Mobile Home Park Investing Newsletter

January 1st is a very important day for all Americans: the day that we start the year with a clean slate and have the ability to meet or beat our budgets without any baggage of a prior period to weigh us down. We are huge believers in budgets – we are constantly building and revising budgets on everything from parks and park-owned homes to our own households. A budget is like a road map. Without a budget, you are basically driving from point A to B without knowing how to get there. Sometimes you might get lucky and wind up at your goal completely accidentally, but other times you mostly take the wrong turn and end up somewhere you don’t want to be. If you have not yet made your budgets for 2016, we urge you to do so. If you have made your budgets, then we hope that you will watch them closely and compare your progress monthly, so that you can hit your goals with less stress and more clarity. With a solid budget, even the hardest goal can be accomplished. Remember that not all budgets are mathematical. Your goals in 2016 may include such items as not missing your children’s sports games at school, or to lose weight, or to buy a mobile home park. Whatever the goal is, break down the steps to achieve that goal, and then monitor your success or failure in hitting each logical step. Putting a man on the moon was our government’s goal in the 1960s, and they were able to achieve what appeared to be impossible by setting a methodology of events and then managing the timetable to make sure each was accomplished.

We would also like to take this opportunity to wish each and every member of our extended mobile home park family a Happy New Year! We look forward to a great 2016 for everyone!

These states are part northern and part southern. They are some of the most densely populated and some of the least. Some have impressive NFL teams and some have none. So what in the world do these seven states have in common? They have all passed significant grandfathering laws that set the record straight once and for all that mobile home park owners have to obey no ordinances except those that were in effect when the park was built.

What is “grandfathering”?

It’s a slang term for the technical name “legal non-conforming”, which means a property that was built 100% in accordance with all local statutes and regulations when new, but those regulations have now changed and the park is no longer in conformance with the current rules. Federal and state law holds that a property that was built legally is not required to meet any laws or rules established after the property was built, unless such time as the improvements on the property are destroyed or abandoned for a specific length of time, typically 180 days.

Why is it such a hard concept for many cities to understand?

Apartments, houses, retail centers, office building and industrial warehouses are all grandfathered “improvements” to land. These improvements are what is grandfathered when the permits are given to build them. So if a grandfathered house burns down, then that house cannot be built back on that lot unless it meets the new rules. The structure is all that held the grandfathered rights, and then the structure is no more, the grandfathered rights also evaporate. But a mobile home park is an entirely different item. A mobile home park has no structures (other than a clubhouse or laundry building), so what’s being grandfathered is the land itself, in its capacity as a “use”. Effectively, a mobile home park is a parking lot for mobile homes, and you cannot end those grandfathered rights unless you voluntarily ask the city to do so in the form of a demolition permit for the whole property, or by abandoning it as a complete mobile home park for more than 180 days in most cities. Since mobile home parks are unique in this right, many city managers and inspectors don’t understand it. But their ignorance has no bearing on the law.

Why did these states codify the rights of grandfathering specifically for mobile home parks?

These states are the ones that have had a city and park owner do legal battle that has worked its way all the way up to that state’s Supreme Court. By winning their Supreme Court case, these park owners have set the precedent for all park owners in the state, and created case law that no intelligent city would dare challenge. The only reason that all 49 states (Hawaii has no mobile home parks) don’t have this forceful reminder on their books is that no park owner case has gone to the Supreme Court yet. But we have never heard of a mobile home park owner losing one of these cases. And, of course, as each state permanently clarifies the protection of park owners’ rights, the other states see that case law and realize that it sets the precedent for their state. Remember that property rights are a federal law, given to us by the Constitution.

Conclusion

We face a few grandfathering disputes with cities every year. We win every one. We have never had to go to court yet – the city typically crumples when their attorney educates them on how things work and what the damages would be if they tried to fight the law. But we are thankful for those states that have codified this right and made it easy for park owners in those states to stand up for their rights.

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].

This year’s annual MH Industry Summit will be held on January 26th. This is a virtual symposium that you can participate in from your laptop, without having to travel and stay in a hotel and sit in a ballroom. We have 16 speeches planned this year, each with question and answer, from the leading experts in our industry. Be watching for more information on this year’s Summit shortly. If you want to take advantage of the industry opportunities in 2016, you do not want to miss this event.

Click Here To Register

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.

The world refugee crisis is constantly in the news. Nobody knows what to do with the avalanche of folks fleeing the unrest in many nations, most particularly the Middle East. But one of the few benefits from this world crisis are new developments in micro housing, some of which may end up as part of mobile home design. When the world is doing well, the focus is on how to build McMansion kitchens, but in times of trouble the topic is “how small and inexpensively can we build a dwelling” and much of this research may have a benefit to our industry, just as the Apollo missions had benefits to creating new forms of fire retardant materials.

The bottom third of U.S. households demographically – which is our customer base – gets hammered in all directions. Not only do they have the lowest incomes, but studies have shown that they have virtually no savings as well, and no educational attainment to allow for most higher paying jobs. They are effectively stuck in a tough position. But that does not mean that they can’t be great customers, homeowners and neighbors.

Priority of bill paying is critical

When your customers don’t have enough money to go around, what’s critical is to be on the top of their stack when it comes to getting paid. You can accomplish this through:

• Monthly invoices. These written reminders allow the tenant to remember that the rent is due and when.
• Having a high late fee. This is not to punish them – you hope that they are never late. Instead, it’s to steer their priority of bill paying. Often, the resident will pay bills based on the size of their late fee, with the ones with the smallest late fee paid last. You want to stay on the top of the list.
• Always maintain a “no pay/no stay” policy. This forces the issue that you are #1 on payment priority. Most people put having a roof over their heads as their number one concern, and you should always be the top bill paying priority as a result.

Be flexible on the rules, as long as there’s a reasonable excuse

If you don’t have a lot of money, there are some steps you have to take to stay on your feet. Work around these as best you can. Help them hold it all together.

• Allow minor auto repair in their driveway. Many residents have to do their own auto repair because they cannot afford to have a professional do it. They have to go buy the parts and install them on their own. Don’t harass them for doing this necessary work. If a car is up on jacks for a couple days while being fixed, don’t sweat that. Be thankful they have the ability to get that work done, and help be the solution, not the problem.
• If a tenant has a job that requires the storing of the materials for that job, and such storage can be done without bothering the neighbors through sensible placement of those materials, then don’t stop them from being able to perform that work. If they have to keep a pallet of shingles in their yard, and they place it behind their car and completely out of view, then let it go. Don’t stop them from gainful employment.

Understand the basics of “pride of ownership”

Most lenders are not concerned about the age of a mobile home, or the quality of the car in the driveway. What they are focused on is the “pride of ownership” – how clean is that house, yard and car? You don’t have to have a lot of money to demonstrate “pride of ownership”. And there are brand new homes that show no pride of ownership. So it’s really a state of mind. We have found that there are many ways you, as a park owner, can contribute to the residents showing “pride of ownership”:

• Make sure the common areas are immaculate. You set the tone for the rest of the park, and there’s no way that you can expect the residents to have self-respect when you demonstrate none. You entry should be nice, with a new sign and white vinyl fencing (if applicable) and all common areas should be well mowed and edged, and all other structures painted and free of any ugly features. When you care, the residents care.
• Identify the worst offenders, and work with them to bring their homes and yards up to par. In some cases, you’re smart to get the job done yourself and bill it back to them in affordable installments or, in other cases, just do it yourself and look at it as a gift. Remember that it’s really hard to do home maintenance when you don’t have the money to hire it done.
• Recognize those that do a great job. Have a “yard of the month” or “home of the month” award. Congratulate those that do a good job. Create an atmosphere of positive works.

Conclusion

Despite the economic limitations that many of our customers face, it is not impossible to run your business effectively and successfully with this client base. You simply need to work around their troubles, and find ways to get the job done. Much of what you need done, as a park owner, requires effort and prioritization more than dollars.

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.

If you are the typical owner/operator of a Manufactured Home Community, you no doubt have mobile homes in your inventory that you would like to sell. They may be vacant units or rental units that you would like to convert to owner occupied. Potential buyers may express an interest in becoming home owners but finding a source to lend them the money becomes a deal-breaker due to their poor credit histories. Well, that no longer has to be the norm.

Performance Equity Partners, Inc. (PEP) offers creative chattel lending programs to Manufactured Home Community owners who need a funding source for individuals seeking home ownership. Established in 2007, PEP is currently licensed/registered in the states of Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Nebraska, Texas and Wisconsin. Our owners/mangers collectively have more than 100 years of lending experience and our staff has been serving customers’ credit needs for 20+ years.

At PEP we understand that bad things can happen to good people resulting in a negative credit rating history. We specialize in lending and servicing applicants that have less than perfect credit histories and don’t qualify for traditional manufactured home financing. Throughout the entire application and closing process, you and your customer will work directly with one loan officer assuring that every application submitted by your park staff will receive prompt and courteous service. Our courteous but aggressive collection program helps control payment delinquency and we work closely with your community property manager to retain good tenants. Our goal is to assist your staff in ways that will allow them to focus on sales, filling vacancies and property management issues.

Do you have a portfolio of existing loans that you would consider selling? Performance Equity Partners looks for the opportunity to assist community owners to help free up capital through the bulk purchase of inventory which has generally been financed personally.

If what we offer interests you please contact our General Manager and Owner, Richard Voboril directly at (708) 478-5251 or by email at [email protected]. (NMLS Lic. #288432)

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.

We had the opportunity to interview D.J. Pendleton, the Executive Director of the Texas Manufactured Housing Association (TMHA), to get his pulse on the industry heading into 2016, particularly the issues facing Texas mobile home park owners.

Some Texas cities are behaving badly when it comes to the MH sector, and the TMHA is fighting that

The TMHA is watching closely for cases in which cities are violating the state laws regarding MH, as well as Federal law in some cases. These cities behave badly in three broad arenas:

• Attempts to ban MH altogether, such as in Huntsville, Texas, which recently attempted to eliminate any individual or company from bringing a mobile home into the city limits. These cities think that they can simply pass such a resolution that eliminate affordable housing from their city. Of course, these concepts are completely contrary to state and federal law. The TMHA was able to step in and defeat Huntsville’s attempt to cause harm to the industry.
• Attempts by cities to violate park owner’s rights under grandfathering (also known as legal non-conforming status). Typically this happens when a city refuses to allow a park owner to bring in a home to fill a vacant lot, claiming that the lot has lost its grandfathered status since it was vacant for over 180 days. The truth is that a mobile home park is a “grandfathered use” like a parking lot, and it’s an all or nothing proposition – the only way to lose your rights to fill every lot is if you close the entire park down for 180 days and cease all marketing. Some cities fully understand this, but attempt to bully park owners nevertheless. In these cases, the TMHA attempts to educate the city or threaten legal action to make them comply with the law.
• Attempts to enact rent control on mobile home parks. There has been much discussion by some city governments on the ability to control how far or fast mobile home park lot rents are allowed to escalate. The truth is that Texas state law forbids rent control by any city. The only one who can enact rent control is the Governor of Texas, and even then only in the event of emergency. So any city that even claims to consider such an action is completely wrong in their thinking – they absolutely no right to do so in Texas. The TMHA is continually educating cities and towns on the existence of this state law.

Some Texas cities are wanting to behave even better, and the TMHA is proactively helping them

Just as some cities in Texas are obsessed with eliminating or reducing available affordable housing stock, others realize that there is an extreme shortage of affordable housing and are trying to improve their relationship with the industry. The TMHA is always watching for cases in which cities or towns demonstrate an understanding and acceptance of MH, and then try to proactively educate them as to the benefits and opportunities. One of the TMHA’s greatest successes takes effect in 2016 on the state level. The TMHA, among other lobby groups, was able to alter the homestead exemption in Texas from $10,000 to $25,000, which means that a huge number of mobile homes used as primary residences now have to pay no property taxes. Only those mobile homes valued at more than $25,000 have to pay property tax beginning in 2016. This is a huge advantage to those who live in mobile homes, as well as to park owners who are trying to sell such homes to the residents.

See for yourself the benefits to membership in the TMHA

If you are interested in learning more about the benefits to membership in the TMHA, contact them directly at (512) 459-1221. We have been members of the TMHA for years, and recognize their efforts in keeping all park owners out of trouble. We wish that all state associations were as well run as the TMHA.