The truth is that despite recent low interest rates and many US property markets seeing properties trade well below previous highs – American real estate is not affordable for most.
What’s the real math for most individuals and families trying to keep a roof over their heads? Is housing becoming more or less affordable? Where is the refuge? How do these trends and facts affect investors?
The US Housing Dilemma at a Glance
- Over half of US wage earners make less than $30,000
- The average single family home costs $268,900
- The average rent for a 3 bedroom apartment is $1,530
- The average mobile home lot rent is less than $500 a month
The Real Cost of Housing
We’ve all heard of the huge labor battles over instituting a $15 an hour minimum wage. $15 dollars an hour is about $30,000 per year. Ironically none of the major metros covered by HSH and the Washington Post had a median home price affordable to those making $30,000 a year. Not even in Detroit. Data from Zillow shows that in many US cities even renters need to make over double that $15 minimum wage to be able to afford the median priced apartment. That soars to over $100 per hour for some cities. As of 2012 Mesocore reveals cities like San Francisco have seen a 22% rise in rent, and a 2% decrease in household income. People are earning less, yet paying more for their housing.
Real estate investors and landlords have often heard that they should qualify tenants like mortgage lenders, based on housing costs not exceeding 30% of tenant paychecks. In reality many US cities show residents paying an average of 45% of their income on housing. In the past lenders have allowed borrowers to spend as much 55% of their salary on housing. Current trends suggest those times could be coming back again.
The Eroding Economics of Affordable Housing
There are multiple factors currently working against affordability of housing:
- Rapidly rising rents
- Rising interest rates
- Rising taxes
- Higher healthcare costs
- A pending recession
- Stagnant wages
What about All the Affordable Housing Projects?
We’ve seen many new construction projects launched over the last couple of years. Many boast an ‘affordable housing’ element. This means a small percentage of units are reportedly reserved for ‘lower’ income earners. However, as revealed by Bloomberg; new deals between government giant Freddie Mac and mega-funds like Blackstone are funneling billions of dollars of tax payer money into projects under ‘expanded’ definitions of ‘affordable’. At the same time the most affordable types of property – manufactured housing, makes up just 6% of housing stock, and they aren’t allowing any more mobile home parks to be built. There are many great mobile home parks out there. Many have seen property managers strive to improve service, makeover communities, and elevate value to residents over the past few years. These parks run from the modest to beautiful golf and waterfront communities. The problem is that there simply aren’t enough spaces in these communities to meet demand and the coming need for more of them.
Affordable Housing and the Investor Community
Mobile home park investors have a huge advantage in the current market. There is booming demand for their product, and that means high occupancy rates, and robust cash flow levels. This asset class will certainly prove to be one of the most reliable for investors. Yet, at the same time it allows individual investors to provide a much needed service which won’t compromise their values.
You’ve discovered mobile home parks are among the most profitable and secure investments, regardless of asset class. You’ve discovered just how much control you have over a mobile home park investments (compared to equity investments). You’ve realized that it’s an excellent way to diversify your portfolio. You’ve already invested your time researching and reading material to this point. Now how do you get started? What is the first step in investing your money in mobile home parks?
Ask Questions of Mobile Home Park Investors
Your greatest assets are people who have already achieved financial success through mobile home parks. Seasoned investors are almost always willing to give you as much information as you would like. They want to share the excitement of their success and pass along information that will help you reach the same level – information they often wish was shared with them when they first started. They may even want to partner with you and mentor you along the process.
Mobile home park investors have a wealth of information to learn about the industry. You can learn about day-to-day operations, vacancy rates, costs of maintaining infrastructure, building a solid base of long-term tenants, and forcing appreciation. As with mobile home park investors, many mobile home park owners are excellent contacts to keep as mentors and resources of information. Current investors will help you take the most rewarding path to success.
Attend Real Estate Investing Seminars
A financial investment in a seminar will have an immeasurable return. It’s an investment in yourself. Learning what has worked for many other investors will without question solidify your resolve to succeed, suppress your self-doubt and anxiety, and help you focus on taking the proper steps forward.
You will be introduced to investment methods and successful systems that have proven results. You will talk with professionals who can help you structure your investment portfolio in creative ways to make you as profitable as possible. Keep an open mind because what may be new to you may be the most beneficial piece of information you learn.
Read Books on Investing in Mobile Home Parks
There are several publications about investing in mobile home parks specifically; there are countless others in the field of real estate investing. As you endeavor to make the most of your invested money, keep reading! Focus your attention on reading every book about this specific niche.
The information contained in the books you read will certainly not all apply to you, but you can glean at least one valuable piece of information from each publication. You may even learn what not to do, and that could be more important to you than anything else. If something jumps out at you, try it. Put your knowledge into practice. Once you’ve read a book, put it aside to apply some of its lessons but then go back and read it again – you’ll gain even more wisdom from it because you’ll have a new foundation of knowledge and experience that you’ll build off of.
Learn As Much As Possible, But Don’t Hesitate To Take Action
Information is incredibly important to your future and ongoing success, so always be learning. Always read a relevant book or magazine, and put yourself around other people with similar goals. But don’t hesitate to take action!
One of the most fundamental mistakes entrepreneurs and investors make is feeling like they need to have ALL the information or know everything about their subject before they can proceed. The reality is: you will never know everything there is to know about mobile home park investing… and that’s okay! You can continue to expand your knowledge while your investment is ongoing. William B. Sprague said, “Do not wait to strike till the iron is hot; but make it hot by striking.” Inaction is the only thing that will completely inhibit your opportunity for success.
Find Mentors Who Will Help You Along Your Journey
A mentor is there to guide you and help you navigate the complex world of mobile home park investing. They’re not there to tell you what you want to hear; rather, they’re there to give you a fresh perspective and to share their experience. Many of the most successful people in business and investing have several mentors, each providing guidance on a different area. You may want to consider finding a mobile home park investing mentor who can help you.
We all get stuck in a rut at times. Sometimes every day seems to be a repeat of the one before, and pretty soon we get stale. Our ideas become bland and we start to feel dry. When you encounter these times, have a mentor that will be willing to tell you the truth you need to hear. Their ideas will kick-start you out of a plateau or rut and help you achieve what you never thought possible.
Partner With A Mobile Home Park Mastermind
Associating with like-minded investors who share a common interest is the intention here. A mastermind group is essentially peer-to-peer mentoring and is an excellent way of achieving quick success. Your mastermind group will be full of people who want to succeed as badly as you do and are willing to collaborate their time and effort to put their best foot forward. As a collective, you become allies and assist each other to avoid making the same mistakes and to fast-track success by implementing well-planned strategies. They may even become investment partners though the process.
Be Prepared To Invest When The Opportunity Comes
Financially, real estate deals can move very quickly. When the right mobile home investment opportunity presents itself, be prepared to take action. Let your accountant and attorney know that you will be acquiring a mobile home park investment and you may require them to review the numbers or legal forms at a moment’s notice. Also ensure that your investing capital can be accessed so that you don’t miss out on a deal that closes rapidly. And, as you continue to familiarize yourself with the strategies and concepts involved in mobile home park investing, you’ll gain confidence as you prepare for your next investment.
Quite simply, mobile home parks are a straightforward, no-nonsense investment. With a little bit of peer guidance, mentoring, and some focused research, this secure asset class will be very rewarding both short and long term. The most important step it to take action!
Graduating From Single Family Homes To Mobile Home Park Investing
Why are sophisticated investors and finance experts moving up to mobile home park investing, and away from single family homes?
Most people might not think of a mobile home as a housing upgrade. But savvy finance professionals and experienced investors are being highlighted by major financial publications for making the move from Silicon Valley and Wall St. to mobile home parks. In early 2015 some of the world’s largest investments firms shocked the real estate industry when they began shedding the massive portfolios of single family homes they bought up during the downturn, and began talking more about land and income. Specifically, Blackstone division Invitation Homes has made a 180 degree turn from acquiring over $9B worth of houses, to its CEO stating the company plans to sell off at least 5% of the portfolio per year. There is no question that Blackstone is still bullish on US real estate, as it has shown with the launch of its new B2RFinance unit which seeks to fuel investors with capital. The massive bulk flip of homes is certain to be a goldmine, in addition to the recent securitization of rental income portfolios. But what’s next?
Why mobile home park investing?
Investors are Growing Up
Most real estate investors’ first acquisition is a single family home. Some start out with a condo or even a mobile home to live in. In fact, around 12 million Americans live in mobile homes, or a little under 10% of the population. Buying a home is a great move. It creates a strong foundation and is a great way for individuals to cut their teeth on real estate as an asset class, and on the process of acquiring properties. Even Warren Buffett, who is one of the world’s most notable mobile home investors, still calls his own (“stick-built”) home one of his best investments ever. Yet our own homes are not calculated as a part of net worth, and are not pure investments. After all; we all need somewhere to live.
Sourcing Investment Property Deals
While there are still substantial amounts of distressed real estate in America, publicly marketed inventory is low. In June 2015 national housing inventory sat at just 5 months according to the National Association of Realtors. According to Housing Wire and data from Redfin, the inventory picture is worse that it appears too. While well priced new listings may be going under contract within hours, Redfin classified 70% of homes on the market in 2015 as ‘stale’. That means unwanted properties collecting dust on the shelf that no one is drawn to buy. The attractive deals are drawing multiple offers, and that means prices are bid up quickly, while the potential for profit drops. Put simply; it’s getting challenging to find profitable single family homes deals, especially in any type of reliable volume.
Overlooked, Underestimated, Undervalued, Mobile Home Park Investing
Even though single and multifamily property sectors are highly competitive they will continue to be so. It’s what the average investor and fund manager understands. It’s their comfortable go-to asset. This is especially true given the current overall investment environment in which there are fears of a stock bubble; gold is soft, and oil and gas have proven unpredictable. Perhaps aside from those willing to gamble on contemporary art, real estate seems the only attractive asset on the table. And certainly the safest. Yet, in comparison to single family, multifamily, and office and retail investing, one type of investing goes largely under the radar – mobile home park investing. This is true even though mobile home investments have been the backbone and saving grace of Berkshire Hathaway and Warren Buffett through both good and bad times. So what we have is a strong, undervalued investment opportunity, without all the competition. It’s exactly the combination of factors that savvy investors crave.
Advanced investors and commercial real estate professionals use price-per-door (aka per unit price) when looking for value. This is why multifamily apartments, rather than single family homes, are normally sought out by funds. But the value spread is even wider than that between homes and apartments. The St. Louis Federal Reserve Bank put the median sales price of existing US homes at $236,400 as of June 1st 2015. But according to Cost Helper, the average price of a single-wide manufactured home is just $37,100. And it doesn’t require a genius to figure out that the rental spreads or cash on cash yields on a manufactured home are a lot higher. While some investors may take on individual mobile homes, mobile home park investing offers the diversification benefits of multifamily, yet with lower acquisition costs.
Economy of Scale
Serious investors need scale. Single family home investing is really hard to scale effectively. Some may argue that even giant firms like Blackstone and Cerberus simply weren’t prepared for the renovation and property management burden that single family homes proved to be. Pools of distressed single family homes can still sometimes be purchased in bulk. But that often means taking the good with the bad, and little control of how spread out each property is. A ‘50% discount’ is pretty meaningless if half of the pool is worthless, or is going to cost double the average unit purchase price to teardown. Then there is the management. Even if units are rent ready, and rented, it is going to cost a lot more to manage 100 units spread out over an entire city. What about across the country? Then there are the transactional headaches and costs. How much more time and money would it take to complete 100 transactions versus just 1? This is where acquiring a mobile home park can really build in even more profit upfront, as well as delivering superior ongoing cash flow spreads. With the lower cost of mobile homes investors can find that they are able to acquire a whole park for less than the price of many single family homes. This brings additional safety, diversification, flexibility, and more consistent cash flow.
Seller financing is very common in the mobile home sector. Acquiring investments with seller financing can reduce acquisition and borrowing costs, and increasing speed.
Building a Team
Building a team to invest in mobile home parks is virtually the same as for single family homes. You may want some specialists that are really masters of this asset class, but it makes for a very easy transition for those that have been investing in single family homes. Your title partners, mortgage connections, Realtors, handymen, contractors, and property managers may still be able to help. And there are even managed and turnkey style mobile home investment options now coming online.
For those looking to upgrade their efficiency in investing in real estate, improve security, and fatten their net profit, mobile home parks can definitely be the step up investors have been looking for. There is nothing wrong with buying a single family home or two first. It’s a great time to buy a house, or move up. But serious income and value investors will find the price, economy of scale, financing, management of mobile homes, and ease of entry hard to ignore.
How does investing in stocks stack up to mobile home investing?
If you’ve ever found yourself defending your stock market investments because you “don’t like to deal with tenants,” or “don’t want to spend my weekends getting my hands dirty fixing up old houses,” – you need to read this…
“I like to invest in stocks because I don’t want to deal with tenants”
There are plenty of excuses to invest in stocks. Perhaps your grandparents did okay in the stock market. Maybe that is what most of your colleagues and ex-school buddies are doing. Maybe there are even some wealthy people that you aspire to be like who have invested some money in stocks. Maybe you have even picked some individual stocks that have performed pretty well for the last couple of months. But with more leading Silicon Valley and Wall St. minds and wallets exiting old school stocks, and checking into mobile home park investing, it’s certainly a wakeup call to look into new investment options.
Whether it is fear of a rumored stock market bubble swelling, or merely the wisdom of looking to diversify an investment portfolio, real estate undeniably stands out as the most attractive option to explore. However, there can be many misconceptions among first time property investors. These sadly often become excuses not to participate.
This includes worries about having to fix up properties like a DIY show on TV, having to deal with nightmare tenants, and not being made to look foolish by investing in something they really don’t get. The next few sections of this report tackle these concerns, and bring clarity to the synergies and contrasts between investing in stocks and real estate like mobile home parks.
Invest within Your Circle of Competence
The principle of investing within our “circle of competence” is often repeated by Warren Buffett. Buffett of course may be known for his stock plays, but is actually one of the biggest ambassadors in investing in real estate, and specifically in mobile homes. In fact, those that know Warren’s moves well know that he continuously names his real estate investments as his best. With no mention of stocks in his top 1-3 list.
Some of those reading this may know stocks extremely well. Yet, how well do they really intimately know every business, industry, and the factors impacting them? Contrast this with real estate. Each and every person reading this, and everyone they know has dealt with real estate and housing. They’ve dealt with it their entire lives. Those that have struggled without housing are just as familiar with its importance. Ever since birth we’ve needed shelter, seen most of our parents spend the bulk of their lives worried about paying for it. Real estate is something we deal with every day. Is there anything we know better?
Security of Capital
Before any promises of returns on an investment comes the security of capital, and return of investment. The stock market is notorious for its volatility, and this can even carry over to publicly traded real estate stocks and REITs. Every industry, asset class, and type of investment has its cycles. However, direct real estate investment offers far less volatility. And it is always there. There can be zero downside protection in the stock market. You can be completely wiped out.
Truly Passive Income
With mobile home parks investing can be completely hands-free. With a professional system and management in place there is no need for rolling up your sleeves and picking up a hammer, answering tenant phone calls, or collecting rents in person. This means truly passive investing, and truly passive income. If you invest in stocks via an advisor and then into managed funds you may be enjoying passive income, but often with double the costs taken out. If you are day trading there isn’t much time for restful sleep.
The Power of Having Others Invested in Your Success
Most investment opportunities really count on you investing in, and fueling the success of others. Mobile home park investing is almost unique in that it provides you with a team of others invested in your success. As a mobile home park investor most often you really mostly own the land. Residents often own their mobile home units, and are leasing the land from you. This does two things. First, it makes the investment even more secure. The land isn’t going to be flattened by a hurricane or tornado or fire, and it’s pretty hard for someone to run away with. Second, it places numerous others in charge of preserving and nurturing your investment. For mobile home park residents this is their slice if the American Dream. They are homeowners, ‘stakeholders’, and they are families putting down affordable roots. To others, these properties may seem more than a little shy of the Ritz, a Manhattan condo, custom Bay area home, or mansion on Miami Beach. Yet, to residents they are equally as valuable.
Timing is everything when it comes to making an investment. It’s pretty obvious where the stock market is, and what lays ahead for stocks in general. Then look at the future for mobile home parks. In one way or another American housing is only going to get more expensive. Mobile homes are effectively one of the last bastions of affordable housing, and affordable homeownership. If demand is any barometer of the future performance of an asset class, then it is pretty obvious where mobile home parks are headed.
So how do stocks compare to mobile home investing? When investors really dig in, they will discover that real estate, and in particular mobile home parks really don’t have to be that complicated or difficult to own and profit from. In fact, mobile homes stick out as superior investments. You know housing. You know that affordable housing is a big issue today. And that isn’t going to change. Done well mobile home park investing offers a lot of security, passive income, can leverage a highly motivated workforce of others invested in your success. And the timing couldn’t be better.
IN THIS ARTICLE: On the path to success, it’s easy to stumble and make mistakes — and even do things that you later regret. In this article, you’ll read about 7 of the business regrets we have as we grew our business so you can avoid them and grow that much faster.
What are the top regrets of business owners? How can aspiring business owners and startup founders leverage the do-over list of more experienced business leaders and entrepreneurs, gain the edge, and get on the fast track success, without enduring the sticking points of those that have been there before?
Tap into these insights from the successful, leap over the hurdles that slowed them down, or bankrupted their first attempts at launching a venture, and hack your way to more of the results you crave…
1. Not Knowing the Right Questions to Ask
Starting a business, investing profitably, growing income and wealth, getting to your goals; it’s all about problem solving. Albert Einstein said “If I had an hour to save the world, I would spend 55 minutes defining the problem and only 5 minutes finding the solution.”
Harvard Business Review, and Fast Company columnist Warren Berger highlights the importance of asking the right questions as using ‘The Power of Inquiry to Spark Breakthrough Ideas”, and reminds us how deeply integrated question asking is in the DNA of companies like Airbnb and Google.
Michael Hyatt who runs one of iTunes’ top business podcasts, is a New York Times Bestselling Author, and former CEO of a top 10 publishing company says the more successful people are, the better they are at asking the right questions.
Asking good questions is productive, positive, creative, and can get us what we want. So how do we ask more of the right questions?
Ten quick tips for asking good questions:
- Go back to your core goals and ask how to make those happen
- List the things that you don’t know
- Get outside input
- Ask open ended questions
- Throw out all assumptions
- Get multiple opinions
- Ask follow up questions
- Listen, and let others fill the silence
- Ask probing questions of others to get to the heart
- Recognize the separation of speculation and fact
2. “Getting Comfortable with Being Uncomfortable”
Life Hacker credits the above quote to the U.S. Navy SEALs. During training, SEALs and other elite military units push themselves to the brink. They do it on a regular basis. Once you’ve faced your worst fear voluntarily, there is nothing to be afraid of anymore.In fact; you can now rush head first into the mission courageously and confidently. And it builds immunity.
Fortunately, Lifehack.org suggests that the best way to build this immunity and momentum is via small efforts. You don’t have to strike out with battling hyperthermia or trying to survive alone in the wilderness. You can start with skipping breakfast, or trying a new coffee shop, or sending someone new an email. Whether you aren’t used to asking questions, paying attention to the math, selling, or making big financial decisions; business can be uncomfortable. That just means that you are forging your way into new territory – success territory. So get comfortable, and make peace with the fact that you just need to learn to enjoy the experience.
On the bright side Psychology Today says that you can treat yourself during the process to increase your comfort level in a new way with every step.
5 ways you can minimize the discomfort and create a habit of embracing being uncomfortable:
- Get out for a run, or walk
- Focus on the discomfort of others, not your own
- Meditate and find your focus each day
- Treat yourself to a massage or shopping
3. Thinking about Yourself, Versus Adding Value to Others
“You can have everything you want in life if you just help enough people get what they want in life.” – Zig Ziglar
It’s natural to think about ourselves. After all, that is the driving factor that inspires people to go into business, or even motivates them to get out of bed and apply for a job. But at some point, CEOs and businesses find that internal focus, and a taking mindset sabotages them. It can wreck the biggest and best funded organizations fast. And often there is no coming back from that.
The reality is the more people you serve, the more success you will see. The more customers you help, the greater the revenues. But this giving mindset must be authentic, and must be built into the DNA of the business from the beginning.
4. Not Understanding Leverage
Leverage is the most powerful tool available to entrepreneurs, investors, and businesses. Yet, it is frequently misunderstood. It can make all the difference in success. Or it can doom an individual and enterprise to bankruptcy.
The entire US and global economy, and real estate markets are all built on leverage. And we’ve seen how leverage can help them grow, and destroy them. The key is to appreciate the benefits of leverage, while never forgetting to fear the outcome of over-leveraging. Call the optimal mindset a healthy respect for leverage.
Used well it will help you get more done, faster. It may even be the pivot that ensures success. And there is more than one type of leverage. There is financial leverage, intellectual leverage, labor leverage, and leveraging business assets.
5. Creating a Team Too Late
Warren Buffett, Richard Branson, Facebook, Google, Airbnb, or Uber – all of them leverage people. None would be where they are without great teams. So it only makes sense that the earlier you create a team, the better it is. The trap that many entrepreneurs fall into is trying to start alone, and then never finding that ‘perfect’ moment to build the team, and actually allow themselves to step back, and move up.
Start as you mean to finish. Thanks to new outsourcing platforms like Upwork, even solo entrepreneurs can begin building a team on-demand immediately, without burdening themselves with overhead.
6. Trying To Do It All By Yourself
“A cord of three strands is not quickly torn apart.” – King Solomon
King Solomon is regarded as one of the wisest and wealthiest of all time. Worth an estimated $20 billion, the author-king wrote this advice around 3,000 years ago . Today, venture capital firms prefer funding businesses with multiple founders. The largest and richest businesses have shareholders. These are all forms of partnering up. Those seeking likeminded business partners can check out tools like CoFoundersLab.
Even those that want to go it alone can find many way to leverage others through outside strategic partnerships. Look for vendors, other small local businesses, or others in your industry that can complement your work, without competing, and find mutually beneficial ways to work together.
7. Listening to Advice from the Wrong People
Don’t take advice from someone whom you are not willing to trade places with.
Getting advice on both what to do, or not to do is critical. But it only helps and has value if it is from the right people and sources. Gaining good advice is all about modeling success. The opposite of that is taking input from the unsuccessful, and plugging that into your business. That’s like a deadly virus. Sometimes you think it is good medicine at first, it’s only when the bad symptoms start showing that you know it isn’t the good stuff. Sometimes by that point the infection and damage is just too bad to repair or cure.
This is what is so dangerous about all of the cheap and free information available today. Free online investment forums are often riddled with thousands of newbies, all trying to coach each other. Some have no idea. Others are openly committing fraud. If you are new, you might not have any clue. So look for sources of success, and do your due diligence on them before putting any advice into your operation.
Avoid these business regrets, and hack your way to the top faster. Don’t just duck or dodge them, add the opposite activities to your to-do list. List your questions, practice getting uncomfortable, look for ways to add value and serve others, gain a healthy respect for leverage, start hiring a team, schedule interviews with potential partners, and find great mentors that will help you model success.