Mobile home parks have always been viewed as the lowest-cost form of housing while dollar stores serve that same niche in the retail sector. Yet there are many more similarities between “trailer parks” and “Dollar Tree” than meets the eye. In this Mobile Home Park Mastery podcast, we’ll review the similarities and why both businesses are underappreciated – a fact that’s about to change.
Episode 281: The Many Similarities Between Mobile Home Parks And Dollar Stores Transcript
Mobile home parks are the lowest cost form of housing in the United States. And dollar stores are the lowest cost form of retail. This is Frank Rolfe with the Mobile Home Park Mastery Podcast. We're gonna talk about all the many similarities between mobile home parks and dollar stores. Now, the biggest dollar store in America is called Dollar Tree, and Dollar Tree was founded in 1986 in Virginia, and the original name was Only $1.00. And I remember shopping at the Only $1.00 store, I lived in Dallas back in the day. And the Only $1.00 store was a magical place, you could go in there and buy just about anything. It was mind-boggling all the products they could sell for $1. The problem was people wouldn't go into the store because the locations were terrible.
To go to the Only $1.00 store back in Dallas, back when they first started the concept, you had to go into some very low-demographic neighborhoods, places where you were afraid to literally park your car to go in the store, they were really off-the-rails. It was a great idea, but the problem was that the price point they were at, you simply couldn't make the numbers tie to rent nicer retail space. Now, there's a lot of similarities between what the dollar store and Dollar Tree have grown into and the mobile home park as it has also been revitalized, kind of come back to life. This rebirth that occurred starting in about the 1990s when Sam Zell got into the business. My partner Dave Reynolds got in, I got in, others got in. And the general concept was, "Hey, let's buy these old mobile home parks and bring these things back to life. There's something that's productive, something great we can do with these things, we can provide really affordable detached housing."
And that's the same thing that the founders of Dollar Tree thought when they got into that business, they thought, "Hey, you know what? We can assimilate a lot of different products here, and what they'll all have in common, they will only be at a very low price of $1." Now, the first thing you have to note between the dollar stores and mobile home parks is we have a really big ability to push rents and still be insanely cheap. Dollar Tree for example has recently changed, where it's no longer just $1, everything is now a $1.25. Now that's a huge increase, that's a 25% increase. So now everything in the store is no longer $1, that's $1.25. And if you were the media, you would say, "Oh, how horrible. They're ruining America, jacking the prices up. People won't be able to buy food because of that giant increase of that extra quarter." But of course we all know that's ridiculous, I go and shop at Dollar Tree all the time.
You can buy office supplies in Dollar Tree, they're no different than that at Office Depot. I can go get a giant thing of black binder clips for formerly $1, now $1.25, if I go to Office Depot, it's five bucks. Over and over, whether it's envelopes or tape, whatever it is you need, they have it, and it's insanely cheap. And while you're there, you can go buy a book. A book that would typically sell for $10 at Barnes & Noble or $20 even, you have in there giant piles of them, $1.25. So you still can't beat the prices even after that 25% price bump, and it's just like mobile home parks. The average lot rent in America for a mobile home park is thought to be about $280 a month. If you double that rent to $560, you would still be in a world in which apartments are $2000 a month and stick-builts are 400,000 bucks.
You'd be so insanely cheap, if you doubled the rents, no one could possibly complain in a real world that, "Oh, that's a rip-off. My $2000-a-month apartment, now that's reasonable." So we both have a lot of room to push prices. If the dollar store went up to $2, would I still shop there? Oh yeah. If they went up to $3, would I still go there? Oh yeah. Why? 'Cause it's still cheaper than anything else on the earth. And that's the same thing with mobile home parks. We could push our rents up to the moon and still remain completely occupied with a waiting list in many parks, because we're still insanely cheap. It's because our prices are so ridiculously low to begin with. Why are they so crazy low? Well, in the case of mobile home parks, it's 'cause moms and pops never kept them up with the rate of inflation.
So as inflation kept marching higher, moms and pops out there, they did not ever elect to go forward and push the rest of those annual boosts of 5% or 8% or 10% maybe in the Jimmy Carter era, and that's how they fell so far behind. But our prices could go up a lot, it would still be very, very reasonable. Number two, the dollar store concept, just as mobile home parks are, is fully contrarian, because their business goes up when the economy goes down. Look at the stock of Dollar Tree, Dollar Tree was at $20 a share in January of 2020 right before COVID broke out, and then moved to $147 after COVID hit. Why is that? Well, because when the nation is gloomy, and things are looking terrible and bleak, what do you do? You go shop at the dollar store. That's just how it works. Mobile home parks are no different.
Back in the 2008 Great Recession, we never saw such a spike in demand as we did in the mobile home park business, 'cause everyone felt like the world was falling apart, and they all had to find somewhere cheaper to live. That contrarian nature will serve all of us well, both Dollar Tree and mobile home park owners, when the recession we're in now is finally agreed and embraced and acknowledged to be a true recession. Sometime this year, we'll enter a new great recession, and contrarian businesses will proffer, and those which are not contrarian will get wrecked. Also, dollar stores are seeing a growing percentage of more affluent customers, the same thing we're seeing in the mobile home park business. In fact there's been studies found, and what they found is that right now, Dollar Tree has seen its biggest, fastest increase in its customer base among those who earn $75,000 a year and more.
Now, why would that be? Why would someone earning $75,000 a year ago shop at the gosh darn Dollar Tree? It's because they are getting smarter and wanting to save because of the gloomy outlook, and because just generally people like to get a good deal. So more affluent people are finally going into the Dollar Tree business, now why is that? Because the locations are nicer, that's why. In most of America today, when you go and find the dollar store, the dollar store's no longer as it was back when I went to my first one, not in the wrong side of town and the worst strip center you've ever seen, next to the old abandoned restaurant. Today they're in all the good spots, all the safe areas where people like to go, and so therefore the $75,000-and-up consumer can go there, they can shop there, they can not feel threatened in parking their car.
The same is true with these mobile home parks as we've been bringing them back to life, suddenly, hey, our customer base broadens because there's more people who are willing to live in a mobile home park because it just looks nicer. I've written articles on the fact that I was in one of our mobile home parks not too long ago, and at the door, I'm just sitting there in my car, engine running, on the phone, and I see a motion, I see someone coming out their door, I look over, this guy looks like he's straight out of the LLBean catalog, the khakis, the penny loafers, the white shirt, the blazer, it blew my mind. I would never have thought back in the 90s, I would ever see that guy in our mobile home park, but yet we've started to break through so many of the barriers of respectability as we've been bringing these things back to life. Another similarity between dollar stores and mobile home parks is we're always trying to make the product line better.
I actually was on an airplane recently with an executive who worked at a dollar store, in one of the larger dollar store chains, and he said that the reason dollar stores are starting to advance their prices up just a little from $1 to $1.25 is not to gouge customers, but to increase their offerings of their product line, because now that they're able to tap into a more higher socio-economic segment, those people wanna see more stuff, more products, so that when they get them in the store, they can offer more things for them to buy. And it's amazing, he said, how many more products they can get although it sounds ridiculous, when the price is $1.25 than $1. When they go around the world shopping for all these different products and deals for people, apparently that little extra push, that little extra quarter opens up the floodway to additional products they can have, and mobile home parks are no different.
We keep trying to expand the horizon by doing things and adding amenities, taking every square foot of that park and figure out what's the best thing we can do with this to promote the sense of community and the quality of life here, putting in picnic tables and charcoal grills, playgrounds, overflow parking, everything imaginable, because we want to make our customers have a nicer home, because as we do that, it ties in with the whole narrative of having higher rents, greater demand for what we do and attracting an even higher demographic customer base. Finally, and this is kind of silly point to add on, but the largest selling product at the dollar store or Dollar Tree or any of those, is the one product no one should buy there, candy bars. Believe it or not, the number one product that people go in to buy at the stores are candy bars, which costs the same price at that store as they do at any other store.
The whole reason you would go to the dollar store, of course, or at least in my case, the one I'm always geared up for are office supplies or things where everything is five or 10 times greater at other stores, but no, people flock to those stores to buy the one single commodity which they could buy at the same price or cheaper almost anywhere else, and that harkens to the fact that our customers still are not the best at economics. And even in mobile home parks, collections are always key, because people don't always make the best financial sense. Of course, part of the narrative of making financial sense of course is the whole country, the longer it makes a whole lot of financial sense, or maybe we're just all following suit. The bottom line to it is that dollar stores do a great job in their niche in the retail industry, and mobile home parks do a great job in their niche of offering the best form of detached housing in America at the lowest cost. This is Frank Rolfe for Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.