Mobile Home Park Investing Newsletter

The stock market is off to its worst start in history. Oil prices are plunging to levels that have not been seen in decades. Fortunes are being lost daily, and by folks who thought they had a sure bet. Is this the start of the apocalypse? Hardly. What you’re seeing is the fundamental theory of economics. The stock market has fallen because stock prices were too high relative to earnings. Meanwhile, oil prices have collapsed because of supply and demand: a greater supply of oil from American producers, coupled with a reduction in demand, has made a barrel of oil a much less important commodity. You can’t escape economics, regardless of what our government thinks. If you print money, you devalue it. If you mandate a higher minimum wage, you will have a corresponding reduction in staff. So why have mobile home parks done well during this period of the Great Recession? Because they are on the right side of basic economics. The supply of parks is fixed by city government that refuses to allow new construction. Meanwhile, demand for mobile homes and lots is growing due to the high cost of single-family homes and apartments. It is also fueled by 10,000 Baby Boomers retiring per day, as well as the fact that over 50% of new jobs created since 2007 have been minimum wage. When you see investments collapse, there is also a good reason for it. Whether it’s the Dot Com bust or the mortgage meltdown, there is a plausible explanation for those occurrences. The global turmoil you’re seeing is not some random bit of bad luck, like an earthquake. Instead, it’s bad economics and gambling coming home to roost. And there is likely to be much, much more it this year. But don’t let that rattle you. Mobile home parks are just fine.

My experience at this year’s Louisville Home Show can be condensed to one word: “impressed”. I’ve never seen the quality of play this high, and the mobile home has been refined to about as high a standard as seems financially possible. I think that, when you look at these photos, you’ll see what I’m talking about.

The power of Clayton

The Louisville Show had never seen the likes of the Clayton pavilion. This was the most memorable part of the show: the elevation of the mobile home product to the status of its apartment peers. When we attended the national apartment show in Las Vegas last year, we were amazed at how much more sophisticated the event is compared to the average mobile home show. One immediate difference is the amount of money spent on the booth designs. The average mobile home show booth is a table with a banner, and the average apartment show booth is two stories high and contains LED. So here comes Clayton’s booth featuring a two-story structure with food and drinks on the patio on the top floor, a “virtual reality” booth that allowed you to “walk” all Clayton designs using special green-screen glasses, additional rooms devoted to Clayton’s product innovations, and then about 10 different Clayton models. I don’t know who designed the Clayton booth, but they should get an award. I know that Warren Buffett was not in attendance, but he would have been proud.

Dark wood floors throughout the house

One design that seemed to be represented among all manufacturers for 2016 is the use of dark wood flooring, often with a “distressed” pattern. I liked it. It made the contrast with the light-colored walls and ceilings even more spectacular, and more in-line with modern design tastes. It also hides dirt and stains, and keeps the houses looking better with the usual wear and tear of the active family.

Kitchen islands

This was a huge design improvement, and one that you can easily add to any home renovation from the 1960’s to current. The introduction of a kitchen island in the center of the “kitchen” section of the home is super simple and infinitely user-friendly. Some of these islands were built to serve as the dining table as well, with the counter overhanging the base sufficient for your legs, and others served this purpose with stools set up against the walls of the island. Countertops ranged from simple formica to more sophisticated faux marble. The general design is to have the island mirror the same color and finish as the cabinets, and the countertop match the rest of the kitchen. You can buy such a kitchen island unit at Lowe’s and Home Depot for a small price, including drawers. Big impact, little cost.

Walls separating the kitchen and living room

In some models – but not all – a new feature is to put a wall between the living room and kitchen, with two openings so it only blocks maybe 50% or less of the space. Then you can add bookshelves to this “wall” on both sides, allowing for the storage of items and the personalization of the space. While this is not for every home, it’s an unusual design format that is not wildly expensive but enormously utilitarian with an extra flair. It definitely helps make the mobile home appear more like a stick-built or Class A apartment. Martha Stewart would be pleased.

Master bedroom accent wall

I wrote last year about the new trend to painting one wall in the living room a different, but complimentary color, and calling this the “accent wall”. In the 2015 Show, that was exclusively found in living rooms. But this year, it was extended into the bedroom and, frankly, it works better in the bedroom than it did in the living room. This is, again, something you can adapt to any home from the 1960’s to new, and offers a huge bang for the buck. Just make sure the color you choose is the right one – this is one of those cases where you better get the counsel of someone who has a background in design.

Doors and halls that are not at right angles

Again, I had not seen this concept until this year. It was a design element that I found in both singlewides and doublewides. The general concept is for the doors separating the rooms to be at any angle except a right angle. This makes the mobile home seem less “boxish”. It’s not a bad idea, but not something you can adapt to an existing home that you’re doing a rehab on.

Bigger windows with better placement

I was impressed at the variety and unique positioning of exterior windows at this year’s show. I’ve always felt that the weakest link of the mobile home design is the exterior. While that’s going to be a huge task to make the exteriors look updated and compelling, the designers have realized that having cookie-cutter windows are not helping. One unusual window was a long, narrow one in the master bedroom, which gives it more light and an updated flair. Other designs had significantly larger windows in the living areas. While I’m not convinced that they are as good as they can be, it was definitely a step in the right direction.

Better window treatments

Virtually every window in every model featured a curtain road and curtains. I know that many owners just skip this luxury and install mini-blinds and move on. But if you really think about it, that’s probably not a smart idea in many markets. Target sells very inexpensive drapery treatments, including just a simple swag across the top. For the right home and the right customer base, I think it would probably move homes faster and at a higher price for a few hundred bucks.

Much better staging

OK, this was one of the most impressive things about this year’s show. The staging quality was unbelievable – particularly in the Clayton model homes. I don’t know who Clayton has hired, but they have to be the best in this niche in the U.S. They have created the power to make a singlewide look like a 5-star hotel room on the inside. And these designs seemed to impress everyone – from those who favor modern design to more classical. The staging was so impressive that it makes me wonder if all park owners who have a critical mass of vacant homes should stage a show home, and sell from that model, as opposed to the vacant, naked boxes that we all currently use.

Unbelievable level of detail

This was pretty exclusively the hallmark of the Clayton homes. The design details were absolutely first rate. Look at this tub, for example. Would you ever expect a product of that caliber in a mobile home? Clayton literally blew everyone away with their offerings at this show. You could feel the attention to detail that they were delivering, and it kind of electrified the audience. The attitude was like “we are taking this product to the next level” and it came across loud and clear

Insanely great product at insanely low prices

Over and over at this show, you would walk the home, guess the price, and find that you were way too high. I could not believe how low the prices have become, while the product has never been better. Most singlewides were in the $20s and most doublewides in the $30s. How can you build a mobile home for that price? Virtually every home at the show costs less than a car. There’s no way that a car can cost that much more to build than these homes. And a car has a shelf life of around ten years, while these homes can last for a lifetime. It’s a shame that the American public has no idea of the value that these homes represent.

You can feel the manufacturing market turning

The industry had an increase of sales of around 10% between 2014 and 2015. The hope is that this trend continues going forward, which I think it will. What’s fueling the rebound is simple: more park owners filling their vacant lots, as well as consumers finding the product more appealing. I think the industry bottom has occurred at 49,789 units produced in 2009. Do I see sales roaring back to 100,000+ immediately? No. But I think that we should see positive increases every year going forward. I think most of the credit for this goes to Clayton, who has the most aggressive program for park owners as well as the best dealer network and marketing.

Conclusion

If you have not been to Louisville in a while, you might want to drop by next year. It’s very encouraging to see the manufacturing industry turning around. The quality of the product and low prices are impressive, and the sales stats are rebounding as a result. And if you want to go but can’t spare the time to go yourself, I’ll be back to do it again for you next year.

View The Pictures From The Show

The 2016 Affordable Housing Summit was held live on January 26th. It featured 18 of the top experts in the industry, including Charles Becker, an Economist from Duke University, and Tim Williams, the CEO of 21st Mortgage. It explained in detail how the industry has changed during 2015 and what the predictions are for 2016. This is information that you can use to create your strategies and attack plans for the year. Just one good piece of information out of the 18 speeches and Q&A periods can pay for itself a thousand times over. So what do you do if you missed the Summit for 2016?

The answer is that you can still buy the recording. Sure, you won’t be able to ask live questions, but you’ll be able to hear the presentations and questions that were asked. Many people said that this was, by far, the best of the Summits we have produced. So shouldn’t you get some insider information on the best strategies for 2016?

Click Here To Order The Recordings

Whether you are simply in need of an insurance quote or you have the unfortunate, yet common task of filing a claim, Mobile Insurance is ready and waiting to take your call.

They offer you the best mobile home park insurance coverage when you need it. Being able to contact them when you need them is just as important. Shopping for insurance or setting the wheels in motion to get your damaged home or your business back on track is not easy. At Mobile Insurance, they work to make the whole process easier with greater value for your money. Call them at 800 458-4320 or email [email protected].

We are asked all the time “what makes for a perfect partner”? The answer is not what most people think, but we think it’s supported by historical fact.

Good partners share the same morals, vision and goals

Now the first aspect of a good partnership should be of no surprise to anyone. To be good partners, you have to share the same morals, vision and goals. Otherwise, you would be in constant conflict. There has never been a successful partnership that was founded on a platform of mutual hatred. If you want to buy a mobile home park for its long-term income potential, and your partner wants to flip parks, what do you expect the ending will be? One person will be highly disappointed and fight the other, which will then grow into mistrust and general lack of cohesion. When it comes to the big picture, both partners must be in complete harmony. There can be no friction at the macro level.

Good partners are exact opposites in skill sets – they are stronger together than apart

Here’s the shocker: good partners are exact opposites on the micro level. They each have different skill sets which, when combined, are stronger than they are apart. A perfect example is Apple, which was the combination of Steve Jobs and Steve Wozniak. Jobs was a salesman and promoter with little computer expertise. Wozniak was a computer genius without any people skills. When combined, they revolutionized the computer industry. But individually, they would have ended up just building circuit boards for hobbyists in their garage. Another example is Simon and Garfunkle. When combined, their voices were magical, but separate (which happened when they split up) they had little success. So, when looking for a partner, don’t look for someone who is identical to you but, instead, someone who is the polar opposite.

Good partners have a higher purpose than money

One final feature of the finest partnerships is the ability to take their collective expertise to a level beyond just money. When you reach a certain level of play, the goal is to be the best, regardless of the financial outcome. Hewlett Packard was nothing more than two Stanford graduates: David Packard and Bill Hewlett. They started the company in 1939 with $538. Once they had achieved millionaire status, they remained as competitive as they had back in their garage in 1939. The goal was to produce the best products, and that transcended how much money they made. They were energized by winning at what they did.

Conclusion

Great partners are magical to watch. They are like combining two elements that merge into something even stronger. If you come across that person, then discuss the potential of a merger. Imagine if Jobs and Wozniak had never met. I’d be writing this article on an electric typewriter and you’d be reading it on newsprint.

Of all the alliances you have to forge in successfully buying and operating a mobile home park, one of the most important is your attorney. There are many different attorney profiles, and you must select the one that is best suited for the task at hand. The most common occurrence, for most park buyers, is the attorney to read and protect your interests regarding loan documents and questions that come up on title and contract issues. Like anything else in life, if you chose a bad advisor, you will have a bad outcome. So how do you find a terrific lawyer well-versed in mobile home park law and issues?

The best corporate lawyer we have ever used is Dave DiMarco at Woods Oviatt Gilman, LLP. We have used him exclusively for all of our conduit loans, as well as traditional bank loans. What we love about Dave DiMarco is that he knows what we are trying to accomplish (get the loan closed quickly and inexpensively) and he can quarterback the situation and push it to the goal line without us having to bug him or worry about our progress. How many attorneys have you had to nag, or even worse, call 100 times to get them on the phone? With Dave DiMarco, you don’t have to worry about if he’s making progress – he’s typically bugging you to push you along on your part of the equation. We have given Dave some extremely complicated, time-sensitive tasks and he has successfully completed them on-budget and on-time. He also has terrific people skills and can take charge of a rogue bank attorney and bring them back around both in speed and complexity. Our success rate with Dave DiMarco has been 100%. We get calls all the time from people looking for a good lawyer, and we always tell them to call Dave. If you need a lawyer to represent your interests in a transaction, then you will be well served to call Dave DiMarco at (585) 987-2833. And, yes, he’s the brother of Anthony and Gerry DiMarco – the #1 mobile home park loan brokers in the U.S. This is a family that definitely shapes the industry.

Clayton Homes and 21st Mortgage have partnered together to bring a game changing new program to mobile home park owners. If you have any vacant lots in your mobile home park or in a park that you are looking to buy, then you definitely need to be aware of the CASH program to fill vacant lots with nearly zero capital out of your pocket.

For more information you can contact Lance Hull at 21st Mortgage. You can call him at 800-955-0021 ext.1218 or email him at [email protected]. You can also contact Aaron King at Clayton Homes. You can call him at 865.380.3000 Ext. 5164 or email him at [email protected]. To visit the Community Calculator website discussed in the webinar, click here.

Disclaimer: The materials and information available from this posting are for informational purposes only and not for the purpose of providing legal advice. The contents should not be construed as, and should not be relied upon for, legal advice in any particular circumstance or situation. Further, the information presented on this posting may not reflect the most current legal developments. An attorney should be contacted for advice on specific legal issues.

Disclaimer: The information in this posting is not for consumer use and is not an advertisement to extend consumer credit as defined by TILA Regulation Z.

This is a photo from our Orange County Boot Camp, taken while we were walking parks. On the left is a $100,000 new home (yes, things are far more expensive in California) and on the right is a $10,000 old 1970’s home. They both pay the same lot rent. They both symbolize affordable housing. And they both seem to exist in peace and harmony. How is that possible?

Pride of ownership is not based on cost of the home

Both homes have great pride of ownership – they are well maintained and have landscaped yards. Banks call this “pride of ownership” and it’s not a function of what you earn, but how you care about what you own. As long as a homeowner has pride of ownership, it does not seem to make much difference how old their home is. This is not just true in mobile home parks. Look at some historical subdivisions in which you have homes that range from the 1920s to the 1960s. As long as they are well kept, one does not detract from the other. In fact, the diversity actually gives the neighborhood a more interesting feel.

Designs have not changed that much over the past 50 years

Let’s be honest, a mobile home is like a shoebox. They are rectangles. Sure, the roof lines have changed over time from flat to round to pitch. And the exterior finishes have ranged from metal to vinyl. But they have not really made enormous advances in shapes and sizes. When you line up cars – even over a ten year period – you see gigantic changes in design that make the older cars look incredibly dated. But mobile homes have never really had a complete makeover, although Frank Lloyd Wright and Raymond Loewy sure tried to. Mobile homes, regardless of age, all look basically the same, and do not detract from each other.

Details and landscaping are the key to good looks

Have you ever noticed that the best looking homes in many parks are actually the oldest? What makes these homes the best looking? Typically, it’s landscaping and architectural details, such as shutters and awnings. These are available for all homes, both old and new. The home on the right, in fact, has a nicer yard than the new home on the left, because those plantings have grown into maturity. In fact, if someone did not know better, they would choose the older home as the more expensive, just based on outward appearance.

Conclusion

Old homes do not die. They don’t need to be removed from your park like an expired carton of milk. Old homes and new homes can happily co-exist in the same park, as long as standards on property maintenance are maintained.

I wanted to share my recent experience with Mike Renz. Jeff and I needed a Phase I completed for a mobile home park purchase late last year. I shopped around, including Mike Renz as one of my quotes, and eventually chose a local consultant to perform the work. The savings was on the order of $300, and the local guy was "local"--meaning, he should be familiar with the area databases, industries, geology, etc.

In my initial conversation with Mr. Renz (and during every presentation he's given for you), he mentioned that regardless of who I chose, if I had questions, to call him. His advice would be free of charge.

The report I received from the local consultants was pretty bad. Being an engineering consultant in my prior life, I was expecting a much higher quality report. The local guys didn't really do any consulting, and worse, made blanket assumptions, suggested scientific theories that were incorrect with no supporting data, and worst of all, erroneously listed recognized environmental conditions (REC). I called Mr. Renz--he immediately/graciously reviewed the report, talked me through his major concerns, and provided a detailed email with a list of talking points that helped me discuss the report with the local consultant. With the talking points, I was able to reason with the local consultant. The final product was a Phase I report that I felt comfortable with, and more importantly, that the bank accepted.

Needless to say, next time Jeff and I need a Phase I, we're calling Mr. Renz.

As always, Jeff and I appreciate your help and advice and your willingness to share your experiences. After listening to Mr. Renz' presentation oat the Summit, I wanted to thank you again for bringing professionals like Mr. Renz to our attention.

-Jill S.

You can contact Mike Renz at (614) 538-0451.

We did a lot of conduit loans -- and regular bank loans -- last year. A common feature of those loans was Security Mortgage Group. If you are buying or financing a mobile home park, let Security Mortgage Group get you the loan. They'll get you better terms than you'll ever be able to find on your own. That's why the win the industry mortgage broker award virtually every year from MHI. If you have any loans you need help on, you can reach Anthony or Gerry at (585) 423-0230.