A while back, I offered a reward of $200 to the person that could come up with a better name for the industry than “manufactured housing”. While searching for a better name, I came to the realization that the industry actually needed two different names. One was for the type of product that allows folks to live on a total payment of around $500 per month in mortgage and lot rent. I proclaimed that the correct name for this part of the industry was “affordable housing”, and have adopted that ourselves when describing what we do with the 5,000 lots we own.
However, there still was no appropriate name for the second industry segment. This is the niche that provides housing that often costs $1,000+ per month including mortgage and lot rent. Clearly, “affordable” is not appropriate. And the suggested names for this segment were very interesting. Apparently, judging by the mail received, there are many people who are unhappy with the “manufactured housing” label. And many people wanted to emphasize qualities that are perceived as a positive attribute of the product – such as “precision”-- as opposed to the negative stigma that “manufactured” seems to portray.
By far the best answer, in my opinion, came from George Porter. Here’s what he wrote:
Been reading your articles in the Journal and was reminded of a story that I heard about many years ago concerning Gloria Steinem, the famous women’s lib personality. She was asked if she would ever be satisfied when a woman was elected President of the United States? Her reply was “no, she would not be satisfied then and would remain unsatisfied until a woman was elected President and no one would really care that she was a woman; just a competent person … period.”
With this in mind, I propose that we name our houses …(are you ready?)…Houses!!!!
Now I realize that we have Italian Americans, Latin Americans, Afro Americans, etc. But really what we all are is Americans and that other is just a way to label someone, for no good reason I might add. Really, what difference does it make, anyway? You are what you are, and our houses are the same. It is just a house. In the past, we seem to want to make ourselves “different”. I don’t know why.
I like Ms. Steinem’s idea. We haven’t gotten very far until nobody cares that it was built in a factory – just that it’s a decent house.
Maybe George is right. Maybe, instead of trying to differentiate ourselves from the rest of single-family home building (which has done much better than we have), we should try harder just to blend into the spectrum of the stick-built industry. I’ve always thought we could get farther in promoting the similarities of our product -- framing, vinyl siding, shingled roof, carpet, appliances – than the fact that you can pull it down the highway. You can also pull a stick-built down the highway, for that matter (I’ve seen several stick-built homes moved in such a fashion). Maybe we should focus our efforts on being less expensive per square foot and faster to deliver a finished product to the job site, and not even talk about the fact that our product is built in a factory.
I live in rural Missouri, and people here do not even know the term “trailer”, “mobile home” or “manufactured home”. They are all considered houses – part of the same family as the brick custom home. As a result, there is no stigma to living in one, and the values are higher. A friend of my daughter lives in a doublewide on a farm. But I think I’m the only one who knows it, because to everybody else it’s just a house. I often feel guilty for even thinking that it’s a doublewide – as though I’m carrying a terrible secret. I think everyone else is right – it’s just a house and not a subject of discussion.
I also frequently drive by a factory that makes roof trusses for stick-built homes. And I always think “I wonder if those people who buy that house know the trusses were made in a factory, just like a manufactured home?” What’s the big difference? Who’s keeping score? What other things inside a stick-built home are built in a factory? Just about everything – carpet, mini-blinds, appliances – right?
I guess the moral is that we have in many ways created our own problem in marketing and public relations by being too loud about our differences, and too quiet about our similarities. We need to stop this practice, as it is not working at all.
I am very impressed with the way that Clayton has attempted to re-design their sales centers to look more upscale and mainstream – and more in line with stick-built builders. The sign out front is just the word “Clayton”. I do not see one mention of the words “manufactured homes” on these centers. However, I see plenty of retailers who have the words “mobile homes” and “manufactured homes” right on their sign. I have to imagine that Clayton executives are thinking the same as George Porter – that our future is based on being one of the crowd, not being some freak with a big arrow hanging over his head.
So the winner is … silence. That’s the best word to describe our upper-end product. It’s a house. Period.
For more information on all facets of commercial real estate, visit www.nicheinvestmentnetwork.com.
Wednesday, February 15, 2012
Monday, February 13, 2012
Like Us!
Niche Investment Network has been busy working on our Facebook page.
Head on over and 'like' the Niche Investment Network. Once we hit 200 likes- we'll be giving away an official article of clothing from Frank and Dave's Trailer Wear department!
See you there!
Head on over and 'like' the Niche Investment Network. Once we hit 200 likes- we'll be giving away an official article of clothing from Frank and Dave's Trailer Wear department!
See you there!
Tuesday, December 20, 2011
How to Make Money in Mobile Home Parks
We see all types of deals out there. Small parks. Large parks. RV parks. But the deals that make money all seem to share the same DNA. Here’s a short course in the basics of making money with mobile home parks – just in time for the New Year.
To make money, buy only parks that won’t lose money
I know it sounds elementary, but the first rule of making money is to make sure you buy a park that will not lose money. What this means is that the park in question already has a positive cash flow sufficient to cover the note payment and provide a return on capital. What does this eliminate? You got it – parks that sell at a price higher than a 10% cap rate, and parks that are vacant. If you buy a park at a 4% cap rate, then how are you going to make any money? Never buy into the concept of land appreciation. While that might sell well in California and Florida, that’s not the mobile home park business – that’s land speculation. We are in the income property business, and the only way values rise is when income rises. If you are starting out at a 4% cap rate, then it will take you a lifetime just to get the park in a position where it is worth what you paid for it. Don’t be a sucker.
Focus on parks that have upside that you can control
A good mobile home park will have upside in raising rents and cutting costs. These are variables that you can control. RVs and mobile homes moving in are things you can’t. Raising your rents is one of the best ways to make money – every dollar you bring in goes straight to the bottom line with no time, effort or risk on your part. Sub-metering water and billing it back to the customer is another great strategy. It costs money up front, but is a fast pay back. Cutting costs, such as replacing the manager with a less expensive alternative or appealing property taxes, are another great way to increase the net income, without a lot of effort and capital investment.
Buying a park at a 10% cap rate is great – but you need some additional upside, even if it’s only raising the rent annually.
Do terrific due diligence
If you do lousy due diligence – or none at all – you will probably never make any money with a mobile home park, unless it is through sheer luck. Due diligence is what allows you to confirm that the park is a good buy, and to detect a clunker and ditch it early on. When you do great due diligence, the odds that you will make money are huge, and that you will fail slight. When we talk to people who have done well with their park, they all share a propensity to do great diligence. When people call us who have parks that don’t work and won’t sell, you find that they have done no basic research at all prior to buying the park.
And be a decent operator
You don’t have to be a great manager to have a successful park. But you can’t be terrible. You have to know how to collect rent and stay on top of rules violations, and hold expenses down. You would be shocked at some of the income and expense statements we see on parks we do due diligence on. And the property condition is even worse. Even if you buy the greatest deal in the world, it’s not going anywhere if you don’t know how to run it.
Conclusion
The mobile home park industry is being fueled by the decline of the U.S. economy – and this is a huge market shift, not just a fad. There is plenty of money to be made in mobile home parks. But you have to go about it the right way.
To make money, buy only parks that won’t lose money
I know it sounds elementary, but the first rule of making money is to make sure you buy a park that will not lose money. What this means is that the park in question already has a positive cash flow sufficient to cover the note payment and provide a return on capital. What does this eliminate? You got it – parks that sell at a price higher than a 10% cap rate, and parks that are vacant. If you buy a park at a 4% cap rate, then how are you going to make any money? Never buy into the concept of land appreciation. While that might sell well in California and Florida, that’s not the mobile home park business – that’s land speculation. We are in the income property business, and the only way values rise is when income rises. If you are starting out at a 4% cap rate, then it will take you a lifetime just to get the park in a position where it is worth what you paid for it. Don’t be a sucker.
Focus on parks that have upside that you can control
A good mobile home park will have upside in raising rents and cutting costs. These are variables that you can control. RVs and mobile homes moving in are things you can’t. Raising your rents is one of the best ways to make money – every dollar you bring in goes straight to the bottom line with no time, effort or risk on your part. Sub-metering water and billing it back to the customer is another great strategy. It costs money up front, but is a fast pay back. Cutting costs, such as replacing the manager with a less expensive alternative or appealing property taxes, are another great way to increase the net income, without a lot of effort and capital investment.
Buying a park at a 10% cap rate is great – but you need some additional upside, even if it’s only raising the rent annually.
Do terrific due diligence
If you do lousy due diligence – or none at all – you will probably never make any money with a mobile home park, unless it is through sheer luck. Due diligence is what allows you to confirm that the park is a good buy, and to detect a clunker and ditch it early on. When you do great due diligence, the odds that you will make money are huge, and that you will fail slight. When we talk to people who have done well with their park, they all share a propensity to do great diligence. When people call us who have parks that don’t work and won’t sell, you find that they have done no basic research at all prior to buying the park.
And be a decent operator
You don’t have to be a great manager to have a successful park. But you can’t be terrible. You have to know how to collect rent and stay on top of rules violations, and hold expenses down. You would be shocked at some of the income and expense statements we see on parks we do due diligence on. And the property condition is even worse. Even if you buy the greatest deal in the world, it’s not going anywhere if you don’t know how to run it.
Conclusion
The mobile home park industry is being fueled by the decline of the U.S. economy – and this is a huge market shift, not just a fad. There is plenty of money to be made in mobile home parks. But you have to go about it the right way.
Monday, December 12, 2011
MHPS December Contest
We’re looking for the ugliest entry signage to a mobile home park. Have you driven into a really ugly one recently?
If so, we’d like to see what it looked like. Send us a photo. If it was so ugly that it broke the camera lens, then draw us a picture.
The winner of this month’s content will be whoever can provide us with a photo of the ugliest entry signage for a mobile home park in the U.S.
If you win, you’ll receive a custom mobile home park T-shirt from Frank & Dave’s Trailer Wear department. These shirts are so rare that you can’t buy them! So give it a shot, and send in, or email, your entry ASAP.
Rules:
-Must send it a picture of the ugliest signage you have ever seen to mhpscontest@gmail.com.
-Email must include contact details. (Email address and phone number) Please include how you would like to be contacted if you are one of the winners.
-Entries must be submitted to mhpscontest@gmail.com no later than December 31, 2011 at 11:59pm CST.
-After December 31, a creative team will narrow down entries and determine the top entry. The winner will then be contacted for their shipping address.
If so, we’d like to see what it looked like. Send us a photo. If it was so ugly that it broke the camera lens, then draw us a picture.
The winner of this month’s content will be whoever can provide us with a photo of the ugliest entry signage for a mobile home park in the U.S.
If you win, you’ll receive a custom mobile home park T-shirt from Frank & Dave’s Trailer Wear department. These shirts are so rare that you can’t buy them! So give it a shot, and send in, or email, your entry ASAP.
Rules:
-Must send it a picture of the ugliest signage you have ever seen to mhpscontest@gmail.com.
-Email must include contact details. (Email address and phone number) Please include how you would like to be contacted if you are one of the winners.
-Entries must be submitted to mhpscontest@gmail.com no later than December 31, 2011 at 11:59pm CST.
-After December 31, a creative team will narrow down entries and determine the top entry. The winner will then be contacted for their shipping address.
Monday, November 7, 2011
November Contest
What is the best or most funny excuse you have received for a tenant not paying their rent? We want to hear them all.
The top winner will be determined and awarded our new Mobile Home Park Store shirt.
Good Luck!!!
Rules:
-Must state in email your tenants best or most funny excuse to mhpscontest@gmail.com.
-Email must include contact details. (Email address and phone number. ) Please include how you would like to be contacted if you are one of the winners.
-Entries must be submitted to mhpscontest@gmail.com no later than November 30, 2011 at 11:59pm CST.
-After November 30, a creative team will narrow down entries and determine the top entry. The winner will then be contacted for their shipping address.
The top winner will be determined and awarded our new Mobile Home Park Store shirt.
Good Luck!!!
Rules:
-Must state in email your tenants best or most funny excuse to mhpscontest@gmail.com.
-Email must include contact details. (Email address and phone number. ) Please include how you would like to be contacted if you are one of the winners.
-Entries must be submitted to mhpscontest@gmail.com no later than November 30, 2011 at 11:59pm CST.
-After November 30, a creative team will narrow down entries and determine the top entry. The winner will then be contacted for their shipping address.
Monday, September 19, 2011
How to Make Money in the Self Storage Business
Most Americans have more stuff than they know what to do with. As a result, they need extra space to store their stuff in. This basic need is the back-bone of the self-storage industry. But just because the demand is there doesn’t mean that making money filling that void is simple and guaranteed. The self-storage industry is more complicated than it looks, and there are many important issues to understand and address.
The Right Type of Facility
There have been a number of different types of self-storage facilities built over the last four decades. However, the profitable ones are among the first variety – they are called “Generation One” or “Generation Two”. The important component is that they have all rentable units located on the ground floor, and in a manner that a car can drive right up to the roll-up door. Why is this? Studies have found that self-storage tenants want to be able to drive right up to their self-storage unit door, roll it up, throw their stuff into it (or pull it out of the it), close the door and drive off. What’s not in demand are units that are located on a second floor or higher, or that you can only reach on foot. Nobody wants to have to take an elevator to their unit, or walk down a hallway with their stuff in tow. There never really was a demand for these type of facilities – it was more a fabrication by self-storage developers trying to rationalize building facilities on more expensive land, which required a greater number of units on that “footprint”.
Just as multi-story facilities have proven to be a flop, so have “climate controlled” units. It appears that the items that most Americans store are not valuable enough to require heating and air-conditioning. If you go to most facilities today, you will find the bulk of the “climate controlled” space vacant. At the worst end of this spectrum are the California invention of “wine storage” units. I was in a facility recently that had only 20% occupancy in “wine storage”. The cheap wine refrigerator available at Costo and other retailers has replaced this concept for most people. And don’t forget that “climate controlled” areas are extremely expensive to operate.
The Right Kind of Location
It is extremely important in self-storage to have excellent street frontage and visibility. The most successful self-storage facilities in the U.S. all share this common trait. This is because many Americans rent space in facilities that they drive by all the time and have awareness of – kind of a “point of purchase” decision. When you have a self-storage facility with poor visibility and an out-of-the-way location, there is no way that anyone will “think” to rent from you, or even find you if they wanted to.
Don’t forget that self-storage is extremely competitive in most markets. Given this fact, it is important that your facility have the correct basic gifts to compete. We all enjoy the stories of underdogs who go on to victory – like the one-handed baseball player – but it is far easier to win when you don’t have a disadvantage from day one.
The Right Kind of Market
Self-storage requires a high density of potential customers. Not everyone needs it, and there are competitors who are also asking for their business. There is a general rule that there should be a population of at least 50,000 people within a three mile radius of the facility. While this is only a guideline, the key thought is that you need a heavy population density for a facility to be successful.
As important as population density, is the density of self-storage space in the market. An over-built market will have low rents and excessive vacancy. The general rule of thumb is that there should not be more than 6 square feet of storage space for every person in that market. For example, a market of 100,000 people should not have more than 600,000 square feet of self-storage capacity.
Demographics are also a key part of a healthy self-storage market. Markets with household income of $50,000+ per year are best. Why? Because the more money you make, the more stuff you buy – and the more stuff you need to store!
The Right Kind of Price and Terms
An essential part of any self-storage acquisition – probably the most important of all – is the price and terms of the deal. Even the best self-storage facility will be a loser if you over-pay for it. You should never buy a self-storage facility at less than around a 10% cap rate (return on the total price). In addition, you should be able to finance the deal with around 20% down, so that your cash-on-cash return is in the mid-teens.
The best buys in self-storage facilities are from “moms & pops” – individuals who own the property free and clear and do not provide very sophisticated management. You can normally buy from these moms & pops at very attractive prices, and they can seller-finance the purchase, avoiding the entire banking application and approval cycle.
Conclusion
Making money investing in self-storage facilities is a very attainable goal. But you need to make sure that you follow some basic guidelines to ensure that your purchase will be a good one.
The Right Type of Facility
There have been a number of different types of self-storage facilities built over the last four decades. However, the profitable ones are among the first variety – they are called “Generation One” or “Generation Two”. The important component is that they have all rentable units located on the ground floor, and in a manner that a car can drive right up to the roll-up door. Why is this? Studies have found that self-storage tenants want to be able to drive right up to their self-storage unit door, roll it up, throw their stuff into it (or pull it out of the it), close the door and drive off. What’s not in demand are units that are located on a second floor or higher, or that you can only reach on foot. Nobody wants to have to take an elevator to their unit, or walk down a hallway with their stuff in tow. There never really was a demand for these type of facilities – it was more a fabrication by self-storage developers trying to rationalize building facilities on more expensive land, which required a greater number of units on that “footprint”.
Just as multi-story facilities have proven to be a flop, so have “climate controlled” units. It appears that the items that most Americans store are not valuable enough to require heating and air-conditioning. If you go to most facilities today, you will find the bulk of the “climate controlled” space vacant. At the worst end of this spectrum are the California invention of “wine storage” units. I was in a facility recently that had only 20% occupancy in “wine storage”. The cheap wine refrigerator available at Costo and other retailers has replaced this concept for most people. And don’t forget that “climate controlled” areas are extremely expensive to operate.
The Right Kind of Location
It is extremely important in self-storage to have excellent street frontage and visibility. The most successful self-storage facilities in the U.S. all share this common trait. This is because many Americans rent space in facilities that they drive by all the time and have awareness of – kind of a “point of purchase” decision. When you have a self-storage facility with poor visibility and an out-of-the-way location, there is no way that anyone will “think” to rent from you, or even find you if they wanted to.
Don’t forget that self-storage is extremely competitive in most markets. Given this fact, it is important that your facility have the correct basic gifts to compete. We all enjoy the stories of underdogs who go on to victory – like the one-handed baseball player – but it is far easier to win when you don’t have a disadvantage from day one.
The Right Kind of Market
Self-storage requires a high density of potential customers. Not everyone needs it, and there are competitors who are also asking for their business. There is a general rule that there should be a population of at least 50,000 people within a three mile radius of the facility. While this is only a guideline, the key thought is that you need a heavy population density for a facility to be successful.
As important as population density, is the density of self-storage space in the market. An over-built market will have low rents and excessive vacancy. The general rule of thumb is that there should not be more than 6 square feet of storage space for every person in that market. For example, a market of 100,000 people should not have more than 600,000 square feet of self-storage capacity.
Demographics are also a key part of a healthy self-storage market. Markets with household income of $50,000+ per year are best. Why? Because the more money you make, the more stuff you buy – and the more stuff you need to store!
The Right Kind of Price and Terms
An essential part of any self-storage acquisition – probably the most important of all – is the price and terms of the deal. Even the best self-storage facility will be a loser if you over-pay for it. You should never buy a self-storage facility at less than around a 10% cap rate (return on the total price). In addition, you should be able to finance the deal with around 20% down, so that your cash-on-cash return is in the mid-teens.
The best buys in self-storage facilities are from “moms & pops” – individuals who own the property free and clear and do not provide very sophisticated management. You can normally buy from these moms & pops at very attractive prices, and they can seller-finance the purchase, avoiding the entire banking application and approval cycle.
Conclusion
Making money investing in self-storage facilities is a very attainable goal. But you need to make sure that you follow some basic guidelines to ensure that your purchase will be a good one.
Monday, September 12, 2011
Investing in Mobile Homes
There are over 60,000,000 Americans with household incomes under $20,000 per year. To this giant market, a mobile home is the only form of detached housing that they will ever be able to afford. And, as a result, the demand for mobile homes has never been higher. But how can you take advantage of this opportunity?
The Basics of Affordable Housing
Before you can begin to invest in mobile homes, you must first understand your customer. For those families with household incomes under $20,000 per year using the government's own ratio of housing cost to income of 33% their housing budget is around $500 per month. At the same time, the average cost of an apartment in the U.S. in 2010 was around $1,030 per month. The point is that this market segment is extremely thankful to find something that they can afford, and is not very discriminating on the quality of the product. They are looking for basic shelter literally a roof over their head, a solid floor, running water and sewer, and heat in the winter. These customers are not expecting fine carpets, hardwood floors, upscale cabinetry. As a result, a successful investor in mobile homes will not focus on providing more than the basics. That is not to say that the home should not be clean and attractive. But the American obsession with upscale bathrooms and kitchens has no place in affordable housing.
And before you think that this customer is different than you and I, look around you. If you earn $10 per hour or less, you are in this segment. And that is a giant pool of jobs in America today. Almost everyone who works at the grocery store, McDonald's everywhere you go earns in this range. And as America's economy continues to decline, this number grows.
Why Mobile Homes Are The Answer to Affordable Housing
Mobile homes are the lowest cost form of detached housing to build. It costs less than $30 per square foot to build a mobile home, as opposed to around $100 for a stick-built home. And used homes often sell in the area of $10 to $15 per square foot. HUD has controlled the construction standards of mobile homes since the 1970s, with the goal of keeping costs at a minimum. If there's been a way to shave costs, it's been done.
The other key is the quality of life that a mobile home can provide the resident as compared to other inexpensive housing options. Unlike an apartment, the customer has nobody banging on their walls or ceiling. They have a yard. They can have a pet. Basically, mobile homes allow residents to have self-respect, and a neighborhood feel that supports a healthy lifestyle.
Why Mobile Homes Are Easy To Renovate
Mobile homes have some unusual attributes that other forms of housing do not share. One is that they have no permanent foundation. A mobile homes foundation is nothing more than a steel chassis, to which the wooden floor is attached. There are so slabs and no piers nothing expensive to settle or crack. Leveling a mobile home costs in the hundreds compared to a stick-built homes thousands. All utilities run in a common trough as opposed to the myriad of wires and pipes in a stick-built home. This makes it easy to locate and repair the water, sewer and electric pipes and lines.
One of the most unusual components of a mobile home is the fact that none of the walls are load-bearing. A mobile home is structurally similar to a shoe box the walls and roof are the only components needed to make it stand up. This gives you much more freedom in renovations, as virtually all internal walls are simply cosmetic.
An Unbelievable Amount of Demand
If the U.S. is in a recession, you would never know it if you run an ad for a mobile home for sale or rent. Even in a small market, you should receive 30 to 50 calls a week in response to your ad. At a mobile home park in Pueblo, Colorado recently, the number of calls exceeded 150 in one week. Why all the calls? Because there is a huge, unsatisfied demand for affordable housing. But that's not the whole story. The other cause of the giant demand is the poor quality of traditional apartment offerings. Have you seen an affordable housing apartment complex recently? Anyone who thinks that mobile home parks are unattractive has not visited apartments. The true crime center of most cities today are the lower-income apartment developments, with drug dealers standing out in front and prostitutes, gangs and drug addicts living inside. This is a horrible environment for any family or individual to live in, and many buyers and renters of mobile homes are fleeing from these terrible situations. In fact, most cities now view aging apartment complexes as their #1 problem- not trailer parks.
Healthy Numbers
Mobile homes are an attractive investment due to very attractive numbers. Essentially, it is easy to sell a mobile home for much more than you paid for it. A mobile home that you buy and renovate for $8,000 can be sold for $15,000 and a home that costs $12,000 can be sold for $30,000. You can buy them relatively cheaply because most people do not want to invest in this asset type. At the same time, there is a huge supply/demand gap, so you can price them high without much competition. The important fundamental and the one that needs to be your guide in every decision you make is to stick with the business model of affordable housing. You have to construct the monthly payment , including mobile home park lot rent, to not exceed around $500 per month. This is what the customer can afford. If you place the consumer in a position of having a bigger monthly obligation than they can afford as was just demonstrated in the sub-prime mortgage meltdown you will end up in endless defaults. This serves no one, as you are constantly having to clean and re-sell the home and your customers are denied the affordable housing, and long term benefit, that they are searching for.
Gaining Knowledge In This Niche
There are two websites that contain a large amount of information on this investment sector. One is www.Mobilehomeparkstore.com and the other is www.MHBay.com which together make up the largest portfolio of websites for the industry. There is also a new site that contains a vast assortment of articles and tips on investing in mobile homes at www.Mobilehomer.com .
Conclusion
Affordable housing is going to be one of the key investment sectors in real estate in the coming years. Get in now, on the ground floor. You can obtain spectacular returns and -- equally important -- provide nice housing to hard-working Americans who need it badly. This is a giant market, and one that you will be hearing a lot more about in the future.
The Basics of Affordable Housing
Before you can begin to invest in mobile homes, you must first understand your customer. For those families with household incomes under $20,000 per year using the government's own ratio of housing cost to income of 33% their housing budget is around $500 per month. At the same time, the average cost of an apartment in the U.S. in 2010 was around $1,030 per month. The point is that this market segment is extremely thankful to find something that they can afford, and is not very discriminating on the quality of the product. They are looking for basic shelter literally a roof over their head, a solid floor, running water and sewer, and heat in the winter. These customers are not expecting fine carpets, hardwood floors, upscale cabinetry. As a result, a successful investor in mobile homes will not focus on providing more than the basics. That is not to say that the home should not be clean and attractive. But the American obsession with upscale bathrooms and kitchens has no place in affordable housing.
And before you think that this customer is different than you and I, look around you. If you earn $10 per hour or less, you are in this segment. And that is a giant pool of jobs in America today. Almost everyone who works at the grocery store, McDonald's everywhere you go earns in this range. And as America's economy continues to decline, this number grows.
Why Mobile Homes Are The Answer to Affordable Housing
Mobile homes are the lowest cost form of detached housing to build. It costs less than $30 per square foot to build a mobile home, as opposed to around $100 for a stick-built home. And used homes often sell in the area of $10 to $15 per square foot. HUD has controlled the construction standards of mobile homes since the 1970s, with the goal of keeping costs at a minimum. If there's been a way to shave costs, it's been done.
The other key is the quality of life that a mobile home can provide the resident as compared to other inexpensive housing options. Unlike an apartment, the customer has nobody banging on their walls or ceiling. They have a yard. They can have a pet. Basically, mobile homes allow residents to have self-respect, and a neighborhood feel that supports a healthy lifestyle.
Why Mobile Homes Are Easy To Renovate
Mobile homes have some unusual attributes that other forms of housing do not share. One is that they have no permanent foundation. A mobile homes foundation is nothing more than a steel chassis, to which the wooden floor is attached. There are so slabs and no piers nothing expensive to settle or crack. Leveling a mobile home costs in the hundreds compared to a stick-built homes thousands. All utilities run in a common trough as opposed to the myriad of wires and pipes in a stick-built home. This makes it easy to locate and repair the water, sewer and electric pipes and lines.
One of the most unusual components of a mobile home is the fact that none of the walls are load-bearing. A mobile home is structurally similar to a shoe box the walls and roof are the only components needed to make it stand up. This gives you much more freedom in renovations, as virtually all internal walls are simply cosmetic.
An Unbelievable Amount of Demand
If the U.S. is in a recession, you would never know it if you run an ad for a mobile home for sale or rent. Even in a small market, you should receive 30 to 50 calls a week in response to your ad. At a mobile home park in Pueblo, Colorado recently, the number of calls exceeded 150 in one week. Why all the calls? Because there is a huge, unsatisfied demand for affordable housing. But that's not the whole story. The other cause of the giant demand is the poor quality of traditional apartment offerings. Have you seen an affordable housing apartment complex recently? Anyone who thinks that mobile home parks are unattractive has not visited apartments. The true crime center of most cities today are the lower-income apartment developments, with drug dealers standing out in front and prostitutes, gangs and drug addicts living inside. This is a horrible environment for any family or individual to live in, and many buyers and renters of mobile homes are fleeing from these terrible situations. In fact, most cities now view aging apartment complexes as their #1 problem- not trailer parks.
Healthy Numbers
Mobile homes are an attractive investment due to very attractive numbers. Essentially, it is easy to sell a mobile home for much more than you paid for it. A mobile home that you buy and renovate for $8,000 can be sold for $15,000 and a home that costs $12,000 can be sold for $30,000. You can buy them relatively cheaply because most people do not want to invest in this asset type. At the same time, there is a huge supply/demand gap, so you can price them high without much competition. The important fundamental and the one that needs to be your guide in every decision you make is to stick with the business model of affordable housing. You have to construct the monthly payment , including mobile home park lot rent, to not exceed around $500 per month. This is what the customer can afford. If you place the consumer in a position of having a bigger monthly obligation than they can afford as was just demonstrated in the sub-prime mortgage meltdown you will end up in endless defaults. This serves no one, as you are constantly having to clean and re-sell the home and your customers are denied the affordable housing, and long term benefit, that they are searching for.
Gaining Knowledge In This Niche
There are two websites that contain a large amount of information on this investment sector. One is www.Mobilehomeparkstore.com and the other is www.MHBay.com which together make up the largest portfolio of websites for the industry. There is also a new site that contains a vast assortment of articles and tips on investing in mobile homes at www.Mobilehomer.com .
Conclusion
Affordable housing is going to be one of the key investment sectors in real estate in the coming years. Get in now, on the ground floor. You can obtain spectacular returns and -- equally important -- provide nice housing to hard-working Americans who need it badly. This is a giant market, and one that you will be hearing a lot more about in the future.
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