by Joanne Stevens
I originally penned this article in 2005. For the most part, what was true then is true today. Instead of a dot.com implosion, the stock market tanked in 2008. As for prices, did anyone foresee $4 per gallon gas? Bottom line, parks and communities continue to offer one of the best value propositions to the consumer.
If you have been reading any real estate publications, you understand the reasons you ought to sell. There are several; but the main reasons are that prices are good (mostly because of the low interest rates and because of all the capital that has come out of the stock market and is buying real estate) and capital gains taxes are at an all time low. But despite those very good reasons, you have decided that you want to keep doing what you are doing and continue to own and operate your properties. If that describes your situation, here is a little re-enforcement or reasons for why you should continue to own and operate your Mobile Home Parks and Manufactured Home Communities (MHPs/MHCs).
10. Population & Demographics
Two groups, the Baby Boomers (born between 1946 and 1964) and the Echo Boomers (born between 1980 and 1994) are going to grow dramatically over the next 15 years. Both groups will need housing. By 2020 the combined demographics is expected to exceed 129 million people. The demand for housing will be strong! You will have some opportunities to fill vacant sites and/or expand. When people reach retirement age, their income typically goes down. Housing that is inexpensive and easy to maintain will fill a niche.
Even with 5% interest, no down payment financing programs, and other 'goodie' incentives for buyers of site built, at some point the price of housing is unaffordable. Site built house prices have been zooming upwards for what–three, maybe four years. The low interest rates create a lot of sales, so there is a lot of demand, which is pushing prices up. But even at 5% interest, the loan payment will exceed the budget of some. Maybe these "some" will buy our homes and live in our MHCs/MHPs.
8. The Dot Com Housing Bubble
Remember the 'new economics' of the dot com companies? The 'new economics' meant that a company didn't have to actually make a profit, just raise a lot of capital, spend money like crazy, and try to get market share. The company would make it up on the volume. Right. According to many economists, if we are in a bubble, the 'burst' is not going to be a debacle, but merely a slowing of the housing market. Still, there will probably be more people looking for a more affordable home. That means an opportunity for you.
7. Home Sales
The MHP/MHC owners that are selling homes in their parks and communities are filling vacant sites. Maybe the profits aren't like the old days (before 1999), but they are filling vacant sites and financing homes at 9% to 18% interest. Many have said their failure rate on contracts is about 10%. That's not a bad risk and the spread on their line of credit of 6% makes for a nice profit center.
Some are responding to the need to return the MHP/MHC to 'the land of affordability.' We are not competing with site built homes anymore. The need to be considered just as good as a site built home in terms of size, features and roof lines just doesn't work anymore. It's time to get back to what manufactured housing has always been, AFFORDABLE! We do well if we stick to that.
5. Survive In '05. It will be heaven by2011.
This is the mantra of the apartment owners/developers. They are struggling with the same things we are–vacancies, rising operating costs, and the exodus of residents that are buying houses. They predict that their business will get better. Not because the market is changing, but because they are adapting and changing to compete in the very competitive housing market. For example; they have determined that the #1 factor for new residents selecting an apartment is the manager. How that prospective resident 'feels' or perceives the manager is critical to the rental decision. Do you think that apartment owners/investors are revamping the expectations that they have for managers? Without a doubt they are and, while no one likes change, we will need to do the same. It is just too competitive out there not to.
4. Owning a Home
All kinds of people have been taking pot shots at our homes and many owners/investors have diminished wealth and cash flow because of the downturn in the industry. Whatever is said about our homes and communities, they can't take away the one thing that manufactured homes and community living offers. That is the ability, the chance to own one's very own home. I think that we get blasé and forget what a driving, emotional force that is for people. In this country, what are we told with from birth? It's better to own than to rent. If you haven't thought about that lately, think back to some of the people that have brought a home into your community. And it doesn't matter what their age or socio-economics were. Were they excited about their new or new-to-them home? We need to be more excited about the value that our homes and communities offer and the deep human need it fulfills. This is a housing AND a people business!
3. Sex and the City
Do you know what people long for today? Do you know that the big national Master Planned Community developers/builders have figured it out? It's the sense of community, of belonging, of being a part of a neighborhood or community, of being secure in knowing that there are people that you can relate to, socialize with, and hang out with (like Carrie Bradshaw and the girls). Seriously, this is drawing people to Master Planned Communities like you wouldn't believe. Apartment owners are also catching on to this and adapting. Again, if you're an owner or manager, there is a lot you can do to attract new residents and retain existing ones.
2. Gas Prices! What Hurts You, Hurts Your Residents.
For existing MHPs/MHCs owners, rising gas prices may eventually help you. How? Because most of your properties are built near highways and commercial areas (because city councils didn't want you near the residential areas, damaging the property values of their homeowner/voter citizens). That injustice may actually help you attract and retain residents. The expense of driving will impact how real estate is developed. Lucky for you, your properties are fast, easy, and close to work, groceries and highways. Plus, the energy efficiency of manufactured homes is hard to beat.
1. God Isn't Making Any More Land…
And Planning & Zoning Commissions and City Councils aren't approving any more zoning for MHCs. There is just as much prejudice for zoning these properties as ever.
Despite vast improvements in the quality and appearance of manufactured homes, the possibility of getting zoning and permits is about zero. What other category of investment real estate can say that? NONE!