappos.com. He chose to live in this property over a penthouse condo he owned nearby. The
attraction was the concept of living shoulder-to-shoulder with a group of about 60 people in a very confined environment. All of the units in Airstream Village are either tiny homes or Airstream travel trailers – with no unit over 30’ in length. There’s a giant stage in the middle, as well as a converted cargo container structure for a business center and another for a laundry. So why did he want to live like that? The answer is that Millennials are huge believers in the power of relationships. Studies have shown that relationships are one of the top goals of this younger crowd both in business and their personal life. Manufactured home communities are perfect for this goal of building relationships, as the social interaction of residents is well known (just look at Time magazine’s article “The Home of the Future” for their take on this).

More respectful of their budget

Millennials seem to be much better at keeping their expenses in check that other age sectors (the reverse of Baby Boomers). Since they value relationships over materialism, they don’t need a lot of stuff to be happy. In this manner, manufactured homes offer one of the least expensive methods of having a detached dwelling with privacy and a yard. And millennials are huge into getting good deals, as they were born of the internet
shopping age where everything is a commodity and seeking the lowest price becomes a sport. With most manufactured homes costing around $1,000 per month less than a traditional apartment, the price attraction for Millennials is huge.

Everything old is new again

Everything in life seems to cycle over time from hot to cold and back again. Furniture from the 1950’s (“Mid-Century Modern”) is extremely collectible and valued by young people today because it’s different and interesting to them. And manufactured homes are also a big part of 1950s and 1960s culture which, frankly, makes them “cool” again. If you never had any prior exposure to our product’s design, you would find it unusual and intriguing – kind of like the first time you see “Viva Las Vegas” or a film in which Elvis lives in a “trailer park”. Every decade has its time to shine in this perpetual design circle of life, and the current era is the time of the manufactured home. Up to bat next,
I imagine, is a return to appreciation of the ranch house.

Lower negative stigma

Let’s be honest, our industry has a really bad stigma. There’s no denying this. The good news is that the Millennials missed out on all the television and movie programming that built that stereotype. “8-Mile”, “Trailer Park Boys” and other offerings were produced either before the Millennials were born or when they were in kindergarten. As a result, they do not harbor the same negative thoughts that other age groups do. This allows
Millennials to give our product an unbiased, fresh perspective.

RVs are leading the way

One of the main reasons that Millennials are attracted to the manufactured housing product is because of the extremely positive marketing and efforts of our cousin, the recreational vehicle industry. Just as we have done such a lousy job of putting our best foot forward with American consumers, the RV industry has hit home run after home run. Their sales are the highest in U.S. history, each and every year! They have created the perfect blend of product design and price point, and then coupled that with one of the best public relations efforts I’ve ever seen. I see the “Go RVing” in many of America’s most upscale publications such as Town & Country magazine, and then on TV during such events as the X-Games. They’ve snuck RVs into everything from the Neiman’s catalogue to Hot Wheels. And, in so doing, our close relative has opened the
door to a higher opinion of our product. It should be noted that young people are the second strongest segment buying RVs behind Baby Boomers.

Conclusion

I expect Millennials to be a significant part of the manufactured home community business going forward. Our product matches well with their goals and lifestyle choices. It’s affordable and “cool”. But let’s all try to be more like the RV industry in promoting to this age group – this is our chance to finally put the negative stigma to rest.

 

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.