Although the loan has been sent to a special servicer, it is not currently in default.”The company made to request to implement certain amendments to the loan” said Jennifer Ludovice, an ARC spokesperson. “Due to the structural impediments inherent in CMBS debt, it was necessary for the loan to be transferred to special servicing to facilitate this process even though the loan is not in default.”

Frank & Dave’s Opinion of This Story:

Virtually everyone in the industry has been following the ARC story for over a decade. ARC came on the scene over a decade ago and rapidly bought their way up to 55,000 lots – often seemingly with abandon. Farallon took a huge risk taking over ARC, and this is the news story that will probably garner the most attention in the industry for the next several months.

Barry gave “Four Key Strategy Areas” that, if adapted by a community owner would have a big improvement on the   bottom line and the growth prospects for the community.  The four key areas are things anyone can do now without a lot of cost, but the clincher is changing the     mindset.  As you read Barry’s list, think about what kind of a community business you would have if you adapted even one of these.

1)  Market Niche Focus

When you bought your first community, were you more knowledgeable then about where your customer was coming from?  Were they coming from apartments?  What was their reason for moving into your community?  Where would they have lived if they weren’t in your community?  Are community owners as up-to-date on housing choices in their local markets as they need to be in order to compete?  Maybe not, suggests Barry.  We need to address the new realities of the housing market. Has our niche changed?  Do rents need to go up or down?  Has our market changed?  To rent sites and sell and rent homes, the community owner needs to adapt to a changed and changing marketplace.  In my market, for example, the demand is for rental homes, but not so much for buying homes.

2)  What is My Plan?

Barry says that we need to be realistic and figure out if we can afford to address the new market realities.  What he is suggesting is that community owners need to know the following about their customer:

• What is the credit profile of the customer I am willing to finance?
• Can they make a down payment?
• What is the age of the home?

What is the plan for the capital to finance the homes?  Two important things Barry noted are:

• Community owners need to be in compliance with the law to finance homes.
• Many owners are running out of cash to finance homes.

(In conjunction with financing of homes, Warren Buffet noted in his 2009 annual   report that unless reasonable financing becomes available, manufactured housing demand will continue to shrink).  To finance homes we need systems that are effective, efficient and compliant.  Do our homebuyers know that they are building equity in their home and how much their equity is? Do they know, assuming their buyer passes the tenant screening for the community, they can sell their home and move on?  On this last point I’m    guessing probably not.  Residential real estate agents do this all day for site-built homeowners, but in the community business, residents don’t get much support from anyone when it comes to figuring out their options, equity being one.  Which may be one reason for the customers’ not buying in a community to begin with.

3)  Resident Pride

We need residents that feel proud about living in the community and want to stay.  This can be accomplished by having management structures in place to retain existing residents.  The retention system needs to include activities for residents and keeping the appearance up.  The rules need to be enforced firmly but politely.   Residents that are under water on their home’s value are no more stable than a renter.

4)  Financing Homes
Community owners need to get creative and think of ways to raise capital to buy more homes and finance them.  The Manufactured Home business is starved for  capital for the consumer to purchase a home.

There is plenty of capital piled up on the sidelines and investors are looking for investment opportunities.  For a well run income producing operation, there are investors.  One idea is to take on a partner, perhaps in a minority position.  Barry said that today a chief worry for the communities is that community owners may not be able to afford to keep up their communities. In addition to rising real estate taxes and operating costs, the cost to buy, fix up, market and finance homes in communities may mean that some, perhaps many, owners simply won’t be able to afford to be in the community business.  Hard choices about selling their community may be in store for some.

MONEY IS COMING BACK TO REAL ESTATE

Dr. Peter Linneman, Chairman of the Wharton School of Finance and economist for NAI states that not only is the money coming back to real estate, but that:

• Multi-family real assets will rebound first, before office, retail, industrial.

• We are at the top for cap rates.  Translation—prices have hit bottom.

• Little has changed in the economy in the first quarter of 2010 but the psychology of the recession has changed.  It’s been said that investors and consumers are mentally   either in fear or in greed.  During the boom years spending and taking risks were the so- called greedy behaviors. When the recession set in, greed quickly turned to fear.  Thus, the tightening of credit. According to Dr. Linneman, how people feel has changed.    Investors and consumers are edging from fear to courage, and from inaction to more  aggressive behavior.  The pendulum is beginning to swing toward greed.

• No new multi-family, including communities, are being developed.

• Pent up demand is and will continue to build.  One reason is the millennium generation coming out of college.  Because it is so tough for young people to find a job in the current economy, many are moving home or doubling or tripling up with friends.  Once they get jobs, they will be moving into their own homes.

• Inflation will be a factor.  As household formation picks up, rents will increase and so will home prices.

• Another recession will occur in 7 to 10 years.  Dr. Linneman says that when debt is cheap and/or easily available it mostly benefits sellers, not buyers.  If you are an owner that is wondering when is the best time to sell, you may want to think about…

      a) selling soon before capital gains taxes go up and interest rates go up, or

      b) waiting for another 7 to 10 years for the next “bubble” and sell at the top of that cycle.

• Interest rates will rise faster than cashflow. Prices of real estate will not go up as fast as interest rates.

• Real estate taxes will go up.

Distressed Buyers

CNBC, the cable business channel held a conference in Vancouver this year. They said that there are more distressed buyers than distressed sellers, meaning there are more buyers wanting to make investment in real estate that produces a cash flow than there are properties available.       Certainly for the park and community business there is a dearth of parks and communities available for investors to  purchase.

Water Usage & Water Cost

A midwest community owner knocks on doors in his community with a plumber in tow.  He asks the resident if he and the plumber may check the faucets, toilets, etc. for leaks. They fix the problem on the spot and charge the resident.

Switching From Investing in Communities to Apartments

A long time investor in communities said recently that he is now buying apartments, not communities.  The simple reason is financing.  Investing in communities is nearly impossible if there are community owned homes.  With apartments, the lender doesn’t lend on the real estate and not the apartments.  It’s a one stop shop for getting a loan.  With rehabbing, selling or renting homes and financing homes, he says that a manufactured home community has become a tougher business.

Murder Headline Misleads Readers

The following was a “Letter to the Editor” in the Cedar Rapids Gazette:

Regarding this March 11 headline, “Man Charged in Mobile Home Death”

I wonder why the editors focused on the type of residence in which the death occurred. Had the alleged murder occurred in a single-family home of traditional  construction style, would we see that in the headline, “Man charged in single-family home death”?  I think the implications being made here are rather irresponsible and are attempting to lead the reader to some unsubstantiated  conclusions. If there is a point the editors would like to make regarding crime and             socioeconomic status or lifestyle or  whatever, the opinion page is the proper place for such discourse, not the front page. In addition, I believe it was a young woman who died, not a mobile home.

Homes Moving Out

A community owner reports that some residents are getting heavy handed when it comes to getting the community owner to buy their   manufactured homes.  He says that a few residents have threatened to move their homes out if the community owner won’t buy their home

Joanne M. Stevens, CCIM

Park and Community Specialist

NAI Iowa Realty Commercial

Brokering mobile home parks & manufactured home communities throughout the U.S

Under a new state ordinance, cities must allow RVs to be in mobile home parks. Cities are allowed to regulate RVs that are used as permanent residences for safety or health reasons. RVs in parks must be connected to sewer and water.

The case began in 2006, when park owner Paul Lawson appealed a city code citation for someone living in an RV in his park. That resident still lives there, but in the ensuing years, has traded in his RV for a mobile home.

Frank & Dave’s Opinion of This Story:

There are two morals to this story.

The first is just how pathetic the legal system is. It took 5 years to resolve what should have been a simple case – so long, in fact, that the state law changed in the interim  and even the person who the case was based on moved on from an RV to mobile home. The only thing worse than the U.S. legal system is… well, we can’t think of anything.

The second moral is how even the State of Washington has been touched by the love of the mobile home park as affordable housing. With RVs now being made acceptable for all parks, it opens up yet another door to improved occupancy at mobile home parks.

Click Here to Download the Report 
 
For more information, contact:
Tony Petosa
(760) 438-2153
Senior Vice President                                   
tpetosa@wellsfargo.com

Nick Bertino
Vice President
(760) 438-2692
nick.bertino@wellsfargo.com

How about looking at something that few people are involved in and that actually generates money for the investor – not just the promoter? That real estate niche is mobile home parks. And they have offered superior returns to the lucky few who understand them for several decades.

It’s all about the cap rate

Single family homes suffer from low, or often negative, “cap rates”. A “cap rate” is the actual return on the debt and equity of the investment. A typical single family home investment of a $100,000 house normally rents for $900 per month. However, before you think that it’s a $900 per month return on your $100,000 investment (which is about a 10% “cap rate”), remember that you have to take out property tax (about $200 per month), insurance of about $100 per month, and repair and maintenance of another $200 per month (I’m talking about those big-dollar repairs like roofs, etc. averaged over time, too). So your net income is only $400 per month, which is a 5% cap rate.

Mobile home parks make at least double that amount. Good mobile home parks have a 10% cap rate or better.

So right off the bat, mobile home parks make about 100% more per year than single-family investments.

It’s hard to push rents in single family homes

Single-family homes are plentiful. Your local newspaper is bursting with homes for sale or rent. As a result, it is very hard to increase rents – in fact, the norm these days is to decrease rents with single-family homes. In many markets, there is a terrible spiral down in rents as investors effectively bid against each other to attract tenants.

Mobile home parks are in very limited supply, by comparison. In most cities, you cannot obtain permits to build mobile home parks – and you have not been able to for decades. As a result, the supply is limited, and there are few competitive forces to contend with.

It’s another important point to note that it costs $3,000 to move a mobile home from point A to point B. That’s why 95% of mobile homes only move one time – from factory to mobile home park – in their entire lives. As a result, you can raise your rent level 5% to 10% per year and not lose a single tenant. Few tenants are willing, or able, to spend $3,000 to move their mobile home over a $20 per month rent increase.

Single-family home investors know too much

Your average single-family home seller is pretty sophisticated. They’ve bought and sold several homes, and know pretty accurately what the correct price should be. And they normally have debt on the house.

Mobile home park sellers are typically “mom and pop” owners, who are very unsophisticated. They often price their park for a fraction of what it’s actually worth. And they rarely have any debt. As a result they can often carry the financing themselves – at below market rates and with non-recourse.

Conclusion

There is a lot more money in mobile home park investing than in single-family home investing. That may be why there are five publicly-traded mobile home park real estate investment trusts (also known as REITs) and there are zero in single-family homes. That may also explain why Sam Zell, one of the top real estate investors in the U.S., is one of the largest owners of mobile home parks in America – and not a single family home speculator.

If making money is your goal, you should look into mobile home parks, and not single family homes.

By popular request of our friends from Texas, Oklahoma, Louisiana, Arkansas and surrounding areas, we are taking the Boot Camp on the road to Dallas on April 30^th to May 2^nd.

If you have been waiting until the Boot Camp got closer to home to save on travel cost, here’s your opportunity.

We’ve also made the Boot Camp more affordable than ever. We’ve changed some things around, and got the price down to $1997 for one person. And you can put that on a 0% payment plan spread over five months.

The Boot Camp is the best learning experience we have at the site, and attendees have the highest historical track-record of successfully buying mobile home parks.

My friend introduced me to the idea of Mobile Home Parks about 13 months ago. I read every book on the subject and every internet site I could find. Nothing compares to the information I got from Dave and Franks courses. I read every book they have and listened to every audio program. I attended the bootcamp in July 09. Now just 8 months after I attended Dave and Franks bootcamp I closed on my first park. Using the information I received I bought a fantastic park with great cash flow and tremendous upside.  

The day AFTER we closed a tenant had a sewer issue. I got a few bids to get it fixed. From $4500 to $6500. I was thinking this was a crappy first day. BUT I remembered a few things I learned from the bootcamp. One was not to panic when this kind of stuff happens. So I thought about it overnight and by the morning had another plan. We rerouted a line and just bypassed that old pipe. Total cost. Less than $450

So my bootcamp price and all my books paid off on the first day. I can’t imagine doing this without Dave and Franks info. They arm you with the knowledge you need to go in confident that you will succeed.  Every dime I spent I saved my FIRST day owning the park. I’m confident that the other skills I learned will save me many headaches and thousands of dollars and literally increase the value of the park.

T Conlin

If you are serious about buying a mobile home park, then you do not want to miss this event.

Seats are limited, so don’t procrastinate to avoid disappointment. We may not be back to Dallas for a while (it’s been almost two years since we did the last event in Dallas).

You can sign up on line at www.mobilehomeparkstore.com or call (800) 950-1364. ]]> http://www.mhweekly.com/the-mobilehomepark-investors-boot-camp-is-coming-to-dallas/feed/ 0 http://www.mhweekly.com/mobile-home-and-mobile-home-park-lender-contest/ http://www.mhweekly.com/mobile-home-and-mobile-home-park-lender-contest/#comments Thu, 11 Feb 2010 08:19:46 +0000 Dave Reynolds http://www.mhweekly.com/mobile-home-and-mobile-home-park-lender-contest/ We all know how hard it is to find a lender in today’s economy for mobile homes and mobile home parks. This month’s contest will entail a search for all local, regional, and national lenders that will loan on mobile homes and/or mobile home parks. We will put together a list of all the submissions that we get and send a copy of this list to all those who send in at least one suggestion. Please send the lender’s company name, contact name, phone, and email to dave@mhps.com and I will put together the list.

Also, as part of the contest, we will draw one name at the end of February for a free copy of our Mobile Home Park Home Study Course.