Last month, I drove about 2,000 miles looking at mobile home parks in Texas, Ohio, Kentucky, Indiana and Michigan in 10 days. Why spend all that time and money to look at mobile home parks? As mobile home park investors, we are actively looking to buy parks in different markets. Nowadays, we rely heavily on information on a computer screen – listings, demographic information, areal views, street views, photos, surveys, sale comps, etc. Yet, unless you physically visit a market, you can’t really be sure of the market. Being more knowledgeable of the market will make us more confident about our offer and ability to close. We had looked at parks in these areas to buy, so I thought I would visit them – with blessing from my wife, of course. Here are some of my observations from the trip.
Even mismanaged parks can be full in a great market. In strong markets like Dallas or Austin, I have seen parks that are poorly maintained, yet fully occupied with high rent. As I was driving through, I saw things from grounds littered with trash, roads marked with potholes, and decrepit homes to pit bulls tied to homes (at least they were tied). Surprisingly some of these parks were full and lot rent alone was close to $500! It’s a testament to demand in these markets. However, it’s not right to neglecting management even if your park is cashflowing.
There can be clean, full parks in so-so markets. Sometimes I would be driving through some weak markets and come across a beautiful park that is fully occupied. The park would be clean, well maintained, with clean homes, nice road, and well-manicured landscaping. If you are buying parks in these markets, these parks will fill before yours do. I found out that many of these parks were owned by older operators who have been in the market for a long time. Since their investments were probably already recouped over the years, they could maintain competitive rent to attract tenants. More importantly, some operators are just really good at what they do – and they have my respect.
Small towns usually have weaker demand. I visited some small towns on my trip. I noticed that parks in these small towns tend to have lower occupancy. The areas usually didn’t have much economic activity. There are exceptions, of course.
Amish horse carriages have turn signals! This is probably the most unexpected thing I saw in this trip. In Indiana, I saw a some amish people on their horse carriages. I noticed all of them had electric turn signals! I respect their respect for vehicle safety – motorized or equine.
Different markets can have different types of housing demand. This sounds obvious, but examples may be more interesting. When I was in a market that used to be heavily focused on manufacturing, I noticed that many parks that charge weekly rent, instead of monthly rent. That surprised me because it would mean higher turnover and more management overhead. When I asked this to the manager, he pointed out that they are simply supplying what people are demanding. Most of the jobs there were part-time or contract jobs. Unfortunately, the companies could not provide permanent positions because their business has not fully recovered. Another interesting model was mobile home parks in vacation areas. I noticed these had a lot of for-sale signs. I presume that people bought homes there as vacation home, but didn’t want to stay any more.
Michigan Markets near Detroit are interesting. We haven’t looked at mobile home parks in Michigan for a while. During the recession, Detroit was probably hit the hardest in the country. We had seen a lot of distressed assets there. As I expected, I saw many mobile home parks that are in bad shape. On the other hand, I was surprised to see parks going through a complete turn around. In these parks, the operator had brought in tens of brand new mobile homes, resurfaced the road, installed new street lights, redid landscaping – the whole nine yards. The occupancy looked pretty high. Now, I am not very familiar with that market to comment on the economics of the turn around. However, it is a great sign that some operator is able do that.
The trip was fun. I am not sure if I can put another 2,000 miles on my next one, but I look forward to it.
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