Some people invest in Google. Some buy shares of Berkshire Hathaway. Other invest in Apple. But sheer investment geniuses invest in bushes. And trees. Because if you own a manufactured home community, these are, dollar for dollar, the best investments you will ever make. How good are the returns? I would estimate that one well placed $20 bush might add $1,000 of value to a manufactured home community. That's a 500% return on investment. And that's a lot better than any of the aforementioned stocks have produced lately. In fact, compared to the current stock market, if the bush was worth $10, it would still be better than the market has produced. And, unlike the market, at least the bush creates oxygen and has other productive uses.
So why is landscaping so important in a manufactured home community? Well, have you looked around recently? Most communities are not cornering the market on pretty. And landscaping has two functions:
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It hides the hideous from view.
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It creates beauty where there may be none.
In other words, you can hide those ugly homes, and trash dumpsters, and other eyesores with a well placed hedge or tree line. And bushes and trees are just naturally pretty. Especially ones that flower. It is amazing what a little landscaping can do to the aesthetics of a property.
So where do you begin a landscaping plan? At the entrance to the community. Every community should have a knock-out entry. It gives the customer a favorable first impression, and that's important to create since, later on, the property may not be worthy of its early favorable impression. A little color at the entry would be nice, but try and stay away from seasonal color, or anything that requires special attention or irrigation. Beyond the entrance, you need to figure out which lots need bushes or trees to look their best. Especially focus on highly-visible corner lots or lots which have curve-in-the-road visibility.
Some important considerations are:
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Choose only hardy native plants. Plants that are built to withstand the local temperatures and rainfall. I don't care if none of the plants in your region turn you on those are the only ones that are going to survive year after year. And planting a bush or tree that is not going to survive in perpetuity is a complete waste of time and money. An example is the community I once saw where the new owner had planted a bunch of palm trees around his swimming pool, in an area that always freezes in winter. You guessed it, a year later they were all dead. What's the point of that exercise? You can easily find a complete list of native plants on the internet or your local bookstore. And if you look hard enough, you should find something that looks appealing to you.
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Never pick plants that need a lot of water. Because nobody is ever going to water them correctly or at all. Even on rare occasions where you have landscape irrigation systems, good luck having them operate on a regular basis without a glitch. And it only takes a few days of lack of water to kill a plant that is very needy of water. Cactus, in some areas, may be the natural and correct conclusion. If you plant a bush or tree that needs constant irrigation, and you are not going to make sure to water it all the time, it's going to die. Even if it lives for three years and then dies, you've accomplished nothing.
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Choose something that is a quality shrub or tree at maturity not just fast growing. In Texas, people often plant Hackberrys because they grow like crazy. But fifteen years later, all you have is a tree that blows down easily and breaks easily, and gets disease and, frankly, doesn't look very pretty. So you have really accomplished nothing. Quality trees take longer to grow, but they live for 100 years or more and are a real asset upon maturity.
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Sometimes, you can choose shrubs or trees that actually do a job for you. The easiest example of this is shade. A tree that casts shade on the community clubhouse may save you a fortune in electrical bills from less air-conditioning. Another example is using a voracious "drinking" tree to dry up an area that has too much moisture. I once knew a community owner who had a septic problem one area of the property was too saturated. So he planted some mimosa trees, and the problem went away in short order.
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When using shrubs and trees to block the visibility of an eyesore, be sure to pick one that is evergreen. If you pick a deciduous one, the leaves will fall off in winter and you will have defeated your purpose. At the time of year when you plant trees and bushes, they always have their leaves on, so be sure and ask if they stay on winter approaches. I never plant anything that is not evergreen, with the exception of crepe myrtles, which give such an outstanding job of color in the summer that you don't mind them turning into glorified sticks in winter (plus they are normally an understory tree, only used to create color anyway).
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Don't plant shrubs or trees too close together. This is a common neophyte mistake. It looks fuller initially, but they start to die as they mature due to fighting for the same water and light, and in the end the entire effect of a mature hedge is ruined it looks like missing teeth.
One of the key reasons why planting a bush or tree is your all-time best investment is that they get better year after year, without any additional investment in them. Mother Nature provides the water (hopefully) and sun to make the plant grow and flourish. And every year it just gets bigger and prettier, without any effort on your part. What other item in your community can boast that. Roads? Pool? Not hardly.
Sure, plants can be a nuisance to the manufactured home community owner. Tree roots can cause sewer line problems in clay-tile systems. And they can push up concrete sidewalks. And leaves can fall all over the ground (I warned you to only plant evergreens). And they need pruning annually, and sometimes they die and require removal. But look at all you get for that little effort! I have seen properties that people rave over (and bring in significantly more lot rent) strictly as a result of great landscaping. You don't have to have topiary style perfection. But nice landscaping, within a reasonable budget, can really make the difference in getting that loan you desire or that sale of your community for big bucks.
So the next time you are at Home Depot looking for a new lock for your community storage shed, detour over to the plants department outside. Look at all the little investments waiting there to give you a huge dividend. But like stocks, choose wisely, and your investment will grow into something really beautiful and tangible. See, there really is a "bush" that is productive and worthwhile to have around! (Sorry George, but its election season). So get out that green thumb, and a shovel, and get to work on your community.
Wednesday, October 13, 2010
Tuesday, October 12, 2010
Get All of the Leaks Out of Your Park Water System
Mobile home park tenants use, on average, about $30 per month of water & sewer. In some parks, however, that amount can run around $100 per occupied lot. Whenever you become suspicious that your water is running too high, here are the steps to find out where the water is going and proactively solve the problem.
Install water meters and read them.
Even if you have no interest in billing back tenants for their actual use, there is no way to track where the water is going without measuring how much tenants use. This will help you identify if your usage problems are tied to just a few tenants who abuse the system. I once had a tenant who was spending $600 per month in water. How? He sneaked into the park a large commercial construction water truck, and filled it up with his hose every night. That one tenant was the entire source of my water problem, and I found him through sub-metering.
Compare the master meter reading to the individual lot aggregate.
Once you have the individual readings, you can now add them up and see if they are the same as your master reading, from the main meter that you get your bill from. The difference between these two readings is the amount of water leaking in your system. Most parks have a small amount of leakage, so don't demand perfection. If, however, the difference is significant (say many thousands of gallons), you have a real problem.
Look for visual signs of leaks.
Before you put a lot of money into testing, see if you can find the leak yourself by walking the property and looking for signs of saturated land and tall, green grass. While this can also be caused by artesian wells and sewer line leakage, big-time saturation requires the kind of constant water pressure in line with a serious leak. Fix these leaks and see what the impact is to your readings.
If that fails, then hire a leak detection company.
It is amazing what a leak detection company can find. Don't ask me how they do it, as I do not fully understand the science. But I have been the thankful recipient of their work. The world record was a leak that had no surfaced evidence of any type, but it was huge maybe 400,000 gallons per month. That would fill 20 commercial hotel swimming pools. In the end, it turned out to be a crime scene someone who had their house downstream on a creek had tapped into the park's main line and run a line to the creek so that the babbling brook was running year round.
Once you find the leaks in the system, fix them.
Regardless of the cost, there is no way that you will be money ahead by letting them keep on leaking. The only exception is the natural, tiny leaks of a large system, caused by trace seepage in the connections.
Before you start evicting tenants for water use abuse, find out why it's occurring.
One of the best things you can do when exploring where your water is going, is to hire a plumber to come out to the park at 10 am on a weekday, and take all the clean out covers off and listen for running water. Most lots will have none. But some will have Niagara falls going down the line even though nobody is home! Why? Because they have all kinds of leaks in their house. Toilet leaks, leaky faucets, you name it. I once had a tenant who left all of his taps running 24/7 because they were broken and he couldn't turn them off. In these cases, you are better off having the plumber go to these tenants' houses and spend 30 minutes to fix their leaks, rather than evict them and try to find a new tenant. If you evict a tenant, you will have court costs, loss of income, and probably an outgo of cash as an incentive to bring in a new home. If you can fix the leaks for $100 you are much better off.
Conclusion
Water and sewer is the largest line item expense for most mobile home parks. That means that saving money on it is going to be the biggest savings you can make. Your park usage is not magic, it is just science. If you take these steps you can get a complete handle on where the water is going, and then take steps to reduce the usage. Always remember that, assuming a 10% cap rate, even an $80 per month savings increases the value of your park by nearly $10,000. And you should be able to save much, much more than that.
Install water meters and read them.
Even if you have no interest in billing back tenants for their actual use, there is no way to track where the water is going without measuring how much tenants use. This will help you identify if your usage problems are tied to just a few tenants who abuse the system. I once had a tenant who was spending $600 per month in water. How? He sneaked into the park a large commercial construction water truck, and filled it up with his hose every night. That one tenant was the entire source of my water problem, and I found him through sub-metering.
Compare the master meter reading to the individual lot aggregate.
Once you have the individual readings, you can now add them up and see if they are the same as your master reading, from the main meter that you get your bill from. The difference between these two readings is the amount of water leaking in your system. Most parks have a small amount of leakage, so don't demand perfection. If, however, the difference is significant (say many thousands of gallons), you have a real problem.
Look for visual signs of leaks.
Before you put a lot of money into testing, see if you can find the leak yourself by walking the property and looking for signs of saturated land and tall, green grass. While this can also be caused by artesian wells and sewer line leakage, big-time saturation requires the kind of constant water pressure in line with a serious leak. Fix these leaks and see what the impact is to your readings.
If that fails, then hire a leak detection company.
It is amazing what a leak detection company can find. Don't ask me how they do it, as I do not fully understand the science. But I have been the thankful recipient of their work. The world record was a leak that had no surfaced evidence of any type, but it was huge maybe 400,000 gallons per month. That would fill 20 commercial hotel swimming pools. In the end, it turned out to be a crime scene someone who had their house downstream on a creek had tapped into the park's main line and run a line to the creek so that the babbling brook was running year round.
Once you find the leaks in the system, fix them.
Regardless of the cost, there is no way that you will be money ahead by letting them keep on leaking. The only exception is the natural, tiny leaks of a large system, caused by trace seepage in the connections.
Before you start evicting tenants for water use abuse, find out why it's occurring.
One of the best things you can do when exploring where your water is going, is to hire a plumber to come out to the park at 10 am on a weekday, and take all the clean out covers off and listen for running water. Most lots will have none. But some will have Niagara falls going down the line even though nobody is home! Why? Because they have all kinds of leaks in their house. Toilet leaks, leaky faucets, you name it. I once had a tenant who left all of his taps running 24/7 because they were broken and he couldn't turn them off. In these cases, you are better off having the plumber go to these tenants' houses and spend 30 minutes to fix their leaks, rather than evict them and try to find a new tenant. If you evict a tenant, you will have court costs, loss of income, and probably an outgo of cash as an incentive to bring in a new home. If you can fix the leaks for $100 you are much better off.
Conclusion
Water and sewer is the largest line item expense for most mobile home parks. That means that saving money on it is going to be the biggest savings you can make. Your park usage is not magic, it is just science. If you take these steps you can get a complete handle on where the water is going, and then take steps to reduce the usage. Always remember that, assuming a 10% cap rate, even an $80 per month savings increases the value of your park by nearly $10,000. And you should be able to save much, much more than that.
Monday, October 11, 2010
How to Evaluate a Mobile Home Park By It's Grass
Of all the barometers of park performance, from a profit and loss statement to the annual license renewal, one of the crudest and simplest is the fine art of analyzing grass. Because you can tell a lot about a mobile home park just from looking at the grass.
The simplest first question is: "is there any grass?" If not, you may be in a desert, or under water. But if there is grass present, then here are some of the things to look for:
*Is the grass green in some areas when it's brown everywhere else (in summer)? This may be a tell-tale sign of water and/or sewer leaks. Anything that puts moisture in the earth is going to result in healthier, greener grass. When you spot these lush oasis in an otherwise burned out park grassland, you will probably find it spongy and saturated. If the green grass is in the general line of the main (at the back of the trailer) then it may be a break in a main line. If it is near the house, it may be a break in the line that feeds just that one house. The same is true about the sewer line. A clay tile sewer system with a collapse or separation in the line will continually leak moisture and give grass a boost. When figuring out park leaks, green grass is the first place you head.
*Is the grass brown in some areas when it's green everywhere else (in summer)? This may be a sign of an underground natural gas leak. If your park is on master-metered natural gas, and you see brown patches throughout the park, then you may have significant gas leaks to contend with. Had I known this on my very first park, I could have saved a fortune by not buying it, or negotiating for the seller to fix the leaks. Natural gas kills grass.
*Is the grass dead in a neat rectangle in the middle of a vacant lot? That means that a mobile home was just moved out of the lot. Due to the continual lack of sunshine under the trailer that was removed, the soil is relatively infertile and grass won't grow there for some time. When evaluating which vacant lots are already set up with utilities for occupancy, then look for big, dead rectangles. The same is true when you are looking for recent pull-outs and decline in occupancy.
*Is the grass un-mowed on each tenant's lot? That is a good sign that the tenants lack "pride of ownership". This will be a real problem with getting a loan on the park. Banks like to see a park where the tenants respect where they live and keep their lots looking clean and mowed. A park where nobody is mowing means they may also not be observing other key rules, such as paying their rent on time, or at all. You need to put in more diligence on a park with this problem.
*Is the grass un-mowed on the park's common areas? This could be a sign that the park management is not doing their job. Since mowing grass is not rocket science, if they can't manage that effectively, how can they manage more complicated issues like repair and maintenance and collections?
*Is the grass around the parking pads missing, and replaced with just dirt? This is a sign that tenants have more than the two cars the parking pad allows, and are parking at night up in their yards. This is something you would only know if you visited at night. The deader the grass, the more they are parking on it.
*Are the tenants smoking grass? Welcome to the mobile home park business.
In summary, grass is not as stupid as it looks. It knows quite a lot about a park it is very observant of its weaknesses, even when they remain unseen by the human eye. So take notice of the grass and let it guide you to where the problems are.
The simplest first question is: "is there any grass?" If not, you may be in a desert, or under water. But if there is grass present, then here are some of the things to look for:
*Is the grass green in some areas when it's brown everywhere else (in summer)? This may be a tell-tale sign of water and/or sewer leaks. Anything that puts moisture in the earth is going to result in healthier, greener grass. When you spot these lush oasis in an otherwise burned out park grassland, you will probably find it spongy and saturated. If the green grass is in the general line of the main (at the back of the trailer) then it may be a break in a main line. If it is near the house, it may be a break in the line that feeds just that one house. The same is true about the sewer line. A clay tile sewer system with a collapse or separation in the line will continually leak moisture and give grass a boost. When figuring out park leaks, green grass is the first place you head.
*Is the grass brown in some areas when it's green everywhere else (in summer)? This may be a sign of an underground natural gas leak. If your park is on master-metered natural gas, and you see brown patches throughout the park, then you may have significant gas leaks to contend with. Had I known this on my very first park, I could have saved a fortune by not buying it, or negotiating for the seller to fix the leaks. Natural gas kills grass.
*Is the grass dead in a neat rectangle in the middle of a vacant lot? That means that a mobile home was just moved out of the lot. Due to the continual lack of sunshine under the trailer that was removed, the soil is relatively infertile and grass won't grow there for some time. When evaluating which vacant lots are already set up with utilities for occupancy, then look for big, dead rectangles. The same is true when you are looking for recent pull-outs and decline in occupancy.
*Is the grass un-mowed on each tenant's lot? That is a good sign that the tenants lack "pride of ownership". This will be a real problem with getting a loan on the park. Banks like to see a park where the tenants respect where they live and keep their lots looking clean and mowed. A park where nobody is mowing means they may also not be observing other key rules, such as paying their rent on time, or at all. You need to put in more diligence on a park with this problem.
*Is the grass un-mowed on the park's common areas? This could be a sign that the park management is not doing their job. Since mowing grass is not rocket science, if they can't manage that effectively, how can they manage more complicated issues like repair and maintenance and collections?
*Is the grass around the parking pads missing, and replaced with just dirt? This is a sign that tenants have more than the two cars the parking pad allows, and are parking at night up in their yards. This is something you would only know if you visited at night. The deader the grass, the more they are parking on it.
*Are the tenants smoking grass? Welcome to the mobile home park business.
In summary, grass is not as stupid as it looks. It knows quite a lot about a park it is very observant of its weaknesses, even when they remain unseen by the human eye. So take notice of the grass and let it guide you to where the problems are.
Saturday, October 9, 2010
HOW THE OBAMA PRESIDENCY WILL EFFECT THE MOBILE HOME PARK INDUSTRY
The election is over and the President-elect is Barrack Obama. While that ends a lot of uncertainty over the general direction of the government, it only opens new worries over what this means to the economy and, on the micro scale, the mobile home park industry. Will Obama help improve the mobile home and mobile home park industry? Or will he further damage the already anemic manufacturing part of the industry, and cause new problems for the still resilient mobile home park part of the business?
These are the potential effects of the Obama presidency on the mobile home and mobile home park industries:
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Improved conditions for financing. Obama appears poised to aggressively attack the still horrible environment for getting a loan. If he can accomplish this, it will make it easier to buy a mobile home and to buy a mobile home park. It is always easier for the new guy to heap the blame on the old leader and then come up with a radical plan to fix the problem. With $700 billion already at his disposal, and some great thinkers on the staff, there is new hope that the problem can be eased (but not eliminated). That's good news for both mobile home parks and manufacturing.
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Improved Odds of Solving the Auto Industry Meltdown and Saving Their Workers. Obama appears to have an appetite to try and save the millions of manufacturing jobs that will be lost if the nation's auto makers shut down. Since such workers are heavy users of mobile homes and mobile home parks, this is a plus for both segments of the industry. Although he may not be able to pull it off, at least he appears willing to give it a chance. The failure to solve the U.S. auto industry problem is definitely bad for both mobile home manufacturers and mobile home parks located in states such as Michigan.
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More Money in Lower-Income Workers Pockets. Since most mobile home customers are the lower earning part of the workforce, Obama's initiatives to reduce taxes and increase supplements for this segment of the population is a great thing for mobile home parks and manufacturers. A $2,000 annual savings from a family of four under Obama represents, in some parks, lot rent for a year, as well as a down payment on a new mobile home.
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Hope May Lead to Better Consumer Spending. Since consumers are the biggest part of our economy, and since Obama seems to inspire hope in the average American, perhaps they will keep on spending rather than pulling back. This may lead to a more mild recession, and that is good for both mobile home parks and manufacturers.
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Reduction of Military Spending May Allow For Stimulating Other Parts of the Economy. One of Obama's campaign stances was to end the war in Iraq and bring the troops home. If he accomplishes this, it will save billions of dollars that can be put into productive programs, and potentially improve the economy. And a better economy is good for both mobile home parks and manufacturers. In addition, bringing home troops will be a boon for parks located near army bases. These parks have seen a lot of vacancy issues as a result of troops deploying to Iraq. When they come home, they have to have somewhere to live, and the parks are more than happy to accommodate that.
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Elimination of the Captial Gains Tax. This is one of Obama's tax strategies, according to some experts. Clearly, this would be devastating for the real estate industry, as it has been built into all budgets and proformas for years, and was seen as one of the big advantages to real estate investing. However, one factor that will mitigate this for park owners is the fact that most parks have a positive cash flow (the industry norm would be 10%), so unlike raw land and other non-income producting assets, or ones that produce little cash flow like office buildings, mobile home park owners will at least be able to wait out if the tax is reinstated, or hold out for a better price while the ramifications are digested.
In summary, the net effect of the Obama presidency is generally good for the mobile home park and manufacturing industries. Although many business leaders championed McCain as the solution for near-term problems, it may just be that Obama can deliver more economic solutions than McCain could have. Franklin Roosevelt was able to lead America out of the depression offering a message of hope. Now it's Obama's turn to give it a try.
These are the potential effects of the Obama presidency on the mobile home and mobile home park industries:
*
Improved conditions for financing. Obama appears poised to aggressively attack the still horrible environment for getting a loan. If he can accomplish this, it will make it easier to buy a mobile home and to buy a mobile home park. It is always easier for the new guy to heap the blame on the old leader and then come up with a radical plan to fix the problem. With $700 billion already at his disposal, and some great thinkers on the staff, there is new hope that the problem can be eased (but not eliminated). That's good news for both mobile home parks and manufacturing.
*
Improved Odds of Solving the Auto Industry Meltdown and Saving Their Workers. Obama appears to have an appetite to try and save the millions of manufacturing jobs that will be lost if the nation's auto makers shut down. Since such workers are heavy users of mobile homes and mobile home parks, this is a plus for both segments of the industry. Although he may not be able to pull it off, at least he appears willing to give it a chance. The failure to solve the U.S. auto industry problem is definitely bad for both mobile home manufacturers and mobile home parks located in states such as Michigan.
*
More Money in Lower-Income Workers Pockets. Since most mobile home customers are the lower earning part of the workforce, Obama's initiatives to reduce taxes and increase supplements for this segment of the population is a great thing for mobile home parks and manufacturers. A $2,000 annual savings from a family of four under Obama represents, in some parks, lot rent for a year, as well as a down payment on a new mobile home.
*
Hope May Lead to Better Consumer Spending. Since consumers are the biggest part of our economy, and since Obama seems to inspire hope in the average American, perhaps they will keep on spending rather than pulling back. This may lead to a more mild recession, and that is good for both mobile home parks and manufacturers.
*
Reduction of Military Spending May Allow For Stimulating Other Parts of the Economy. One of Obama's campaign stances was to end the war in Iraq and bring the troops home. If he accomplishes this, it will save billions of dollars that can be put into productive programs, and potentially improve the economy. And a better economy is good for both mobile home parks and manufacturers. In addition, bringing home troops will be a boon for parks located near army bases. These parks have seen a lot of vacancy issues as a result of troops deploying to Iraq. When they come home, they have to have somewhere to live, and the parks are more than happy to accommodate that.
*
Elimination of the Captial Gains Tax. This is one of Obama's tax strategies, according to some experts. Clearly, this would be devastating for the real estate industry, as it has been built into all budgets and proformas for years, and was seen as one of the big advantages to real estate investing. However, one factor that will mitigate this for park owners is the fact that most parks have a positive cash flow (the industry norm would be 10%), so unlike raw land and other non-income producting assets, or ones that produce little cash flow like office buildings, mobile home park owners will at least be able to wait out if the tax is reinstated, or hold out for a better price while the ramifications are digested.
In summary, the net effect of the Obama presidency is generally good for the mobile home park and manufacturing industries. Although many business leaders championed McCain as the solution for near-term problems, it may just be that Obama can deliver more economic solutions than McCain could have. Franklin Roosevelt was able to lead America out of the depression offering a message of hope. Now it's Obama's turn to give it a try.
Wednesday, October 6, 2010
Do Mobile Homes Have A Shelf Life?
Am I supposed to take the roof off and smell manufactured homes to see if they've spoiled like milk? Do they have an expiration date stamped on the frame? Can you fit one in a curbside polycart?
If not, then why, as a community owner, do I get asked all the time by banks, buyers, residents even at cocktail parties how long a manufactured home is expected to last? Is the correct answer "forever", or are manufactured homes truly temporary and disposable?
The construction process
A manufactured home is made predominantly out of wood and metal. A stick-built home is also made out of wood and metal. So why is one permanent and one temporary? Sure, the manufactured home is lighter than the stick-built home. This is mainly due to the absence of any masonry (bricks, fireplaces, etc.) and the fact that, by design, the framing is reduced. But the actual materials are the same in a manufactured home as in a stick-built one. Do these materials ever wear out? I live in a 200 year old house. Other than the stone walls, it is made of wood and metal. And I don't have any doubts it can go another 200 years. I grew up in a house that was 50 years old, and it's still standing today. In fact, I never hear of anyone who had to abandon a home because the wood and metal finally wore out. It just doesn't do that. Properly cared for, the components that make up a manufactured home should last forever.
So what about the design? Well, the design is not temporary in nature. If anything, the manufactured home design would imply a longer life span than a stick-built home. Rather than a foundation which can shift and crack over time, the manufactured home is on a metal chassis that should last forever. Additionally, the simple roof design, if kept up, keeps the possibility of moisture intrusion lower in the manufactured home. No, there is nothing about the design that would imply a lack of longevity.
Use and ability to wear out
You live in a manufactured home. You live in a stick-built home. What's the difference? The regular course of business in a home is to get up, go to work, come home, cook dinner, watch some T.V., go to bed. How is this going to wear out a manufactured home any quicker than it does a stick-built? Many people point to the rowdy lifestyle found in some one-star manufactured home communities. But with the exception of this subset, which would tear up a stick-built home with the same speed, where is the damage going to come from to destroy the manufactured home? From turning the door-knob too many times? From walking the same path from the living room to the kitchen over and over?
I can't see where the stress is coming from to render a manufactured home temporary and a stick-built permanent.
Obsolescence
At some point in a manufactured home's life does it wake up to find that it is obsolete? How can that happen? As a dwelling, the general pattern of American tastes has not changed that much over the last 100 years or more. Most people expect bedrooms, bathrooms, kitchens, living rooms, closets and the like in their homes. Are we expecting one day that all consumers demand an in-home movie theater and start to abandon all homes that do not have one? And if that did occur, why would they only abandon the manufactured homes and not the stick-built?
If we're going to be picky, let's remember that the manufactured home business has only been around since about the 1940s. And HUD code homes since 1976. But there's a ton of stick-built inventory that is from the 1800s almost 100 years earlier. If something's going to go obsolete, it would be that older stick-built housing, right? I live near St. Louis, and there are thousands of dwellings there built around the time of Abraham Lincoln, with tiny bedrooms and bathrooms that were installed later after the outhouse went out of fashion. I think we should be reviewing those in a conversation of housing obsolescence before we even bring up manufactured housing, don't you?
Maintenance cost
Well, maybe the problem is the cost to maintain manufactured homes, or the existence of replacement parts. But wait a minute. Manufactured homes are normally built with metal exteriors. That's going to hold up a lot longer than a frame house. And the average roof only needs to be coated with roofing compound every so often no shingles to replace. And the foundation looks good because there is no foundation. To level a manufactured home takes a couple hours. To level a stick-built home takes a fortune.
On the interior, you're talking about paint and carpet. The same as a stick-built home.
Sure, I worry about my Dodge Durango one day not having parts available, but that concern is ill-founded with manufactured homes.
Government intervention
I hear all the time that old manufactured homes will one day be phased out. By who? Cities often have codes now that require certain dates or earlier on new homes coming into manufactured home communities. But that does not apply to homes already sited in them. Those are grandfathered.
And let's be honest. There is a ton of single-family stick-built inventory out there that does not meet current code, either. One of the challenges of remodeling older stick-built homes is not triggering an end to all of the things that were grandfathered, such as inferior wiring, plumbing, setbacks, fire-codes, and the like.
Nope, manufactured homes are not likely to be outlawed.
So where does the "temporary" concept come from?
I suspect from two different sources.
First, the U.S. Government. With every modern weather catastrophe, FEMA rushes in with manufactured homes as temporary housing until real stick-built homes can be built and re-built. So they have created the impression that manufactured homes are not worthy of being lived in over the long term. They re-stress this point at least once a year during hurricane season. And they blast it all over the media.
The government did the same thing in the industry's formative years, offering it as "temporary" housing at military bases and, later, colleges on the GI bill. So they have been promoting this negative publicity for virtually the entire history of manufactured housing.
The other source is manufactured home dealers, themselves.
They constantly advertise and promote the concept of "trading in your old home for a new one". Just like a car. So the suggestion is that your manufactured home is only good for a few years, and then time to get a better model. When was the last time you saw Pulte or Lennar make this sales push?
The dealers also ruin things by putting old, destroyed manufactured homes out on their lots, or in fields next to dealerships, for all to see. These homes are normally trade-ins that are in such poor condition that nobody would ever buy one. But by putting them there in public view, it tells everyone who passes by what a disposable product it is that it just completely falls apart over time. If these homes were at least skirted and painted it would be different. But the dealers seem to have no problem leaving them there, leaning over to one side with the windows and doors missing and insulation blowing out from underneath.
Can you imagine a new car dealer having old wrecks rusting near their entrance?
Conclusion
As always, the urban legend of temporary, disposable manufactured homes is the result of poor marketing and public relations by the industry, not based on fact.
I am sorry to say that I have never seen any literature at any dealer, internet site, or association headquarters that tells the story of why manufactured homes last forever. So why would be expect anyone to know any better?
But then again, what would I expect from a manufacturing and retail industry that can't seem to ever do anything right? Thank heavens I'm in the community side of the business.
If not, then why, as a community owner, do I get asked all the time by banks, buyers, residents even at cocktail parties how long a manufactured home is expected to last? Is the correct answer "forever", or are manufactured homes truly temporary and disposable?
The construction process
A manufactured home is made predominantly out of wood and metal. A stick-built home is also made out of wood and metal. So why is one permanent and one temporary? Sure, the manufactured home is lighter than the stick-built home. This is mainly due to the absence of any masonry (bricks, fireplaces, etc.) and the fact that, by design, the framing is reduced. But the actual materials are the same in a manufactured home as in a stick-built one. Do these materials ever wear out? I live in a 200 year old house. Other than the stone walls, it is made of wood and metal. And I don't have any doubts it can go another 200 years. I grew up in a house that was 50 years old, and it's still standing today. In fact, I never hear of anyone who had to abandon a home because the wood and metal finally wore out. It just doesn't do that. Properly cared for, the components that make up a manufactured home should last forever.
So what about the design? Well, the design is not temporary in nature. If anything, the manufactured home design would imply a longer life span than a stick-built home. Rather than a foundation which can shift and crack over time, the manufactured home is on a metal chassis that should last forever. Additionally, the simple roof design, if kept up, keeps the possibility of moisture intrusion lower in the manufactured home. No, there is nothing about the design that would imply a lack of longevity.
Use and ability to wear out
You live in a manufactured home. You live in a stick-built home. What's the difference? The regular course of business in a home is to get up, go to work, come home, cook dinner, watch some T.V., go to bed. How is this going to wear out a manufactured home any quicker than it does a stick-built? Many people point to the rowdy lifestyle found in some one-star manufactured home communities. But with the exception of this subset, which would tear up a stick-built home with the same speed, where is the damage going to come from to destroy the manufactured home? From turning the door-knob too many times? From walking the same path from the living room to the kitchen over and over?
I can't see where the stress is coming from to render a manufactured home temporary and a stick-built permanent.
Obsolescence
At some point in a manufactured home's life does it wake up to find that it is obsolete? How can that happen? As a dwelling, the general pattern of American tastes has not changed that much over the last 100 years or more. Most people expect bedrooms, bathrooms, kitchens, living rooms, closets and the like in their homes. Are we expecting one day that all consumers demand an in-home movie theater and start to abandon all homes that do not have one? And if that did occur, why would they only abandon the manufactured homes and not the stick-built?
If we're going to be picky, let's remember that the manufactured home business has only been around since about the 1940s. And HUD code homes since 1976. But there's a ton of stick-built inventory that is from the 1800s almost 100 years earlier. If something's going to go obsolete, it would be that older stick-built housing, right? I live near St. Louis, and there are thousands of dwellings there built around the time of Abraham Lincoln, with tiny bedrooms and bathrooms that were installed later after the outhouse went out of fashion. I think we should be reviewing those in a conversation of housing obsolescence before we even bring up manufactured housing, don't you?
Maintenance cost
Well, maybe the problem is the cost to maintain manufactured homes, or the existence of replacement parts. But wait a minute. Manufactured homes are normally built with metal exteriors. That's going to hold up a lot longer than a frame house. And the average roof only needs to be coated with roofing compound every so often no shingles to replace. And the foundation looks good because there is no foundation. To level a manufactured home takes a couple hours. To level a stick-built home takes a fortune.
On the interior, you're talking about paint and carpet. The same as a stick-built home.
Sure, I worry about my Dodge Durango one day not having parts available, but that concern is ill-founded with manufactured homes.
Government intervention
I hear all the time that old manufactured homes will one day be phased out. By who? Cities often have codes now that require certain dates or earlier on new homes coming into manufactured home communities. But that does not apply to homes already sited in them. Those are grandfathered.
And let's be honest. There is a ton of single-family stick-built inventory out there that does not meet current code, either. One of the challenges of remodeling older stick-built homes is not triggering an end to all of the things that were grandfathered, such as inferior wiring, plumbing, setbacks, fire-codes, and the like.
Nope, manufactured homes are not likely to be outlawed.
So where does the "temporary" concept come from?
I suspect from two different sources.
First, the U.S. Government. With every modern weather catastrophe, FEMA rushes in with manufactured homes as temporary housing until real stick-built homes can be built and re-built. So they have created the impression that manufactured homes are not worthy of being lived in over the long term. They re-stress this point at least once a year during hurricane season. And they blast it all over the media.
The government did the same thing in the industry's formative years, offering it as "temporary" housing at military bases and, later, colleges on the GI bill. So they have been promoting this negative publicity for virtually the entire history of manufactured housing.
The other source is manufactured home dealers, themselves.
They constantly advertise and promote the concept of "trading in your old home for a new one". Just like a car. So the suggestion is that your manufactured home is only good for a few years, and then time to get a better model. When was the last time you saw Pulte or Lennar make this sales push?
The dealers also ruin things by putting old, destroyed manufactured homes out on their lots, or in fields next to dealerships, for all to see. These homes are normally trade-ins that are in such poor condition that nobody would ever buy one. But by putting them there in public view, it tells everyone who passes by what a disposable product it is that it just completely falls apart over time. If these homes were at least skirted and painted it would be different. But the dealers seem to have no problem leaving them there, leaning over to one side with the windows and doors missing and insulation blowing out from underneath.
Can you imagine a new car dealer having old wrecks rusting near their entrance?
Conclusion
As always, the urban legend of temporary, disposable manufactured homes is the result of poor marketing and public relations by the industry, not based on fact.
I am sorry to say that I have never seen any literature at any dealer, internet site, or association headquarters that tells the story of why manufactured homes last forever. So why would be expect anyone to know any better?
But then again, what would I expect from a manufacturing and retail industry that can't seem to ever do anything right? Thank heavens I'm in the community side of the business.
Tuesday, October 5, 2010
BUYING A MOBILE HOME PARK IS LIKE FLYING AN AIRPLANE
Everyone knows that commercial air travel is the safest in the world. But that's because of the high level of training of the pilots. From the pre-flight checklist, to the flight plan, to dealing with problems in the air, the pilot knows everything about what they're doing. The pilot who successfully landed in the Hudson River recently, did so because he knew every possible strategy of what to do in an emergency - he knew the options and could make an intelligent decision.
To succeed in the mobile home park business, you need the same amount of knowledge as those pilots. We offer educational products designed to give you as complete a picture on the mobile home park business as you will need to succeed - everything from how to differentiate a good deal from a bad one, how to find a park to buy, to how to do successful due diligence on it and operate it successfully. We cover every aspect from day one to selling the park you have purchased down the road.
There was a guy in Dallas who saved for years to buy a private plane. But he didn't want to invest the time or money in learning how to fly it. So he bought it and decided to try and fly it (this is a true story). He brought the whole family out to watch his initial voyage. He got about ten feet off the ground and then crashed and blew up. In the same way, we get calls at the site frequently from people who have bought mobile home parks without any prior training, and are already in trouble with them. When we review the deal with them, we are horrified that they have bought deals that make no economic sense, and there is no possible solution. This is as troubling for us as it is for the site visitor.
Mobilehomeparkstore.com has produced these materials to offer you a complete mastery of investing in mobile home parks. These are not promotional materials filled with stories of how much money you will make. These are real-life manuals on the technical aspects of the industry, written by two guys who have bought, operated and sold over $100,000,000 in mobile home parks. If you are going to get into the business, you need to know what you are doing, for the sake of you and your family. This is how to do it:
Search products offered through MobileHomeParkStore.com
We also offer a layaway plan in which you can pay over a series of months. We have tried to make everything we do more than affordable. Some people say we price our things too cheap, based on the sheer quantity of material.
What's important is that you know what you are doing before you even think about buying that first park. Remember the old quote:
"Think like a man of action. Act like a man of thought". To succeed in the mobile home park business is more than just action. And all of the information you need is right at your fingertips, at Mobilehomeparkstore.com
To succeed in the mobile home park business, you need the same amount of knowledge as those pilots. We offer educational products designed to give you as complete a picture on the mobile home park business as you will need to succeed - everything from how to differentiate a good deal from a bad one, how to find a park to buy, to how to do successful due diligence on it and operate it successfully. We cover every aspect from day one to selling the park you have purchased down the road.
There was a guy in Dallas who saved for years to buy a private plane. But he didn't want to invest the time or money in learning how to fly it. So he bought it and decided to try and fly it (this is a true story). He brought the whole family out to watch his initial voyage. He got about ten feet off the ground and then crashed and blew up. In the same way, we get calls at the site frequently from people who have bought mobile home parks without any prior training, and are already in trouble with them. When we review the deal with them, we are horrified that they have bought deals that make no economic sense, and there is no possible solution. This is as troubling for us as it is for the site visitor.
Mobilehomeparkstore.com has produced these materials to offer you a complete mastery of investing in mobile home parks. These are not promotional materials filled with stories of how much money you will make. These are real-life manuals on the technical aspects of the industry, written by two guys who have bought, operated and sold over $100,000,000 in mobile home parks. If you are going to get into the business, you need to know what you are doing, for the sake of you and your family. This is how to do it:
Search products offered through MobileHomeParkStore.com
We also offer a layaway plan in which you can pay over a series of months. We have tried to make everything we do more than affordable. Some people say we price our things too cheap, based on the sheer quantity of material.
What's important is that you know what you are doing before you even think about buying that first park. Remember the old quote:
"Think like a man of action. Act like a man of thought". To succeed in the mobile home park business is more than just action. And all of the information you need is right at your fingertips, at Mobilehomeparkstore.com
Sunday, October 3, 2010
HOW I MADE A MILLION DOLLARS WITH A MOBILE HOME PARK
The mobile home park industry is terribly misunderstood. There is massive opportunity, but everybody is looking in all the wrong places. Why? Because mobile home park investing, properly done, requires trusting in the opposite of what your initial instincts are. That's because it is an unusual investment real estate niche that does not work like apartments, single-family homes, duplexes, or any other form of housing you have ever seen before. And its advantages make those other forms of investment appear pale by comparison.
In most forms of real estate, the more upscale the property, whether it's a Class A skyscraper, or prime retail anchored by Chanel and Polo, the more valuable it is. And in most real estate niches, you have to take a lot of risk and leverage to play the game. Well, forget all that with mobile home parks. It's all about the downscale part of the market, and seller carry if you want to make a million dollars. Here's one example.
I bought my first park for $400,000 with $10,000 down and the seller carrying a $390,000 mortgage with no personal recourse. The location was near downtown Dallas, and the neighborhood was horrible. But the park served a clear purpose it was affordable detached housing for people with low incomes. The reason I could buy it so cheap and with so little down was that it showed terribly no sane person would buy a dump like that with so much deferred maintenance.
Of course, the deferred maintenance was mostly cosmetic. It was nothing that paint, an edger, a mower, some tree trimming, some trash collection and some pothole repair could not resolve. But even then, there were the collections problems, lack of management and a virtual culture of non-payment and no respect for park rules. All of that had to be corrected through evictions and non-renewal of leases. Sure, it was unpleasant. But it was necessary.
Once I had cleared out the bad element, I had to focus on attracting new customers, and to bringing in mobile homes to occupy vacant lots. And I had to suffer through the loss of my natural gas system and problems with my master-metered electrical system. I had to put another $100,000 in capital into the park during this time, which brought my total down payment to the standard 20%.
And after surviving such tough times and harrowing moments, I was rewarded with a $1,525,000 sale to another investor group, which netted us about $1,000,000 after paying off the seller note and recapturing our down payment.
What made this story possible? While I was working on the problems, the basic business was taking care of itself. Why? Because there is always a demand for affordable housing and it costs about $3,000 to move a trailer, so you don't have to worry about customers moving out on you. In addition, I was not responsible for anything but the dirt. I did not have to run around doing repairs on homes. And the entire time this was going on, I did not have the pressure of a full recourse loan my worst case scenario was just giving the property back.
Can you do the same thing I did? Yes, if you can find a great deal and know what to do with it. I was very lucky on my deal, because I didn't know what I was doing, and I made some guesses which turned out to be pretty good. But I also made some huge, costly mistakes. But you don't have to. With our Mobile Home Park Investing Home-Study Course, we will show you exactly what the correct steps are in buying a mobile home park, and how to manage it into a profitable investment.
Will you make a million on every park you buy? Absolutely not. But we can definitely put the odds in your favor, whatever your goals are.
Go to www.mobilehomeparkstore.com or call (800) 950-1364 and learn all about mobile home park investing, and our specialty products for investors.
And one more thought. The time to find good deals is when things are bad. This is the worst recession since the Great Depression. Harness that negativity into the buying opportunity of a lifetime. You can skirt the financing void with seller carry notes. And the focus on affordable housing means that the worse things get, the more customers there are. There are about 1,250 mobile home parks available right now on our website. And there are still thousands out there that might be for sale that are not on the site yet. You should be calling on these deals and using them to achieve your dreams.
In most forms of real estate, the more upscale the property, whether it's a Class A skyscraper, or prime retail anchored by Chanel and Polo, the more valuable it is. And in most real estate niches, you have to take a lot of risk and leverage to play the game. Well, forget all that with mobile home parks. It's all about the downscale part of the market, and seller carry if you want to make a million dollars. Here's one example.
I bought my first park for $400,000 with $10,000 down and the seller carrying a $390,000 mortgage with no personal recourse. The location was near downtown Dallas, and the neighborhood was horrible. But the park served a clear purpose it was affordable detached housing for people with low incomes. The reason I could buy it so cheap and with so little down was that it showed terribly no sane person would buy a dump like that with so much deferred maintenance.
Of course, the deferred maintenance was mostly cosmetic. It was nothing that paint, an edger, a mower, some tree trimming, some trash collection and some pothole repair could not resolve. But even then, there were the collections problems, lack of management and a virtual culture of non-payment and no respect for park rules. All of that had to be corrected through evictions and non-renewal of leases. Sure, it was unpleasant. But it was necessary.
Once I had cleared out the bad element, I had to focus on attracting new customers, and to bringing in mobile homes to occupy vacant lots. And I had to suffer through the loss of my natural gas system and problems with my master-metered electrical system. I had to put another $100,000 in capital into the park during this time, which brought my total down payment to the standard 20%.
And after surviving such tough times and harrowing moments, I was rewarded with a $1,525,000 sale to another investor group, which netted us about $1,000,000 after paying off the seller note and recapturing our down payment.
What made this story possible? While I was working on the problems, the basic business was taking care of itself. Why? Because there is always a demand for affordable housing and it costs about $3,000 to move a trailer, so you don't have to worry about customers moving out on you. In addition, I was not responsible for anything but the dirt. I did not have to run around doing repairs on homes. And the entire time this was going on, I did not have the pressure of a full recourse loan my worst case scenario was just giving the property back.
Can you do the same thing I did? Yes, if you can find a great deal and know what to do with it. I was very lucky on my deal, because I didn't know what I was doing, and I made some guesses which turned out to be pretty good. But I also made some huge, costly mistakes. But you don't have to. With our Mobile Home Park Investing Home-Study Course, we will show you exactly what the correct steps are in buying a mobile home park, and how to manage it into a profitable investment.
Will you make a million on every park you buy? Absolutely not. But we can definitely put the odds in your favor, whatever your goals are.
Go to www.mobilehomeparkstore.com or call (800) 950-1364 and learn all about mobile home park investing, and our specialty products for investors.
And one more thought. The time to find good deals is when things are bad. This is the worst recession since the Great Depression. Harness that negativity into the buying opportunity of a lifetime. You can skirt the financing void with seller carry notes. And the focus on affordable housing means that the worse things get, the more customers there are. There are about 1,250 mobile home parks available right now on our website. And there are still thousands out there that might be for sale that are not on the site yet. You should be calling on these deals and using them to achieve your dreams.
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