3/5/2019

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Wheels Off! Or On? The In’s and Out’s of Mobile Home Parks

Actual footage…

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HUDManufacturing Process Changes

Where there’s a tornado….

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Importance of MHP/RVP

• Manufactured housing provides a low cost housing option

• RV’s provide temporary or transitional housing options

• Both exist to fill a void left by multifamily and traditional housing

Affordable Housing is a Real Problem!

• The current MEDIAN sale price in US is $238,000 - Zillow

• Current MEDIAN Rental Rate in US is $1,690 – Zillow

• The Current Median Household Income in US is $59,055

• Housing Expenditures (PITI) are over 35% of Gross Income!!

• Housing Expenditures (PITI) are over 43% of Net Income!!!

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Largest owner of mobile homemanufacturing and financing in the U.S

Affordable Housing – Homeless

Tiny Houses Not Allowed…

• Tiny Houses not defined in most city zoning codes.• By default, they aren’t allowed

• “It doesn’t say you can, so, you cant”

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Meet The Cramper!

Is it a bicycle? Is it an RV?Cities: How can we regulate it?

Assessors: Is it taxable?

Cities want a solution, but are afraid of MHP’s• Council members will say they want a solution, but, MHP’s are

politically risky • “Single minded seekers of re-election”• Scarcity of Land is also a factor

“We need a solution” “Not In My Backyard!”

Analyzing MHP’s RVP’s• Ultimately comes down to Supply and Demand

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Demand Analysis

• Current Vacancy Rate of Parks in Jurisdiction

• Employment Centers

• Manufacturing, Construction, Skilled Trades

• For RV’s: Not just vacation!!!

• Oil/Gas Industry

Man Camps

• Oil & Gas Industry must house workers• Mainly in Remote Locations• Major Formation Developments• Pipeline Installation

MHP – Revenue Sources

• Lot Rent

• Late Fees!!

• “Park Owned” Trailers

• Utilities Markup

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RVP Revenue Sources

• Lot Rent

• Late Fees!!

• Utilities Markup

• Laundry/Vending

Miscellaneous Income• The late fees are a big deal!!

• Utilities markup and sub metering is usually regulated by state law

• RV parks may utilize monthly flat fees for electric

• RV Parks may also do “All Bills Paid”

MHP Expense Analysis

• MHP’s with land only will be comparable to industrial property expense ratios.

• Park owned trailers will increase maintenance cost significantly.

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MHP Expense Analysis

• MHP’s with all park owned trailers will see expenses similar to older multifamily

• On site sewer facilities and well water supplies will increase expense ratios as well.

RVP Expense Analysis

• Don’t forget the trash!

• Utilities will likely be all bills paid or submeter• Offsetting revenue/expenses

• Common area maintenance – pool, clubhouse, etc.

• Lots of weedeating!

• Road maintenance can be costly

• Septic system maintenance

Risk Factors – Cap Rate Analysis

• #1 Risk/Cap Rate Factor… Management!!!

• AKA… How much time am I going to have to spend on this thing?

• Large parks with low Owner Involvement = Low CAP

• Small parks with high Owner Involvement = High CAP

• Big Question: Would you rather work for 12% or get 6% Mailbox Money?

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Risk Factors – Park Owned Homes

• Mobile homes depreciate!!! Fast!!

• Tenants are hard on them!

• Requires a high/fast recapture rate

• Investors will typically require a 2-5 year payback

Risk Factors - Financing

• Financing for MHP’s under $1mm can be challenging

• Owner financing is common

• Larger parks will be bought and sold by regional or national investors

Risk Factors – Investor Behavior

• Investors balance Management and Return

• High demand for strong historical occupancy

• Large parks with land only and city utilities are gold

• Substantially higher returns required for parks with park owned homes and on site sewer or well water

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Risk Variables MHP vs RVP

• MHP’s are generally more stable• MH’s are expensive to move

• RV’s can generally be gone in less than 30 minutes

Risk Variables MHP vs RVP

• RV’s generate higher rent per acre• Usually 2:1 over MH’s

• RV’s are usually month to month or week to week• MH’s will usually be on long term contract.

• Park Owned Homes option for MHP’s

• All Bills Paid Option w RVP’s

Valuation Modeling

• Valued on Price Per Lot/Space

• Typical CAP rates range from 6% to 12%

• Local owned parks will not likely be at market rent• **USE MARKET RENT***

• Should see $10-$20 bumps annually

• MHP Vacancy rates 5-15%

• RVP Vacancy Rates 5-25%

• Use Expense Ratios and “Tweak”

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“One day Son all this will be yours.”

IT RUNS

DOWNHILL!

Wastewater Options

Three main types:

• Lagoon

• Septic

• City Sewer

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Lagoon – Good

Lagoon Systems

• Lagoon systems use a natural process to break down waste water through aerobic bacteria and photosynthesis.

• Grey water is the discharge from a lagoon. • Sludge must be periodically removed as a solid.• Requires substantial land area for the pool

Septic – Better

• Aerobic Systems becoming very common.

• Must have substantial size discharge zone

• Monthly service may be required

• Traditional septic systems require sandy soil

• Monthly service required to prevent blockage in pipes

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City Sewer – Best

• Very little maintenance

• If there's a problem, call the city

• Park responsible for lot lines

Water Supply

• A clean and continuous water source is critical

• Areas with extended drought periods may become uninhabitable

• No water… No tenants

• No tenants… No value

Well Water – Good

• Well water can be very high quality

• Generally requires daily or weekly testing

• Logbook must be kept for agency review

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City/Community Water – Best

• Highly reliable

• Virtually no maintenance for park owner

• Water restrictions can limit use by tenants

• Sub-metering can be profitable for park owner

Just because it doesn’t have the best, doesn’t mean it’s worthless

“One man’s trash is another man’s treasure”

Relative Investor Demand

Ownership:

Utilities:

Park Owned Mixed Ownership Land Only

Lagoon Septic City Sewer

Well Water City Water

HighLow

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Future of Mobile Home Parks• Sex Offender Parks

• Convicted Felon Parks

• Senior Parks

• Transitional Housing• Homeless -> Renter -> Owner

• Tiny Houses

• REIT Influence• Bundle Parks in Regional Area

• Consolidate management expense

Thank You!