Ep. 1 | 7 Reasons to Invest in Mobile Home Parks

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Welcome to the first episode of The Mobile Home Park Lawyer Podcast! In this episode, Ferd talks about seven reasons why you should be investing in mobile home parks today. Ferd gives us the inside info on how to invest in mobile home parks and potentially double, triple or even quadruple your investment in only a few years. Enjoy!

 

“Mobile home park investing is very misunderstood. And this ignorance can keep you from making lots and lots of money.”

 

HIGHLIGHTS:

0:00 – Intro
0:59 – If you’re not investing, why not? Mobile home park investing is misunderstood
1:51 – The first reason mobile home parks are the best investment is because they have a low maintenance cost
2:13 – The second reason, is that there is a massive need for affordable housing in the U.S. right now
2:47 – The third reason is that there’s a gap between supply and demand
3:50 – The fourth reason is that you offer superior product for the price
5:06 – The fifth reason mobile home parks are a good investment is the low turnover of tenants
7:03 – The sixth reason is that mobile home parks are a fragmented industry, so there aren’t many big players and there’s great opportunity
8:12 – The final reason is you have the ability to fill vacant lots and expand, something you can’t do with apartments
9:26 – Double or even triple the value of your park in just a couple of years

 

RESOURCES:

7 Reasons to Invest in MHPs Checklist

 

FULL TRANSCRIPTION:

Welcome back, Mobile Home Park Nation. Here we are again today talking more about why you should invest in mobile home parks. If you seriously have not joined us yet, you’re not investing. Why the heck not? What are you waiting for? Let me guess visions of Confederate flags, pitbulls running loose, creepy guy named Larry, all the stereotypes you’ve seen in the media, from the show Eight Mile, from the show Cops, all the stigmas. I get it right? It’s not sexy, it’s not Bitcoin, it’s not investing in Tesla, you’re probably not going to get invited to the country club to you know, tell stories about your trailer park, or whatever they want to call it. Okay, I get it, but mobile home park investing is very misunderstood. And this ignorance can keep you from making lots and lots of money. Mobile Home Parks are the best investment. Okay, the best real estate investment, and here’s why. There are seven reasons I’m going to tell you today that make mobile home parks an attractive investment for you, for me, for all of us.

First off, what is mobile home park and why is it attractive? Okay, the first reason around the gate is that it’s real estate investment, but it’s a land lease community. What that basically means is you own the land, the tenants own the mobile homes, which means you don’t have the same level of maintenance costs as you would an apartment complex or another property. Land lease communities are great, you basically have a diversified group of ground leases from other tenants. So that’s the first reason why mobile parks are great.

The second reason is there’s a massive need for affordable housing in United States. I mean really, tell me a community in this country that is not facing an affordable housing shortage. It’s nearly impossible to build affordable housing, it just costs too much.  An hour of labor, you know, a brick, a window, it’s too much, people can’t do it, people aren’t building it. So you have government subsidized projects. Those aren’t very popular, and there’s only so much tax money you can throw at this problem. And those products are typically inferior housing alternatives. So what we’ve got here with the mobile home park industry is the opportunity to provide this quality, affordable housing that is so much in need.

The third reason that mobile home parks are great investments is because there’s this gap between supply and demand, and economics 101 is thrown out the window. As I mentioned, there’s a ton of demand, where’s the supply? Well, there’s a barrier to entry. Also a barrier to competition in the mobile home park industry, and the reason there’s no supply coming or very limited new supply is because government agencies hate mobile home parks, okay? They want to reject them. It’s hard to get zoning, it’s hard to get development, the cost of development is expensive. Mobile home parks typically are in more urban, high priced areas as far as land costs. So there’s just not a lot of new product coming. So that creates an opportunity for everybody that’s already got a mobile home park, or a buyer of an existing mobile home park to set themselves up in a good position. Unlike an apartment or shopping center, I mean, nobody’s gonna build a new one down the street from you. There’s limited competition, which obviously helps from a pricing perspective, which we’ll get to a little bit here in a minute.

The next and fourth reason why mobile parks are great investments is because we offer superior product for the price. I mean, our customers, they’re not staying in downtown sky rises, they’re not staying in McMansions looking for an affordable housing choice. Generally, all in between $800 and $1,000 a month for a two or three bedroom house. Well that puts them, in the air in the land of crappy apartments, classy apartments that are you know typically 90 cents to $1 per square foot. So 1200 square foot apartments about 1200 bucks. Mobile home, we can get you in a 1200 16 square foot 16 by 76, brand new single wide mobile home for about 800 bucks a month. Wow. Talk about pricing difference! So size is one factor, what else is good about our product? In an apartment, you got somebody above you. They’re jumping up and down, chasing the kids. Someone in the left, someone in the right, playing their drums or guitar, yelling at the TV for a Chiefs game or something. And it’s kind of a crappy environment. Mobile home park, there’s nobody on top of you, nobody left and right to you. You’ve got a yard, you’ve got a grill, you’ve got a dog, you can have all that stuff. You can have a parking space right in front your house. You’re in a neighborhood with trees, kind of a scenic location, even. A lot of mobile home parks with dog parks and playgrounds. Some of them have golf courses and pools and big club houses. So the product is just far, far superior.

Okay, the fifth reason mobile home parks are a great investments is because of sticky tenants. Basically this is low turnover. Mobile home park tenants don’t leave nearly as often apartment complex tenants do. The typical tenant stays for over eight years is what the research says. And part of the reason is because they’re not really mobile. I mean, it’s kind of a misnomer. It costs five grand to move one of these things down the street. And if they’re older than 1976, it’s illegal to move them. Even if it’s younger than 1976, it’s impractical to move them again. So by not being mobile, they’re not as price sensitive. If you increase the rent 5 bucks, 10 bucks, nobody’s moving. 50 bucks, maybe, maybe not. And you can’t gouge people, and that’s not what I’m implying you should do. But these tenants have been charged, paying below market rates for years because ma and pa that lived in the double wide on the corner just never pushed rates, because they were friends with them or because they didn’t understand how to run a business. And part of that’s reason these parks, some parks have gone downward. So it’s our opportunity to increase the quality of the park, increase value to the tenants, and then they’ll stay. And I had a park in Illinois that I increased the rent $50 right out of the gate. And nobody moved. Nobody even complained. Why did they not complain? Well, because we were providing a better value. The park was in disarray for years and years and years. Well, we right out the gate,  we repaved the streets, added decorative fences, put in rose bushes, put in a playground, painted a bunch of houses, got rid of old houses, got rid of a couple bad tenants. We started doing all this in the first month or two. Then we sent out our rent increase from $122 to $180. It’s a $58 increase right out of the gate. And you know what, people didn’t care. They’ve got a better value, and that was okay with them. Just like I pay a little extra for razor blades or for toilet paper or for trash bags. I don’t buy the cheapest version of those. Yeah, they’re cheaper, but the quality is far inferior. So I’ll pay up a little bit for good quality, and sticky tenants will too.

Okay, the sixth reason why mobile home parks are great is because they’re in a fragmented industry, meaning there are very few large players, large owners in this asset class, unlike some other asset classes. And there’s a lot of ma and pa out there still. You can buy a park from somebody that you know doesn’t really own two, ten, 100 parks. It’s not as sophisticated. Again, I’m not saying you should take advantage of people, but there’s an opportunity for deals. I’ve bought in parks from 95 year old guys on one or two occasions. And they just said, here’s what I want. I said, okay, deal. I paid the price. They just said $100,000 and I said okay, deal. $200,000? Okay, deal. So they were happy, I closed, they got their money, they got to retire. And I got a great deal. Also, being fragmented, the industry has not yet been consolidated. And that’ll happen at some point. Like the inner asset classes where a small group of really big players are going to buy up a good portion of the entire industry. And if you have a park when that happens, again, it has not happened yet, if you own a park, or two, or three or 10, at that time, you’re gonna get paid a premium. So it’s good to be in the game before business has consolidated.

Okay, the seventh reason why mobile home parks are a great investment is because you have the ability to fill vacant lots. So in a mobile home park, if the lot is vacant, it’s pretty much worthless. It’s not paying you a lot of rents. Now, there’s no evaluation. An unoccupied lot, depends on the rental price in your market, but an unoccupied lot allows anywhere from $20,000 to $50,000 in value, so there’s a huge incentive to fill those lots, okay? Well, you can do that. You can’t in apartments, like I can’t take a 16 unit apartment complex and then create 64, there’s no room right? So what are you looking to do, you can push the rents a little, you can do better operations, and maybe you can cut some expenses. That only pushes your yield so much, right? But a mobile home park, I can turn zero into 50,000. I’ve got a park here in Kansas City Market that when we bought it, there were 21 occupied homes out of 93 lots. This was December 2018. So just under two years ago. We’re already at 80 occupied lots, we’ve been buying homes left and right and selling them left and right. Each one of those is going to add about $40,000 of valuation to the asset. And that’s the best part. I mean, you can put sweat equity in, you can run a better mousetrap than the last guy by working smarter and harder. And you could double, triple, quadruple the asset value in a couple years. And what does that do to your yield? And then you start talking about interest rate return not in the double digits but the triple digits. I mean, that’s happened right? And it seems unbelievable. I’ve done it. We’ll get into the financial metrics in another episode, but this ability to fill lots, man it is the best, one of the key things that makes mobile home parks great.

Again, I get it. Mobile home parks, they’re not sexy. You’ve got to get over that, get over the stigma. You’ve got to understand, cure your ignorance, get in the game, join me buying mobile home parks.

That’s it for today. Click on my website to get a copy of these seven reasons why mobile home parks are the best, and I look forward to talking with you guys in the near future.

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