December-November 2008

We wish all of you a very Happy Thanksgiving and hope that it is a great time of fellowship with your family and friends!

Dave, Frank, Terri, Perry, Trish, Diane, Carrie, and Amy

NOTE:  The 2009 Mousepads have just been ordered.  To receive a complimentary MHPS mousepad, send an email to Amy@mhps.com with your name and mailing address and yours will be sent out in time for 2009!

WATCH YOUR INBOX:  In the next week or so you will be receiving a special announcement with a series of FREE teleseminars with special guests that will be speaking at our upcoming Mobile Home Park Summit as well as some success stories from our previous Mobile Home Park Bootcamps!

This issue of the MobileHomeParkStore.com and MHBay.com Newsletter includes: 

1. Daves Top 10 List of Acquisition Criteria
2. Forget Ike & Katrina:  The Perfect Storm is Building in Mobile Home Parks, By Frank Rolfe and Dave Reynolds
3. Do you Really think your Stock Market Investments are Safer than a Mobile Home Park Investment?, by Frank Rolfe
4. Mobile Home Park Summit Offers Insights into the Opportunities Created by the Current Recession in the U.S.
5. Dont Blame Community Owners for the Plight of the Industry, by Frank Rolfe
6. National Manufactured Home Community Rent Survey Summary - JLT & Associates
7. Tell us what you think and send us your articles!

Dave's Top 10 List of Things to Look for or Lookout for when Buying a Mobile Home Park in the Current Economy!

1. Price based on Current Occupancy - it is difficult to fill parks with homes today and paying extra for vacant lots is a no-no in most markets.
2. Parks with vacant homes that can be rehabbed and still priced based on current occupancy (or a little higher).  It is much easier to rehab and sell homes than it is to buy, move in, and set up homes.  In this case, if the homes can be rehabbed and there is a market to sell or rent the homes (and there usually is), then this may be a viable community.
3. Parks with a diverse economy - no 1 horse towns or cities with a rapidly declining population!
4. City utilities if possible
5. Parks with under market rents or the ability to submeter and pass on the water and sewer charges
6. Watch out for parks that have sewer plants, lagoons, and wells and they are not big enough to support a replacement system down the road (it is easier to swallow a $150,000 upgrade on a 200 space park than a 25 space park).
7. Parks with good infrastructure (utilities, roads, etc) or if the infrastructure is bad make sure that the discounted price covers the necessary repairs.
8. Seller financing is a real plus these days!
9. Size of lots is always a key factor.
10. Parks with lot rents that are in the $125 to $250 range.  These typically will have better opportunity for rent increases and typically can be purchased at cap rates at 10% or higher.

FORGET IKE AND KATRINA : THE PERFECT STORM IS BUILDING IN MOBILE HOME PARKS - AND THE RESULT WILL BE SOME OF THE BEST DEALS IN DECADES

Like all forms of real estate, mobile home parks have had about a decade-long run of easy financing and low cap rates. However, those good old days are over. And the result can be some of the best yielding mobile home park deals since the first trailer rattled down the interstate. Here's our weather forecast on the great mobile home park storm, and what the impact will be: New Home Sales Mobile home sales have been in a continual decline since 2000. From a peak of almost 400,000 units sold per year then, sales are down to under 100,000 today. And most of those sales are units that do not end up in parks. The good news is that, unlike the single family home industry, bad new home sales have been in every park owner's and bank's budgets for almost a decade. There is no collapse to worry about -- it's already been dead for a decade. And no educated sellers are trying to use numbers based on good sales that are not really there anymore, nor do you have to guess when the rebound will occur. This whole side of the industry has been dead and buried since before Bush was President. Financing Few banks want to make loans on mobile home parks. There were only about 20 that did it with any regularity, and that number has dwindled down to about 5. At the same time, there has been a "flight to quality" on the part of all banks when it comes to making loans. The net result is that only credit-worthy borrowers with 25 to 30% down can get a bank loan. This is a sharp contrast to the past decade when anyone who could fog a mirror and had 10% down was able to get credit. The effect will be a buyer's market for those who qualify. Equally important, the death of financing will set in motion even greater seller financing availability. One of the attractive parts of mobile home park purchasing has been the existence of seller carry. Now, you should see even more of it. Most seller carry offers below market down payments [giving you greater leverage], as well as below-market interest rates and, perhaps most importantly, non-recourse. Cap rates This is where the opportunity goes from Category 1 to Category 5. Only a few years ago, cap rates on parks were around 6% to 8%. Due to the lack of qualified buyers, those rates have skyrocketed almost overnight to 8% to 12% or more. And that's not even the whole story. Back when financing was easy, sellers get comfortable capping income that wasn't really there. The home that just got pulled out, the asphalt repair that was capitalized and hidden from the actual profit and loss statement - they were never really scrutinized. Today, with greater scrutiny, the income and expenses are a lot more accurate and capable of being banked on. Even if the buyer is an unaware, the bank normally lends a second, conservative opinion and reduces down the price or kills the deal. Quantity of deals There have never, in the 10 year history of www.mhps.com, been so many mobile home parks for sale at one time. This enormous supply/demand disaster has rendered many terrified sellers into a panic mode. Sellers are stating on their parks "make offer", "must sell", and "seller will carry". This is the quintessential "buyer's market". It's not as bad as it looks This is the key part of the perfect storm. Although sellers are freaking out and reducing prices, and banks are shriveling up and blowing away, the mobile home park business has not really been much affected. Sales of new homes have been terrible for a decade, and every park owner has already adjusted their business. Occupancy has remained stable at most parks for at least the last five years (many parks had a significant drop in occupancy at the start of the melt-down on new homes in about 2001). There is no reason to believe significant declines in occupancy lie ahead. Operating costs, although feeling constant minor upticks in water and tax rates, remain very predictable and not out of control. There is no 800 pound gorilla in the expense closet. And bank foreclosures on parks remain among the lowest of all classes of real estate. The decline in bank loans has not been due to problems with the mobile home park business model - only guilt by association with the rest of commercial real estate market. Once in a lifetime opportunity The perfect storm of this magnitude may not come around again. Or it may come back in a cycle twenty years from now. But if you are trying to invest and get a maximum return, the time is now. Put on your raincoat and hat, and head out into the storm, because it may not be this dark for long.

DO YOU REALLY THINK YOUR STOCK MARKET INVESTMENTS ARE SAFER THAN A MOBILE HOME PARK INVESTMENT?

For the last decade, those of us in the real estate business have had to hear that the stock market was the world's safest way to make 10% per year compounding. That there was no point in taking any risk by buying commercial real estate, since the stock market was a guaranteed 10% return or more. The very possibility that the market would collapse was considered impossible, and values of individual stocks, while seemingly overvalued at 50 times earnings, were considered safe under new wave valuation philosophies. What a difference a couple of months make. While trying not to gloat, my friends who raved about their stock investments don't take my calls anymore, and I'm not hearing too many positive chats about stocks at parties anymore. Clearly, historically, the mobile home park investments have clobbered the stock market. If you think this is just luck, or a once in a lifetime alignment of the starts, think again. Mobile home park investments will always beat the stock market, if you buy the right mobile home park. The reasons include: Mobile home parks tend to hold their value even in recessions. Why? Because their product is shelter, and that's not a commodity that you can avoid buying, even in a bad economy. Without a decline in sales, maybe increasing costs are the Achilles heel? Wrong again. The total costs of the average mobile home park are only 30% to 40% of revenue, and of those costs, most are fixed and don't go up much over time, such as property tax and insurance. In an environment where cash flow does not decline, real estate values stay in place, even in a recession. The only differential is a radical change in valuation structure, and that has historically not been the case. Mobile home parks valued at a 10% cap rate have been the standard for decades. Mobile home lot rents, unlike the stock market, historically go up 10% per year without retreating later and losing all the increases. They can do this because they are so low to begin with - even when you increase them it is still the most affordable housing alternative and nobody complains. In a world of an average of $200 per month lot rent, a $20 per month increase annually is not considered a big deal to the customer - just look at the increases in gas and food prices they have endured in the same time period. And I have never heard of a decline in lot rent. Ever. Mobile home parks have one huge advantage over every other type of business in the U.S. Their customers have to pay $3,000 to leave. That's what it costs on average to move a mobile home from one park to another. And that's payable in cash, no credit given.  And how big would a lot increase have to be to make it worth spending $3,000 to save $20 per month? Unlike a restaurant, where customers can come and go and, in recessions, mostly go, mobile home park customers are trapped. There are very few new mobile home parks being built, or that can be built, due to highly restrictive ordinances. As a results, unlike the stock market, there are few new entrants into the industry that can overnight ruin everything. There is no chance that Blockbuster or Starbucks can announce that they are going to build a new mobile home park on every major corner in America by the end of the year. This creates greater stability in the asset class. Unlike most of the companies on the stock exchange, there is no new technology out there that can wipe out your investment with short notice. There is no "internet" to sneak up behind you and destroy your investment - to render your business model archaic and old-fashioned. There is not a lot you can do different with a mobile home and a tiny piece of dirt; and if there is, it's already been tried 10 times. Just ask anyone who invested in newspapers, television or radio the benefits to being in a slow, old-fashioned industry (that most notable stock investor, Warren Buffet, has indirectly supported this premise by purchasing Clayton Homes, a mobile home manufacturer, as part of his stable of "low-tech" businesses. If you owned stock over the last several months you probably lost 40% of your investment. If you had owned a mobile home park, you would have lost nothing. And it will take the stock market years to make back what it lost (if ever), while the park is already in the black. One final reason that mobile home parks destroy stock investments - dividends. Most stocks pay no dividend. Those that do pay a paltry 2% to 3%. Mobile home park investments, if bought right, yield about a 10% dividend or more on your money. So you don't have to sell them to have a good investment. In fact, you may elect to never sell them and just keep the cash flow. Try to say that about a stock. In summary, mobile home parks nearly always beat owning stocks. There are just too many advantages to mobile home park ownership that stocks can't match. Of course, just like stocks, it's important to buy the right park. For help on that, visit our Mobile Home Park Bookstore or attend one of our upcoming Bootcamps. So fire your stockbroker (if he hasn't jumped out the window yet) and put your money in something that actually holds its value and pays a dividend - mobile home parks. You, and your children, will be glad you did.

Mobile Home Park Summit Offers Insights into the Opportunities

Created by the Current Recession in the U.S.

As seen on Google News

Mobilehomeparkstore.com has announced that they are holding an event in Anaheim, Calilfornia on February 20, 21, & 22nd entitled "Successful Mobile Home Park Strategies for the Recession". This three-day event will feature presentations by various speakers with the theme of how to make money - and not lose money - in the current U.S. recession. The first day will include a presentation by Scott Myers on Self Storage Investing and the last two days will be on mobile home parks with various speakers. "I think it's time we all acknowledge as a nation that we are in serious economic trouble, and focus some thinking on how to change our management and acquisition strategies to address these changes. This is an event that anyone who owns or wants to own a mobile home park should not miss", says Dave Reynolds, founder and owner of Mobilehomeparkstore.com. Of course, mobile home parks are well positioned for a recession. "Since mobile home parks cater to people needing affordable housing, occupancy will be stable or increase as a direct result of the recession" , says Reynolds. However, the recession will offer some operational challenges - and some huge acquisition opportunities. "I truly believe that this is the best buyers market in mobile home parks I've seen in 10 years" says Reynolds. "I've bought over ten parks myself in the last 12 months". Speakers at the event will include Dave Reynolds, founder and owner of MobileHomeParkStore.com, Frank Rolfe, who has ranked as high as the 63rd largest owner of parks in the U.S. as well as representatives from the following companies: 

• HFF -Holliday Fenoglio Fowler, L.P.
• Marcus & Millichap
• Sierra Consultants
• Mobile Insurance Agency
• Clayton Homes
• 21st Mortgage
• Granbridge Real Estate Capital
• Clayton Bank
• Wells Fargo Commercial
• Edison Micro Utilities

We also have some remaining tables for sponsors at the event and other sponsorships are available.  Contact Dave or Perry at 800-950-1364 for more information on that. The event will be held at the Anaheim Convention Center in Anaheim, California. There are many attractively priced hotels in the immediate area, as well as Disneyland and other attractions for spouses and family members. Reserve your space now via our online and secure registration form! Save $120.00 by signing up before November 30, 2008. 

1 Ticket -   $399.00 - $279.00 until 11-30-08 

2 Tickets - $549.00 - $429.00 until 11-30-08

3 Tickets - $649.00 - $529.00 until 11-30-08

4 Tickets - $749.00 - $629.00 until 11-30-08

  For Additional Information contact us at 1-800-950-1364

DON'T BLAME COMMUNITY OWNERS FOR THE PLIGHT OF THE INDUSTRY

It has become a pretty common excuse among manufacturers and dealers to blame the decade-long slump in new manufactured home sales on the community owners. The logic is that the increase in lot rent at most communities has made it virtually impossible for a new home buyer to afford the sum of lot rent, mortgage payment, insurance and taxes. This same group believes that the slump in home sales can only subside in tandem with community owners dropping their lot rents to more "affordable" levels. Some groups have even sent letters and leases to community owners requesting that they, among other things, agree to forego lot rent at any time a lender's home becomes vacant. So surely the problem with this industry falls completely on those heartless community owners. Right? Wrong. While it makes good cocktail party conversation (as if anybody in this industry would be holding a party), it wouldn't take Clarence Darrow to poke enough holes in that argument to drain tonight's spaghetti dinner (as if anybody in this industry can even afford spaghetti). Here's why: The dollar amount points to builders & dealers Sure, lot rents have increased substantially over the past decade. It is probably true that the average lot rent in the U.S. has doubled over this period. Since the average lot rent in the U.S. is probably about $200 per month, that translates to a $100 per month increase. Now, let's look at the builders' & dealers' side of the equation. Their prices have also effectively doubled or more during this period. So the $25,000 singlewide is now a $50,000 single or doublewide. What kind of monthly dollar amount is that? About $300 per month more for the average customer! O.K., I guess that point is pretty much proven without any more discussion. Community owners have known this for a long term, and have pleaded with manufacturers to try and build less expensive models. The industry is yet to answer this challenge in any material way. The higher monthly cost to the customer is clearly not community owners' fault. And don't forget the role of the lenders Interest rates on new manufactured home loans were about 7% in 1998. Those same rates today are about 12% -- if you can get a loan at all. What is the effect of this shift? If you assume even a $40,000 home price, that change in interest rate translates to about $200 per month more in monthly home cost. Ouch. I guess even lenders are responsible for about twice the pain as the community owners. The proof's in the pudding During this entire period of dreadful home sales, community owners have, with the exception of the repossessions of new homes, remained with steady occupancy. Apparently, customers do not feel that they are being overcharged by community owners or, if they do, they have not felt so overcharged as to move out and abandon their home or haul it on down the highway. Now let's look at the manufacturers and dealers side. Their sales are atrocious. Clearly, customers buy what's a good value and don't buy what is not. And based on that logic, the community pricing is about the only thing that is working in the industry. For further evidence, look at the share prices of the manufacturers and the REITs. While the manufacturers' stock prices have plunged over the last decade, the REITS have actually increased slightly. For builders and dealers to criticize the community lot pricing and business model is like a failed franchise trying to put down McDonalds. Community owners have the ability to push rates and builders and dealers don't It has long been a part of the community owner's play book that rents can be freely raised with little ill effect since it costs a homeowner about $3,000 to move their home. That's why community rents have doubled and occupancy has been hardly impacted. Unfortunately, builders and dealers do not share this enviable position. They have to compete with a million other options. When the sum of home payment and lot rent is $1,000 per month, for example, the buyer can also look at stick-built homes, condominiums, and quality apartments. And they can compare both purchase and rental prices. As a result, manufacturers and dealers have to be incredibly proactive about keeping total prices low. To date, I have not seen much effort in this regard. The moral is that community owners can do whatever they want with rents - they have no competition (not including land/home, which is normally outside the city limits). So don't blame them for sticking with their business model - and one that works well. What about the quality of the product? Community owners provide dirt. And some utility lines. That's about it, except for communities that have a lot of amenities like swimming pools and clubhouses. There is not a lot of customer negativity to this product, because it is pretty basic. Manufacturers, on the other hand, clearly have a problem with delivering a product attractive enough to persuade the customer to forego the other options. Does anybody else out there think that it is odd that some community owners have been able to take new manufactured units and upgrade their appearance enormously using slight cosmetic upgrades such as real, residential quality shutters. Why don't the factories do this type of strategic thinking? Until the product looks like $1,000 per month, it won't command it. Conclusion Everyone is looking for a scapegoat - someone to blame for what has become an almost comical, perpetual decline in new home sales. I remember in 2000, when sales plunged, and everyone thought if they could just hold out one more year, then things would improve. Everyone in the industry has been saying that for almost a decade now, with about as much success as a starlet waiting for the studio to call about that movie part 10 years after the audition. I'm as disgusted as anyone that nobody has been able to lead the industry out of its slump, but, if we have to assess blame, let me say emphatically "it's not the community owners' fault". So the next time someone says to you "the real problem with this industry is that the lot rents are too high", say "I'm afraid that's not true". Or better yet, just say nothing and nod and know better.

 John Turzer of JLT & Associates presents the:

2008 National Manufactured Home Community Rent Survey Summary - pdf

Are you a manufactured home owner or community owner with homes or lots for sale or rent?

If so, then you can list your new and used mobile homes for sale or rent and lots for sale or rent for FREE at MHBay.com