Macro, Micro, & More…

September 25th, 2020

Blog Posting # 605 @ 25 Sept 2020; Copyright 2020: Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!”

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION: This week’s blog posting is a ‘twofer’! Receive and read one right here. The other one, blog # 604, must be requested via email message to gfa7156@aol.com So, what’s going on? I penned a tripartite story titled, the ‘Very Bad Boys of Manufactured Housing’. In it I identify a gangster, serial killer, and mass murderer – all who, at one time or another, made their living in land lease community business environs. Not wanting to offend anyone, by wholesale distribution of this blog, I decided to make it available on a ‘per request basis’. It really is ‘quite a tale’. Hence, if you’d like to receive and read blog # 604, let me know via gfa7156@aol.com and I’ll respond, with article attached thereto. GFA

I.
Macro, Micro, & More…

Have you noticed, more and more commentary, from the secular and business press, writes how healthy the housing market it these days – despite the coronavirus pandemic. Well, here’re a couple gems I gleaned from ‘Cash In on a Housing Revolution’, by James Glassman, in the current issue of the Kiplinger Personal Finance magazine.

‘COVID-19 will change the home-buying landscape for the better, in part by creating more homebodies. During the epidemic (sic), homes became the center of nearly all family activity – recreation, entertainment, dining, education and work. Equity in a family home is the number-one asset for households, accounting for about one-third of net worth, collectively.” P.28

And this….

‘Exodus to the country. According to the National Association of Realtors, buyers want to move farther out so they won’t be so close to neighbors who might be infected, now or in the future. The mayhem that followed police violence this spring has also led to some disenchantment with urban living, but the nation’s three largest metropolitan areas – New York, Los Angeles and Chicago – were already losing population.” P.28

Bringing this matter ‘closer to home’; specifically, the manufactured housing business, here’s what John Ace Underwood, founder of SellingEDGE, observes and opines to independent (street) MHRetailers:

So long as people have jobs and the demand is as high, rising home prices typically are no reason to panic, as they affect all retailers equally. However, when you couple rising home prices with seriously prolonged build times, now you have a problem. Those who aren’t paying attention to profit margins on EVERY deal and believe they can make up for lower profits by increased sales volume will find themselves in financial purgatory before they now what hit them.” Email correspondence.

Know what? Most, if not all what consultant Underwood pens here is correct and telling. However, when adding land lease communities to the mix, with their increased volume of on-site new HUD-Code home shipments (i.e. up from 24% in 2009 to 40% in 2015), being sold and seller-financed or lease-optioned, there’re two matters to consider:

• Rising home prices and prolonged build (manufacturing) times have waved-off some owners/operators from buying new homes until prices and lead times stabilize. One more reason monthly MH shipment totals are plateaued and now dropping.

• While profit margins are certainly important, many if not most land lease community owners/operators who sell and seller-finance on-site, routinely accept smaller margins, if any, to get new homebuyer/site lessees in place and paying rent – counting on the annuity nature of said payments, over the long haul, of say, 20 years or more.

Now, more than ever before, HUD-Code housing manufacturers should sit down and talk with land lease community owners/operators about the present and future of manufactured housing and the real estate asset class, where target markets are concerned – less geographically oriented, but using purchasing indicators like Area Median Income (‘AMI’). Bottom line? Will we continue trying to crack the ‘big box = big bucks’ housing sale code (Keeping in mind only six CrossMod™ home were purchased and mortgaged – by one of two GSEs – during all of 2019); OR, redouble our commitment to truly affordable housing? Strange to me, how more and more new stick-built homes are going up, while our monthly (and annual) manufactured housing shipment volume, once again, declines. Why aren’t we discussing and strategizing about this?

As I’ve said before, I’d be pleased to volunteer as planner and host of the aforementioned ‘sit down’, this year or early next, at the RV/MH Hall of Fame in Elkhart, IN. If seriously interested, email me via gfa7156@aol.com; or if you just want to talk about the matter, phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

And this in conclusion. How’s the old Eldridge Cleaver bromide go? “If you’re not part of the solution, you’re darn sure part of the problem!”

II.

MHIndustry ‘watchdog’ MHARR Sounds the Alarm!

‘Fannie Mae & Freddie Mac Have Learned Nothing From Their Subprime Debacle’

So reads the title of the Manufactured Housing Association for Regulatory Reform’s (‘MHARR’) communique for September 2020. Too many salient, thought-provoking, convicting passages contained therein to repeat here. Bottom line for me? While many of Mark Weiss’ comments disturb (trouble) me, I find myself wondering: ‘Why isn’t anyone else in the manufactured housing industry’ plowing the same regulatory ground? He’s either accurate or he’s not. If the former; well, we only have ourselves to blame if we don’t heed his warnings. If the latter, then someone should step forth and set the record straight.

If you’d like to read these four single-spaced typeset pages, email Mark via (202) 783-4087.

III.

Is Your Firm Eligible for Inclusion in the 32nd annual ALLEN REPORT?

The deadline (10 September) has come and gone, but if you respond to this reminder SOON, we can still include your land lease community portfolio firm in the 32nd annual ALLEN REPORT, planned for distribution during January 2021.

Eligibility? If you own and or fee manage 500+ rental homesites or a minimum of five land lease communities (any size), you’re eligible!

What to do? Email me at gfa7156@aol.com and request the 32nd annual ALLEN REPORT questionnaire. Will get it to you right away!

George Allen, CPM, MHM EducateMHC

Wall Street Analyst Muses about Land Lease Communities as Investments

September 18th, 2020

Blog Posting # 603 @ 18 Sept 2020; Copyright 2020: Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!’

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7196@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION. Two interesting parts to this week’s blog; one quoting a Wall Street analyst, the other, an abbreviated outline I use when sharing the Official State of the Manufactured Housing Industry, with various audiences. ANNOUNCEMENT. If not already a subscriber to The Allen Confidential! newsletter, you might want to do so ASAP. Why? Because the lead feature in the October issue is titled: PAST ‘PLAYERS’, Where are they today? Have spent the last month or so identifying and tracking down 50 or so individuals that were once widely recognized names in the MH & LLCommunity business models. Some very interesting findings. Active ‘players’ are not profiled; and those who’ve died, as you may or may not know, are identified in a Memorial column, each month, in the TAC! newsletter. To subscribe: visit www.educatemhc.com

I.

Wall Street Analyst Muses about Land Lease Communities as Investments

Two reports, prepared by non-MHIndustry or land lease community ‘players’, appeared on the business news scene recently. I’ll review one of them here: ‘You are About to Change our Mind on Manufactured Housing’, by Brad Thomas. Perhaps next week we’ll take a look at ‘The Basics of Investing in Manufactured Home Communities: History, Evolution and Opportunities’, produced by LoopNet.

Thomas, from the very beginning, struggles, using inappropriate manufactured housing terminology. His description of choice for our unique, income-producing property type? Manufactured Housing Parks, when he should be penning land lease communities!

One of the writer’s first observations is how this realty asset class is: “…unique, controversial, and (a) vastly underappreciated segment of commercial real estate’. P.1

Now, this is interesting. Thomas cites $27.7 billion (market cap) for this realty sector. He calculated that figure by adding together the market caps (i.e. market cap values for REITs ELS, Inc. @ $12 billion; Sun Communities @ $15 billion). Unclear whether he included UMH Properties @ $619 million, or not. So, as you can see, this is a very narrow window of examination, covering just two, maybe three, publicly-traded portfolios of land lease communities. How does this $27.7 billion compare to other REIT segments? Industrial, office, self-storage and retail are pegged at $125.7; $78.8; $60.7; and $101.2 respectively. FYI. EducateMHC prepares and circulates, to PRIME subscribers of The Allen Confidential! monthly newsletter, a combined ‘Official MH Shipment & Stock Market Report’, describing the performance of all eight public MH & land lease community-related firms. To subscribe, visit www.educatemhc.com

Nice to know. Among all REITs (real estate investment trusts), “…manufactured housing parks were the top-performing real estate sector in 2019.” P.5.

“Owners of manufactured homes…stay in their homes longer than traditional homes.” (15 years vs. 13 years) p.7. Another factoid worth hanging onto.

But here’s a claim I challenge: “…there were only 10 new manufactured housing parks established in the U.S. in all of 2019.” P.9. Writer provides no documentation of this claim. I’d be comfortable with a number twice that amount, based on what I’m hearing these days.

“Manufactured home parks are designed for those living off around $30,000 per year.” Note: National average AMI or Area Median Income, of late, has been in the $50,,000-60,000 range. Do you know how to use AMI to estimate housing price points for any local housing market? If not, request a copy of the ‘Ah Ha! & Uh Oh! Worksheet’ via gfa7156@aol.com

Now, this is interesting. “Manufactured home park depreciation schedules typically average 15 years, compared to apartments of 27.5 years, and commercial properties (e.g. office and industrial) of 39 years.” This means, “The higher depreciation rate equates to higher after-tax cash flows to investors, based on identical income generation.”p.18. Bet most of you didn’t know that.

“Existing REITs in this sector, Equity LifeStyle Properties, Inc., Sun Communities, Inc., and UMH Properties (UMH), buy essentially all their properties from individuals or families at around net asset value. Once in the REIT, however, they are immediately valued at a -20% premium. This creates immense value for shareholders.” P.18

II.

Land Lease Communities Today…

Most of the time, when I’m asked to present the Official State of the Manufactured Housing Industry, I cover two major sectors: manufactured housing per se, and land lease communities at large. What follows here is an abbreviated summary of just the latter half.

According to the 31st annual ALLEN REPORT, for year 2019, not much changed from the previous year. Access to chattel capital, for on-site seller financing of home-only loans, continues to be the dominant, albeit frustrating challenge for most community owners/operators nationwide. One continuing result, an emerging trend, is the return to renting out of new homes on-site…just as we did during the late 1970s and early 1980s.

Statistics from the ALLEN REPORT indicate 93 percent national physical occupancy, among portfolio firms, during 2019; and, 41 percent operating expense ratio or OER. A new ‘measure’ came on the scene during 2019, the National Average Multifamily Rental Rate (for conventional garden style apartment communities). For example, during the measurement period, that figure was $849.00/month rent. Compare this amount to $800/month for a manufactured home in a land lease community where site rent is $300/month and PITI is $500/month. Taken together, the $800 monthly figure, compared to $849/month, suggests a $49/month incentive to live in a land lease community. However, if utility expenses, for said home in a land lease community, are included in the monthly payment, that ‘incentive’ disappears, unless site rent is reduced or lesser (more affordable) home is financed.

The new tripartite advocacy, resource, and communication presence for land lease communities nationwide?

• Manufactured Housing Institute or MHI. National legislation, representation, regulation, and issues affecting MH, and realty asset class at large.

• National Communities Council (NCC) division of MHI. National projects, property management & installation training via MHEI, and networking opportunities relative to community owners/operators nationwide

• EducateMHC. Primary resources (e.g. ALLEN REPORT & 12 additional Resource Documents updated monthly), communication (via this weekly blog & The Allen Confidential! newsletter), and services (e.g. Manufactured Housing Manager or MHM training & certification, & confidential assessments of property operations performance.

And yes, there are emerging – and existant, trends to watch as time passes.

• Continued consolidation of Mom & Pop-owned land lease communities into private and publicly-owned property portfolios, too often resulting in less coorporate support for state manufactured housing associations.

• Increased presence of resident-owned communities or ROCs.

• More new HUD-Code homes shipped directly into land lease communities for sale, e.g. 25 percent in 2009 & 40 percent during 2015 and beyond.

• Success or failure of properties acquired by outside investors (hedge funds) paying exorbitant amounts, then increasing site rents to much higher levels.

• New HUD-Code homes ‘sold on-site’, often with minimal profit margins, to ‘make the deal’, relying almost wholly on the annuity nature of site rent into the future.

Two perennial issues affecting all manufactured housing and land lease communities:

• Continued absence of two secondary markets: resale of manufactured home and valuation thereof, via continued use of ‘book value’; and, selling off of seasoned ‘contract sale’ paper on MHs, to replenish chattel capital for the purchase of new homes on-site in land lease communities.

• And now, a new (?) challenge for the industry and realty asset class! Economic Impact Analysis or EIA. While a complicated process – researching and publishing accurate economic impact of various industries, and realty asset classes, on local, state, and national levels, it’s how we best justify our existence, even need for less regulation, if appropriate. The (?) mark? EIAs have appeared, over the decades, in various states, e.g. Indiana in late 1980s, and recently in Wisconsin. Should be done in every state and, by MHI, MHARR, and or MHCOA, on the national level! Let’s see if it happens.

We’ll conclude this part of the blog by making an observation about ‘doing business’ during the coronavirus pandemic. Virtually every land lease community owner/operator I’ve talked to during the past six months has expressed mild surprise about how well homeowner/site lessees have honored their rental commitments. Yes, some have incentivized the process with earl pay discounts, etc. But, by and large, it appears residents appreciate having their own home (to self-quarantine within) and do not want to risk losing it during these stressful times!

George Allen, CPM, MHM
EducateMHC

SIGNAGE, SIGNAGE, SIGNAGE

September 11th, 2020

Blog Posting # 602 @ 11 Sept 2020; Copyright 2020: Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!’

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com , & visit: www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

SIGNAGE, SIGNAGE, SIGNAGE

Signs are everywhere! But have you ever stopped to think how they affect and influence your personal and business life? I did so recently, and came away with these musings.

My first experience with the effectiveness of creative sign-making occurred decades ago, as I drove behind a Klosterman Bakery delivery truck. Below the company name was this message: ‘I just left a great restaurant!’ To myself, I thought: “Hmm. Wouldn’t I prefer to ‘follow’ him to discover a great restaurant?” Well, I penned a letter to the CEO of Klosterman’s, making that recommendation. And guess what? A few months later, as I pulled behind another of the firm’s delivery trucks, I read this message: ‘Follow me to a great restaurant!’ Never heard from the firm, thanking me for my suggestion. Just figured a junior marketing exec used my suggestion, and got promoted for doing so. Oh well.

Then there’s the first practical signage lesson learned in (then) manufactured home community management. It was 1978, and during my first week on the job with Turtle Creek Management, managing four rough ‘trailer parks’ in IN & KY., I asked to visit the ‘best run community in the U.S.’- as an example to aspire to. Well, they sent me to Wymberly in Georgia, then owned by Craig White. First thing I noticed as I drove on-site was an attractive 2 tall X3’ wide plywood sign mounted on 2X4s, a foot off the ground, with flowers planted underneath. Message? WELCOME HOME. And on the reverse or exit side, DRIVE CAREFULLY. That sign idea was an inspiration to me, then a professional property management trademark, when I went out on my own a couple years later.

Fast forward 30 or more years. That’s when I drove on-site, visiting a MI. property managed by now retired Lynwood Wellhausen. When I commented on how slow everyone seemed to be driving, he took me off-site to see the signs I missed when entering the property. Each one, with white letters painted on a bright red background, asked: ‘How Would You Feel If You Injured a Child While Speeding in This Community?’ And a few years later, a variation to this theme, became available via the internet. 2’wide & 3’ tall, again white letters on a red background, with this message: DRIVE LIKE YOUR KIDS LIVE HERE!, followed by this sourcing address: www.DriveLike Your Kids Live Here.com

Now here’s a cute sign story. In southern Indiana – can’t recall the specific town, there’s a small billboard on the outskirts, near a hotel, which proclaims: ‘A Lovely Place to Stay’. Nothing more, nothing less. Well, when I first saw it, I jotted down the message, pondered it, then decided it’d be a fitting subtitle, so to speak, on property entrance signs gracing superior land lease communities. The new message? ‘A Lovely Housing Discovery!’ Know what? Chrissy Jackson, ACM, and a few others have borrowed that idea over the years, and such signs now exist at several land lease communities around the U.S.

No one, in my opinion, has done a better job with offsite and on-site signage than Florida Communities of several decades ago. What’d they do? Began with full-size highway billboards enroute to all their properties, each one featuring the late entertainer George Gobel, rowing a boat on a lake, headed for one of the firm’s properties in the distance. Then, once on-site, it was obvious entry signs were repainted every six months, and ‘beautified’ with fresh flower plantings every couple months. Seriously. And at the Information Center, a sign announcing: ‘Reserved For Future Resident!’ Then, driving thru the property, see ‘kick down’ signs featuring a Smiley Face caricature – frowning. Message? ‘Sorry, I’ve Been Taken!’, informing one this rental homesite was already leased, awaiting a new home.

A couple other contemporary sign trends. More and more we’re seeing dual signs on-site; one in English, the other in Spanish; oft times providing instructions on how to pay one’s rent electronically – along with other messages. And, for those land lease community owners/operators who host Home of the Month contests every spring and fall, consider having an A-frame structure supported sign (i.e. 3’X4’ plywood on 4”X 4” frame for portability), proclaiming: HOME OF THE MONTH! Paint this in bright colors, including corporate logo, and move it from rental homesite to homesite each month, identifying ‘winners’.

Bootleg signs. Property near an interstate highway? If so, consider mounting aluminum plate signs, painted in same PMS colors as official highway signs, containing only the name of the property – with an arrowhead at either end, showing exiting vehicles which way to drive. Done well, they oft remain in place for years. In this case, imitation is more than just flattery, it’s a practical help to prospective homebuyers/site lessees enroute to your land lease community!

Land lease community leasing/sales (a.k.a. Information Center) offices are notorious for offbeat humorous messages posted therein. Here’re several examples purloined from community offices during Mystery Shopping visits:

• ‘Writers of Bad Checks will be Beaten, Stomped, and Stabbed. Survivors will be Prosecuted!’

• ‘Business Hours: We’re Open most days about 9 or 10. Occasionally as early as 7, But some days as late as 12 or 1. We’re Closed about 5:30 or 6. Occasionally about 4 or 5, But sometimes as late as 11 or 12.’

• Nodis. ‘Trespasers will be persekutedd by 2 mungrel honds that don’t like STRANGERS n’ a 2 barrel shotgun loded fer troble. DAM if I aint gittin Tired of This HELL Raisin on My place!!’

And probably one of the most frequently seen ‘signs’ has long been, plastic license plates containing the name and phone number of the land lease community, along with this message: Neighborhood Watch! And while vinyl bumper stickers are more temporary than permanent signs, here’s one that was popular back in the k1980s: ‘I (heart) MY MANUFACTURED HOME!’

Now here’s a personal sign story. Back when George Allen, son of the famous late NFL football coach with the same name, was running for U.S. Senate in Virginia, friends of mine would appropriate one of his yard signs, 2’tall & 3’wide, that said: ‘George Allen for SENATE’. Then they’d stop by our home at night and mount the political sign in our front yard. Always good for a few curious telephone calls next day and the next.

So, do you have a favorite ‘sign story’ you’d be willing to share with us? If so, let me know via gfa7156@aol.com

George Allen, CPM, MHM
EducateMHC

DANGER!

September 4th, 2020

Blog Posting # 601 @ 4 Sept 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit: www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

DANGER!

‘One of the Most Risky Business Transactions in the Manufactured Housing Industry’

Buying & Selling Land Lease Communities

Acquiring a land lease community (formerly, manufactured home community) as a real estate investment? You familiar with the numerous touchstones to examine, document, and plan during the pre-closing due diligence period? Thinking here of ‘good & bad’ relative to property location & street layout; number, size & functionality (i.e. whether functionally obsolete or not) of rental homesites; and the type & condition of property’s infrastructure, where utilities (above & below ground) & streets are concerned. And the list goes on, including careful due diligence examination of property’s ‘financials’, where accounts receivable & payable are concerned, along with staffing considerations past, present & future.

For many years, as a long time land lease community owner/operator and freelance consultant, I offered Mystery Shopping and ‘pre-due diligence inspection services’ to novice, or first time buyers. Unsure anyone active in the real estate asset class does this, other than EducateMHC, now that I’ve withdrawn from active professional property management.*1 So, for the most part in this blog, I’ll share touchstones and techniques which highlighted pre-due diligence services over several decades.

Marketing and selling one’s land lease community, as a real estate investment, is as tricky as the acquisition drill; but here, in my opinion, potential pitfalls have more to do with real estate contract terms than almost anything else. While these comments apply primarily to sellers, most also have an application to buyers as well. Examples:

• Whether to use a real estate broker or not – and if so, who or which firm? Given the popularity of land lease communities, as investment vehicles these days, one might consider using the services of a local, or near local, real estate specialist attorney, to protect one’s interests! How to market the property? Tap into inquiries received during the past six or so months. And, once the word is out, the property is on the market, you’ll receive plenty of additional inquiries. Bottom line? Whoever leads, or is part of your marketing team, must be protecting your pecuniary interests from start to finish! Now, if you know (well) a regional or national broker who specializes in marketing land lease communities, this might be a wise choice to consider.

• Pricing one’s property, with and without park-owned homes in place. These days, a land lease community-savvy real estate appraiser is probably your best bet – not necessarily the broker who maybe ‘promises you an exceptionally high offer’, to get your attention and listing. Valuing homes on-site (again, park-owned homes) is an especially touchy subject. For example, will their value be based on income- producing potential or replacement value (e.g. NADA blue book or programming)? Sellers generally prefer the former; buyers – to keep values low – generally prefer the latter.

• Do property listing and sales contracts protect your interests or those of the listing broker (brokers) and or buyer? How to tell? Several ways, but one of most ‘telling’ is the existence and nature of ‘escape clauses’ contained therein; i.e. Can you get out of the ‘deal’ easily, or have to forfeit any deposit you may have accepted to take your property off the market? And for how long are you locked into the listing contract? 30, 60, 90, 120 days or longer? Generally, ‘the shorter the better’ unless the property has issues.

• Cash or contract sale? An old Rule of Thumb: ‘You can control the price or the terms of the deal, but not both!’ Meaning: Cash sale = less $ at ‘closing’ (i.e. via bank loan) with no risk of having to take the property back in foreclosure. However, more $ at ‘closing’ with contract sale, but be vigilant on terms ensuring they protect the seller in the event of loan default. Seriously. Happens more than most folk realize. For a list of 20 lenders and brokers who specialize in land lease community loan origination, refer to the EducateMHC Resource Document: ‘National Registry of ALL Lenders’.*1

• If a contract sale, and buyer has other land lease communities within 100 miles of the subject property, visit them to observe how well or poorly the buyer manages them. Best indicator of what to expect for the property you’re selling.

• A final bit of advice for now. Be aware of, and beware, buyers who immediately accept your offering price or value. While maybe legitimate, know there have long been buyers who use this ploy: Agree to pay higher than justified sale price, then wait out the due diligence period, with little or no property and accounting inspections and demands. Then, within a week or so of ‘closing’ make demands on seller to lower the sale price and or correct deferred maintenance, and worse, capital expenditure shortfalls ignored to that point. All too often this work!. Why? Sellers often plan their post-sale lifestyle changes, have told friends and family of the pending transaction, and otherwise – mentally ‘walked away from the property’, not wanting to start the process again.

Some of the touchstones I, as a pre-due diligence consultant, considered during the review of documentation provided by property owners and or real estate brokers, to our clients who were potential buyers:

• Ensure buyer knows what he/she wants to buy and has the ability and capital to effect a land lease community transaction. Examples: OK with 50% (turnaround challenge) or must have 100% physical – and economical occupancy? Prefer public or private utilities on-site, e.g. water, sewer. Low or high site density, e.g. five or 15 homes per acre? Accept functionally obsolete rental homesites (too small for siting of contemporary manufactured homes) or not? And how far/close to buyer’s home or office must the property be?

• Research and visit local housing market to get ‘feel’ for the property proper, employment opportunities in the area (unless a retiree mecca), quality of education, and presence of shopping, hospitals and other services. Good place to start is local Chamber of Commerce and their handouts.

• Visit www.zipwho.com to learn the Area Median Income (‘AMI’) for this local housing market (property specific). This will assist in learning what housing price points, from ‘risky’ & ‘affordable’ perspectives, ‘work’ in this location. To that end, you’ll need a copy of the ‘Ah Ha! & Uh Oh! Worksheet’ to work through those numbers.*1

• Consider making Good/Bad Unchangeables & Good/Bad Changeables lists for the subject property. Max number of good Unchangeables (e.g. location, density, utilities) is Good. However, bad Unchangeables are ‘warning’ signs. If aligned with buyer’s goals (e.g. turnaround challenge is OK), max number of bad Changeables (lack of rules enforcement, poor collections, lousy resident relations, etc.) is a Good indicator; otherwise, buyer may want as many good Changeables as possible. Hint: Almost all ‘Changeables’, good and bad, are property management-related, so begin there.

• Take time to perform a SWAT Analysis. On an 8 ½ X 11 inch piece of paper make a vertical line from top to bottom, and midway down the page, a horizontal line from side to side. Then, top left corner, label as STRENGTHS (now). Top Right corner, label as WEAKNESSES (now). Bottom left quadrant label as OPPORTUNITIES (now & future), and bottom right quadrant label as THREATS (now & future). That way, as you review local newspapers, talk with the property owner and other resources, learn and categorize the Strengths, Weaknesses, Opportunities, and Threats, relative to this property. And plan accordingly.

• Ascertain whether present rental homesite rate is in sync, or not, with other types of multifamily rental properties in the same local housing market. Two steps: First, ascertain local monthly rent rate for conventional garden style apartment communities in the same area, especially 3BR2B units….comparable in size to manufactured housing. Take that average (e.g. $900/month) and divide by ‘3’. Answer = $300/month for land lease community target site rent for transaction property. Is offered property above or below that amount? First acid test. Step two; compare subject property rent with other land lease communities in the area, to see if there’s room for ‘lift’ after ‘closing’, or is rent already above market, restricting buyer’s options post ‘closing’?

• At some point during this sequence of touchstones, perform a ‘Cash Flow Analysis’ of the property’s operations, using the ‘MHIndustry Standard Chart of Accounts’ for Land Lease Communities, along with the Operating Expense Ratios (‘OERs’) contained therein. Use a Cash Flow Analysis form that allows you to list the ‘present performance $’ side by side with ‘future performance $’ based on changes anticipated for the property post closing.*1 Know that the national average OER for land lease communities continues to be 40+/-%, according to the 31st annual ALLEN REPORT.

OK, the transaction appears to be headed for consummation or ‘closing’. What now? Prepare a Management Action Plan (‘MAP’) based on one’s visits to the property, Cash Flow Analysis, SWAT analysis, and lists of Unchangeables and Changeables. Even Mystery Shop the property, by phone and in person, to evaluate the present day staff’s job performance. When preparing the MAP, be sure to include a completed Takeover Checklist, and Property Information Sheet (e.g. vendors, phone numbers and more). All these helpful materials, and more, are included in the nearly 200 page textbook: Community Management in the Manufactured Housing Industry, available from EducateMHC.*1

Two concluding tips. When first entering a new local housing market, when evaluating a land lease community, attempt to locate an independent (street) MHRetailer. Playing the role of a would be homebuyer, ask for names of best and worst properties in the area. If subject property is not mentioned, ask about it. Also ask for a list of all communities in the area. Next. When driving on-site for the first time (in an older vehicle, and dressed casually) stop and ask a resident what the site rent amount is, how it’s paid (on-site, mailed or electronically), and what he/she likes and dislikes about living there. Answer to the second question will usually unearth issues that will likely play into negotiations to purchase the property.

End Note. 1. To contact EducateMHC, visit www.educatemhc.com or Erin Smith, MHM, via (317) 738-3434

ACHIEVEMENT ANNOUNCEMENT

August 31st, 2020

Blog Posting # 600 @ 31 August 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!’

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U! Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION. Most of the quotes in Part II of this blog (#600) have been lightly edited to ensure consistency in terminology and descriptions. GFA

I.

ACHIEVEMENT ANNOUNCEMENT

This is George Allen’s 600th Weekly Blog Posting Since 2008!

Twelve years of pretty much ‘shooting from the hip’, where manufactured housing & land lease community reporting of statistics, identifying challenges, and documenting emerging trends are concerned. When industry & realty asset class NEWS could not wait until the next Allen Letter – recently renamed The Allen Confidential! was penned and published, this blog led the way, informing inquisitive and thoughtful decision-makers what was taking place around them nationwide! And those timely NEWS perspectives continue today, as we look closely at Manufactured Housing’s (latest) Conundrum!

Trust you will continue to follow this blog’s NEWS through to the 700th posting two years from now. And along the way, know I want to hear from you, with NEWS tips and leads, via gfa7156@aol.com
GFA

II.

Manufactured Housing’s Conundrum:

“Is COVID-19 really the culprit for manufactured housing ills these days, or simply being used as cover for other troublesome realities?”

We asked this timely question of 60 manufactured housing & land lease community ‘insiders’ from every segment of the industry and realty asset class, during mid-August. Since then we’ve received a dozen written responses, mostly via email and telephone, expressing a wide range of views, but with this common theme: one way or another, the coronavirus pandemic has affected all aspects of manufactured housing production & land lease community operations!

This is what representatives from two HUD-Code housing manufacturer penned:

• “Over the past month, we saw our largest (price) jump in lumber and OSB (‘oriented strand board’) ever. The demand for building products – from shingles to doors to 2X4s to OSB have gone up and up. The OSB mills (staffing) have been reduced and shut down for COVID.” Another respondent: “The (building) materials have gone crazy over the past few weeks, e.g. July 24th & 31st, OSB went up 25-30%.”

• Freight cost factors: Fuel prices, road construction and municipal detours forcing longer routes. And, once again, “…there’s a shortage of truck and escort drivers.”

• ‘Improvements in materials’ (e.g. window wrap, upgraded furnaces, Ecobee thermostats, etc.) have contributed to product price increases.

• From a land lease community owner: “…in CA, at the ________ plant, 35% of employees are off work, and the product coming off line has major problems, and there is no one available to fix the problems.”

Zeroing in on the lumber supply shortage. Here’s what MHI recently wrote on the subject:

• ‘The random Lengths Framing Composite Price topped $600 per 1,000 board feet at the end of July – marking the first time that prices have topped the $600 level. Framing lumber prices have soared roughly 80% since mid-April while the price of OSB is up well over 100% from a year ago.”

• And something you might not know: “…housing demand has remained steady across the country, and there was also an unexpected surge in demand from do-it-yourselfers and big box retailers during the pandemic.” Plus, “…tariffs on lumber imports from Canada continue to average more than 20%.”

Underscoring what you just read, here’s a summary quoted from the 19-25 August issue of The Epoch Times – the weekly newspaper I now read instead of The New York Times and The Washington Post.

• “Supply shortages of framing lumber and OSB are harming the U.S. economic recovery and its burgeoning housing market – according to the National Association of Home Builders (‘NAHB’).”

• NAHB suggests the White House urge “…domestic lumber producers to ramp up production to ease growing shortages.”

How are land lease communities handling these increased manufactured housing costs?

• ‘Over the last few years we have (been) filling rental homesites with new homes we sell at cost, if need be. All we really care about is having established the market rent for that space; that is where the true value of these communities lies.”

• “…while I’m selling new homes at cost, I have come to require the homes to remain in the (land lease) community for at least four years. Other communities use ‘secret shoppers’ to buy my homes, only to move them out. In our sales contract, I require the home remain in the community a minimum of four years, and if they move it beforehand, they are required to pay the pro-rated amount of site rent that remains. Doing this, puts the home price where a street dealer is disincentivized from purchasing my discounted homes.”

• “As you are aware, in CA, we have no new land lease communities, so have been changing out lots of pre-1980s homes with newer, high end manufactured homes.”

• “I no longer consider investing in land lease communities in soft markets because I simply don’t know where the product pricing will be, to fill vacant rental homesites.”

Talk about a two-edged sword dilemma. Here it is:

• “…the stimulus checks and added unemployment benefits have helped some of our perpetually late residents get caught up on their rent balances.” (&)

• “…we pay our employees a ‘COVID Bonus’ for continuing to work fulltime during the pandemic”, to offset the ‘more $ to not work’ compensation they receive from government sources.

Two bottom lines, of sorts, for this week’s blog: Through June 2020, HUD-Code housing shipments have slipped by 200 units from June a year ago – and continue to fall. And, according to the Federal Housing Finance Agency (‘FHFA’), housing prices, nationwide, are up 5.4 percent from a year ago, year to date. So, fewer manufactured homes available, even as conventional housing prices continue to rise.

Well, that’s our conundrum summary to date. If you’d like to add your comments to this mix, simply email me via gfa7156@aol.com

POSTSCRIPT. Lest you think the coronavirus is affecting just our industry, where shortages are concerned, here’s an observation from a recent issue of the Washington Examiner magazine: ‘Timber, coin, and gun shortages attributed to the coronavirus.’

III.

Revisiting the T-Shirt Collection

If you enjoyed last week’s blog describing my T-Shirt collection, the one about to be donated to the RV/MH Hall of Fame in Elkhart, IN., and have MH-related corporate T-Shirt(s) you’d like to add to the collection, simply box them up and send to George Allen c/o 170 Commerce Dr., Franklin, IN. 46131.

***

George Allen, CPM, MHM
EducateMHC

A Potpourri of MH T-shirts, & How We Can Share Them With Future Generations!

August 18th, 2020

Blog Posting # 599 @ 21 August 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION: Two weeks ago, I sent dozens of MHInsiders (all major HUD-Code housing manufacturers, many property portfolio owners/operators, and other industry/asset class leaders) a lengthy email message with this SUBJECT line:

“Is COVID-19 really the culprit for manufactured housing ills these days, or simply being used as cover for other troublesome realities?’

Then talked about rapidly increasing wholesale housing prices, escalating delivery costs, and shipment backlogs extending into mid-2021. Requested input from recipients, and boy did I ever receive it – a dozen thoughtful, helpful replies to date! Will likely address these timely and troubling topics in next week’s blog posting (i.e. historic #600), but wanted to give ‘blog floggers’ (YOU) this opportunity to provide additional input. Send to GFA c/o gfa7156@aol.com. Won’t use your name unless you make it clear it’s OK to do so.

Now for the lead-off to Part I of this week’s blog. The following dozen or more T-shirts in my collection, described here, were presumed ‘lost’ for the several years. Found them this past weekend as I was cleaning out my Franklin office. Now sharing some of their rich history with you!

I.

A Potpourri of MH T-shirts,
&
How We Can Share Them With Future Generations!

But first, this IMPORTANT ANNOUNCEMENT. ‘Manufactured housing-related collections (i.e. books, T-shirts, coffee mugs, challenge coins and more) must find a home soon, or be lost to our industry forever!’ It’s our business legacy we’re talking about here! More on this a little later in this blog posting. GFA

Two dozen white, black and colored T-shirts trace manufactured housing history from 1936 to the present day. As I close down our corporate office – to work from home, I must ‘find a home’ for at least four collections accumulated since 1978. Carolyn has already said ‘no’ to turning our home into another manufactured housing museum.

So, what are the messages on these T-shirts? Well, just a taste here, as I’ll likely elaborate, maybe even photograph them, for a future Allen Legacy column in MHInsider, magazine, or feature in The Allen Confidential! business newsletter. But no photos here in this blog posting.

‘Visit the NATIONAL TRAILER SHOW, September 10-15, 1937, at 71st Armory in New York City’. So reads the message on oldest T-shirt, provided by the publishers of defunct Lost Highways magazine. To read more about that short-lived firm, and its’ colorful tales of ‘trailer life of yore’, watch for coverage in a future Allen Legacy column in MHInsider – one tracing manufactured housing history via its’ trade publications over seven decades.

Then there’s the iconic Manufactured Home Communities, Inc. (one of the earliest real estate investment trusts or REITs), WORLD TOUR T-shirt (1993) ‘Reshaping the Perception about Manufactured Housing Communities.’ Yes, this is the one with a caricature of (presumably) Sam Zell on the back shaking an accountant by the neck, saying: “For the last time pencil neck, it’s not called a trailer.” And, almost a decade later, MHC, Inc. (IL) came out with another white T-shirt, this one proclaiming: ‘Times Change. KEEP UP. Leading manufactured housing into the new millennium.’

What other T-shirts are in this eclectic collection? Here’re brief descriptions with a minimum of humorous and enlightening messages contained thereon. Details, and maybe photographs, will be published in one or another of the future trade publications mentioned earlier.

Chateau Communities, (MI & CO) another of the original REITs, later sold to Hometown America in 2003, distributed a variety of T-shirts over the years. One even promoting resident relations and ancillary income in their land lease communities.

ARC, a short-lived REIT (2004 & 2005), known at different times as Affordable Residential Communities and American Residential Communities (If my memory is right), designed a T-shirt featuring their corporate logo on the front and mission on the back. The corporate history of this firm, as brief as it was, deserves description someday, i.e. from its’ ‘ARC Way’ formula for turning around troubled communities, to the simultaneous auction of all its’ properties, in a huge hotel ballroom outside Chicago. Hint. The auction was so large; the firm’s stock price fluctuated throughout the day, as properties were bid for and sold – only to have all transactions nullified later, because sale prices did not meet the stated reserves.

Then there’s Community Housing Management Services (CA). The only non-profit public benefit portfolio owner/operator, that I’m aware of, to serve Senior citizens and others.

The Choice Group (MI) broke this T-shirt pattern by handing out dark blue button-top golf shirts to employees, residents, and clients.

The final portfolio firm to market itself in this unique fashion was/is Follett Investment Properties. This one debuted during year 2000, at a training conference in San Diego, CA. For that matter, I still wear, during spring and fall, a good quality windbreaker jacket also bearing the FollettUSA logo.

Oops! Almost forgot one. A jet black T-shirt from the Carlyle Group (Can’t tell you which one of the two firms that go by that name) features a really fearsome animal graphic on the back. You have to see it to believe it. Hence a future article, hopefully, with photographs.

Now for a plethora of miscellaneous non-corporate T-shirts, all of which have stories not told here. Ever heard of the Trailer Park Troubadours? Well, they’re for real-real. Their slogan? ‘I’ve been trailer hoppin’.’ I met the duo at a MH show at the Grand Ol Opry Hotel outside Nashville, TN. decades ago. Another of my corporate mementoes is a framed and signed glossy photo of the TPT guys performing their land lease community-focused country songs.

Then there’s the Bropfs (independent – street – MHRetailers in St. Charles, MO., with their yellow T-shirts featuring ‘doublewides’ and unit pricing; and white ones for ‘singlewides’ and unit pricing. The founder of this firm, now retired long-retired Bob Bropf, was known for attending semi-formal state association banquets wearing a long sleeved T-shirt that mimicked a tuxedo, tie, and cummerbund.

Now, this one was sold at a high-end big box retail store in the Mall of America in MN. An off-color brown, the front features a rendering of an old singlesection ‘mobile home’, with this caption above: ‘I STILL LIVE AT HOME!’

Ever heard of The Kings? It’s a social group of businessmen (i.e. land lease community owners/operators from throughout the Southeast U.S.). Their gray, long sleeve T-shirt features this slogan: “You mess with me…you mess with the whole trailer park!’ And, come to think of it, FollettUSA also has a red T-shirt, out and about, with the same slogan on it.

OK, there’s still a half dozen or more T-shirts I haven’t described here, so watch future issues of MHInsider and TAC! for ‘the rest of the story’ and hopefully, photos as well.

Recalling the opening paragraph of this blog posting, this T-shirt collection – and a few other historical collections, need a home! This is where you come in. Some reading this blog, have the wherewithal to fund part or all the manufactured housing hall and displays at the RV/MH Heritage Foundation Hall of Fame, museum, and library, in Elkhart, IN. The RV industry already enjoys a massive presence at the facility, and funding is all that’s holding up manufactured housing. Please give the matter some thought, then phone (574) 293-2344 and ask to talk to Darryl Searer, director.

So, if you don’t want this (blog) to be the last word on historic T-shirts, or books for that matter – recalling parts I & II of Allen Legacy columns in recent MHInsider magazines, contact the Hall of Fame to learn how much $ it’ll take to ensure manufactured housing’s presence there! In the meantime, know that Carolyn and I donate every year, and have for decades, but we cannot do this alone. Remember, the number is (574) 293-2344, and visit their website online. Better yet, plan to attend the Class of 2020 Hall of Fame Induction Banquet on 3 December 2020, to see for yourself what an impressive facility this is. See you there!

Once & For All, Here It Is!

August 14th, 2020

Blog Posting # 598 @ 14 August 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing!

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, k& visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing& land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION: There’s nothing new in this blog posting. I’ve been teaching and writing about these ‘tools of the trade’ for a long time. However, between attrition and new hires, I know we need to keep this near-proprietary information out and about, for your benefit and education. So, read and enjoy; be sure those you work with in land lease communities know these techniques as well. GFA

I.

Once & For All, Here It Is!

How to know the ‘affordable housing payment amount’ in any local housing market, and ‘how much house’ any prospective homebuyer can afford to buy!

As many of you, who know me and read this blog and EducateMHC’s The Allen Confidential! newsletter, I have long maintained that ‘low income housing folk’, a.k.a. ‘housers’ hijacked the concept and reality of affordable housing. A recent article (‘The Changing Face of Affordable Housing’) in the Institute of Real Estate Management’s (‘IREM’) Journal of Property Management magazine, contained this telling paragraph:

“Doing more with less has been the mantra for affordable housing for many years. Program compliance, which is typically not consistent between (sic) the four or five funding sources, means managers are completing multiple reports. This reduces available time to connect with residents.” P.41…and limits the scope of affordable housing to low income, and very low income, housing users! GFA

That has little-to-nothing to do with what makes a local housing market, or prospective homebuyer’s search for a home, in either case, AFFORDABLE! What really and truly does peg the dollar amount of affordability? Here’re the answers:
The local housing market, whether there’s a home-selling presence there now, or contemplating launching such a business presence, here’s how to peg affordability:

1. Identify the postal zip code for said local housing market and visit zipwho.com to ascertain the Area Median Income (‘AMI’) of the populace who live there, e.g. $50,000.

2. Multiply the AMI by widely-accepted Housing Expense Factor (‘HEF’), to identify the $ amount needed, for a prospective homebuyer to rent a conventional apartment or buy a home in that local housing market; e.g. $50,000 X .3 = $15,000 or $1,250 per month.

3. A caveat applies here, as well as in the next scenario. When the $15,000 pays PITI alone (principal, interest, taxes, insurance), the transaction is ‘risky’, requiring the homeowner to pay more each month (i.e. utility bills) for his/her home. When the $15,000 covers PITI & annual housing expenses (i.e. utilities), the transaction is truly ‘affordable’ – but also means the homebuyer buys less home than via the ‘risky’ route.

4. Which way will you sell and finance your home buying customers?

The prospective homebuyer, or in the case of a land lease community – homebuyer/site lessee, the process is pretty much the same, but for the inclusion of monthly rental homesite fee in the 30% Housing Expense Factor set aside to pay PITI & utilities each month – or not.

1. Identify prospective homebuyer’s Annual Gross Income or AGI (equivalent to AMI in previous scenario; amount will vary from person/family to person/family), e.g. $50,000.

2. Multiply the AGI by widely-accepted 30% Housing Expense Factor (‘HEF’), to identify the amount needed by prospective homebuyer to buy a home in the local housing market or live in a land lease community, e.g. $50,000 X .3 = $15,000 or $1,250 per month.

3. The caveat here is the same as described above, relative to ‘risky’ vs. ‘affordable’ transactions, plus this twist. When living in a land lease community, the monthly fee for a rental homesite must be accounted for in the $15,000; covering PITI, annual utilities – or not, and definitely, rental homesite fee.

What you read above is the proverbial ‘bottom line’ relative to affordable housing. Sure, low income housing folk will continue to refer to LIHTC (low income housing tax credits) and Section 8 housing, and other programs, as characteristic of affordable housing. But now YOU know the truth of the matter. Affordable housing has directly to do with the AMI of any local housing market identified by postal zip code; and the Annual Gross Income a prospective homebuyer/site lessee ‘brings to the table’ when purchasing his/her new or resale home.

Believe it or not, there’s actually an easy-to-use worksheet available, for FREE, for you to use when working either or both affordable housing scenarios. It’s called the ‘Ah Ha! & Uh Oh! Worksheet’ and is available to you from EducateMHC. Simply request it via gfa7156@aol.com

II.

Once & For All, Here It Is!

Quickly & Easily Estimate the Capitalized Income Value of Full, and Less Than Full, Land Lease Communities, In Average Condition, Using the New Rule of 72!

Prior to 1994 I made a comfortable living, in part, as a review appraiser of (then) manufactured home communities. Two years earlier, while on active duty during Desert Storm, and working in Honduras, I compiled the ‘first ever’ industry standard chart of operating accounts and related operating expense ratios (OERs’), based on the Institute of Real Estate Management’s professional property management Experience Exchange format. This chart and OER data was published in a J. Wiley & Sons case bound text titled: How to Find, Buy, Manage, & Sell a Manufactured Home Community, 1996 & 98. That pretty much ended my review appraiser days, as ‘everyone’ now had access to the chart of accounts and OERs I’d been using for the past decade. *1

A few years later, Susan McCarty (daughter) and I created the Valuation Calculation Worksheet, a.k.a. VCW, using features from all three income-producing realty perspectives: market, income, and replacement values. The goal was to provide a ‘do it yourself’ tool for sole proprietor community owners, so they would not have to rely on estimate produced by itinerant real estate brokers. And the VCW worked well, and continues to do so, but the perennial need was for something even simpler and accurate. Hence the New Rule of 72.

Everyone, it seems, has heard of, and likely used, the original Rule of 72; to wit: At a given percent return on one’s money, how long does it take to double in value? Simple. ’72 divided by the ROI, e.g. 20%. Or, 72 divided by .2 = 3.6 years to double the value.

New Rule of 72 is amazingly simple to use. Drive through an average land lease community and count the number of rentable homesites, both occupied and vacant, e.g. 200. Then ascertain the monthly rental homesite fee, e.g. $200.00. Now, multiply 200 sites by $200 and that total by 72. Result? $2,880,000.00 is what that property would be worth if 100% occupied and everyone paying rent current at $200/month. Per site value = $14,400/site.

Rarely is a land lease community 100% occupied; always something less. So, ascertain the number of occupied and paid current rental homesites with homeowner/site lessees in place (e.g. 180). Multiply 180 sites by $200 and that total by 72. Result? $2,592,000. Per site value = Again, $14,400/occupied site, plus a lesser value for the vacant rental homesites.

Doesn’t get any easier than that! An important thing to remember, however, is the New Rule of 72 applies only to AVERAGE land lease communities. ‘A’ grade communities will be worth more, and ‘C’ or ‘C’ grade communities less than estimated here. How to know? Use the ABClassification Process form available via EducateMHC (www.educatemhc.com).

***
End Note.

1. Prior to 1992, most MAI appraisers, when it came to manufactured home communities, used an average overall OER of 50-55% (Characteristic of conventional apartment communities). Truth of the matter was, and still is, the accurate average overall OER for (now) land lease communities, was and is, 40+/-%! Why the significant difference? Given their higher turnover of tenants, conventional apartment communities must market much more (i.e. staffing & advertising); and upon turnover, must paint units, service utilities and appliances, and clean or replace floor coverings. Bottom line? Valuations of manufactured home communities, back then, were oft – if not always, undervaluing these income-producing property. And frankly, the larger the community, the more the overall OER shrinks in size (e.g. 40 to 20%), as operating expenses remain fairly constant, while income increases with physical and economic occupancy growth.

George Allen, CPM, MHM
EducateMHC

Are You Ready?

August 7th, 2020

Blog Posting # 597 @ 7 August 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’ comprise the real estate component of manufactured housing.!

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC< telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

I.

Are You Ready?

For the 32nd Annual ALLEN REPORT? During the month of August, if you’re a portfolio owner/operator of land lease communities in North America, expect to receive an electronic letter and input form from EducateMHC, asking you about property portfolio size and composition, along with operations performance statistics. When completed and returned before the September deadline, the information you provide will be culled and written into the 32nd annual ALLEN REPORT, to be distributed during the month of January 2021. If you’re unsure you qualify, or fear you won’t receive this timely opportunity to input the longest running, most referenced statistical compendium in the manufactured housing industry, let us know via gfa7156@aaol.com or phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

For the Federal Housing Finance Agency’s (‘FHFA’) Listening Sessions? Pay attention to future announcements about Listening Sessions scheduled to occur from 14 – 16 October, in various locations around the U.S.. Manufactured housing is one of three underserved markets the GSEs (Fannie Mae & Freddie Mac) are tasked, by Congress, to address with Duty to Serve (‘DTS’) plans each year. And these Listening Sessions are our industry and realty asset class’ unique, in-person opportunities to make our needs and frustrations known to federal agencies that can help with finance and more. This weekly blog posting, and EducateMHC’s The Allen Confidential! business newsletter, are two primary sources for this information going forward. Visit www.educatemhc.com to subscribe.

For a dose of manufactured housing history? If you’re active in MH and or land lease community ownership/operations, and enjoy learning helpful and practical lessons from ‘those who’ve gone before’, you need to be reading every issue of the MHInsider magazine! Why? Because every issue, at the end of general content features, is the Allen Legacy column. To date, here’re the titles you’ve maybe missed – and some yet to come:

• Preserving Your Personal & Corporate Legacy. ‘How to pen your memoir.’
• The Last Decade Has Seen a Profound Paradigm Shift – from MHRetailers to in-community sales and home-only finance.
• Tunica’s History Ties Into Industry (Copy of invoice & check from Elvis Presley for his new manufactured home)
• History of MHI Congress & Expo Leads Back to Gub Mix
• RV/MH Hall of Famers: An Eclectic Mix of Pioneers, Leaders with Vision & Talent
• A Confluence of Community Owners (The SECO story!)
• The Quintessential Family Business (i.e. land lease community ownership)
• Stepping Out of the Manufactured Housing Shadow
• Do You Know MH Lingo? (It is certainly a unique way of communicating!)
• Read a Good Book Lately? If you’re a ‘reader’, you need to see this column!
• Tracing Manufactured Housing & Communities History, Part I: 1955-1990
• Tracing Manufactured Housing & Communities History, Part II: 1990 – 2020
• Print Publications Tell MH Story for 75 Years! This one is a real gem for info!)

The last two stories have yet to be published. But this gives you ‘more than a flavor’ of what to expect from this stellar trade publication. Not receiving copies? Simple. Just email Patrick@datacompusa.com and request to be put on the mailing list.

For the postponed RV/MH Hall of Fame Induction Banquet? I am! So many ‘friends in the business’ being inducted this time around. To buy a banquet ticket, phone (574) 293-2344. Responding to popular request and interest, I was planning to host an industry/realty asset class-wide national meeting that day, at the Hall of Fame facility. Goal would have been to seek solutions to our industry’s continuing lagging new HUD-Code housing shipment volume performance. There’s certainly enough interest ‘out there’ to have the meeting. However, have learned a major RV meeting is also scheduled on 3 December, at the RV/MH Hall of Fame facility as well. What to do? Ideas from you?

For Manufactured Home Manager training and certification? If not already an IREM CPM, or MHI ACM, or EducateMHC MHM, you should be! Professional property management continues to be under-represented among land lease communities nationwide. While there’re 50,000 such communities, there’re only 125+/- CPMs, 200+/- ACMs, and nearly 1,500 MHMs at work. All those numbers should be quadrupled, to bring us anywhere near where we should be, compared with conventional apartments, condominiums, office buildings, and shopping centers. To learn more about the popular MHM program, contact EducateMHC vis its’ website: www.educatemhc.com or phone me via the aforementioned Official MHIndustry HOTLINE.
II.

Old News Now; Scary News Earlier…

Jim Clayton narrowly escaped death, earlier this week, in a helicopter crash in TN. His brother Joe died in the accident.

***

National Economic Impact of Manufactured Housing, Part II

July 30th, 2020

Blog Posting # 596 @ 31 July 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www. Educatemhc.com

Motto: ‘U support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION:

I.

National Economic Impact of Manufactured Housing,
Part II.

Last week, via blog posting # 595, we identified four past and present documentations of economic impact of manufactured housing and land lease communities on national and state levels. Remember? They were:

• RV/MH $ Economic Impact in Indiana during 1997, courtesy of the IMHA/RVIC
• MHI’s debut of Dr. Stephen Cooke’s ‘production value’ of a new 2013 HUD-Code home
• Annual ALLEN REPORT, as it pertains to land lease community portfolio performance
• Foremost Insurance’ now defunct manufactured homeowner market demographics

Well, guess what? There’s a fifth economic impact study to add to this list and it comes from the state of Wisconsin – and the stats are less than one year old! Another template to use.

This Economic Impact study was prepared by the University of Wisconsin-Whitewater Fiscal & Economic Research Center. It covered three sectors of the manufactured and modular housing industry: manufacturing, retail and services and park residents. Bottom line? Taken together, these sectors “… generate more than $2.65 billion and 26,063 jobs in Wisconsin annually.”
Furthermore, “…manufactured home manufacturing has a $185.9 million economic impact, and creates 1,115 jobs in Wisconsin each year. Manufactured home manufacturing also accounts for $48.76 million in total wages and $4.2 million in state and local taxes.”

“Manufactured home retail and services are responsible for $456.4 million in annual economic impact, with 2,884 total jobs, $85.7 million in total wages, and $31.5 million in state and local taxes.”

“The economic impact of manufactured home park residents is even more staggering, contributing $2.15 billion to Wisconsin’s economy annually. Manufactured home park residents account for 22,064 total jobs, $881 million in total wages and $157 million in state and local taxes.”

And there’s more! But I think you get the idea: ‘How helpful it’d be to be reading similar economic impact information for states in which you engage in manufactured housing and ownership/operation of land lease communities. But this is not going to occur unless you take steps, via your state manufactured housing association, to initiate and fund such a study in your local housing market (state) area. For advice on identifying and selecting a research firm to serve your association, contact Amy Bliss, CAE, Wisconsin Housing Alliance: (608) 255-3131.

Also remember. EducateMHC plans to enclose the aforementioned RV/MH $ Economic Impact study (circa 1997) as part of the August issue of The Allen Confidential! business newsletter. This could serve as the research and reporting template you need to replicate Economic Impact findings in your state. To subscribe, visit www.educatemhc.com

II.

One More Reason…

‘ How we tend to be isolated as a niche industry!’

I first encountered this reality early in my career as a land lease community owner cum freelance consultant. Back in the late 1970s, and throughout the 1980s, ‘everyone’ – it seemed, had a Rule of Thumb for valuing (then) ‘mobile home parks’, eventually manufactured home communities. But none of these ‘formulae’ were based on facts or research, just whimsy. That is, until the early 1990s, when Larry Allen, MAI and I conducted national studies, via Manufactured Home Merchandiser magazine, to quantify operating expense ratios (‘OER’), patterned after Experience Exchange format and data from the Institute of Real Estate Management (‘IREM’) resources for conventional apartment communities nationwide.

I parlayed the knowledge we gained, into a useful valuation tool, as a review appraiser. And for some time, made good money, demonstrating how virtually every ‘mobile home park appraisal’ was wrong! Why? Because, to that point in time, everyone kinda assumed the OERs were the same as those for conventional garden style apartments. NOT. For example: because homeowner/site lessees were/are responsible for their homes inside and out, the maintenance expenses characteristic of apartment living were far less in a land lease community. And, due to very low turnover (5% for homes & 10% for homeowners) at the time, marketing expenses for land lease communities were much lower as well. How much so? Overall, at least 10-15%, i.e. garden style apartments = 55% OER; land lease communities = 40%. This difference alone resulted in most land lease communities being undervalued.

That lasted until J. Wiley & Sons published my book, How to Find, Buy, Manage & Sell a Manufactured Home Community, in 1996&8. My lock on ‘review appraiser’ work continued for a while – until MAI appraisers realized the Industry Standard Chart of (Operating) Accounts and OERs contained therein (e.g. page # 13) was the hands-on tool they needed to effect more accurate valuations of this unique type income-producing property type.

See what I mean? And this sort of scenario continues today, 25 years later. How so? As recently as this past week I was invited to listen-in on a webinar purported to be the ‘last word’ relative to Incorporating Manufactured Housing – as affordable housing – in the Builder Model. First off, I don’t think any of the four or five panelists actually ‘works’ in manufactured housing, let alone land lease communities. And while ‘affordable housing’ was given a lot of lip service during the webinar, not once did anyone actually define or quantify the concept. Furthermore, everyone seemed enamored with CrossMod™ homes and Fannie Mae’s MHAdvantage $ program. But nary one of them knew that only six such homes were placed under the MHAdvantage program during all of 2019. And, as I pointed out in post-webinar correspondence, NO mention whatsoever of land lease communities in this presentation, even though as much a 40 percent of today’s new HUD-Code housing shipments are going directly into this type investment property type! Once again, as an industry and realty asset class, we are little understood.

YES, we tend to be an isolated niche ‘real estate asset class’ within the ‘manufactured housing industry’, and because of that, folk simply don’t study us as one might think. The upside of this conundrum occurs when one (i.e. you & me) takes time to study and understand these sectors. We can, in our own way and timing, parlay what we know into self-serving and self-rewarding opportunities!

George Allen, CPM, MHM
EducateMHC

National Economic Impact of Manufactured Housing?

July 24th, 2020

Blog Posting # 595 @ 24 July 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’

EducateMHC is the online national advocate, asset class historian, data researcher, education resource, & communication media for all land lease communities throughout North America!

To input this blog and/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: gfa7156@aol.com, & visit www.educatemhc.com

Motto: ‘U Support US & WE Serve U!’ Goal: to promote HUD-Code manufactured housing & land lease communities as U.S. # 1 source of affordable attainable housing! Attend MHM class!

INTRODUCTION: Welcome to the world of Economic Impact Analysis, a.k.a. EIA, relative to manufactured housing and land lease communities. Plan now to read more about this timely project, for our industry and asset class, when featured in the August or September issue of The Allen Confidential! business newsletter. Also know, that issue will contain an updated edition of ‘EVERGREEN (‘always relevant’) Issues Pertaining to Manufactured Housing & Land Lease Communities – as EducateMHC’s Resource Document.

I.

National Economic Impact of Manufactured Housing?

No one really knows! Oh, we talk and write about the matter from time to time, sometimes making half-hearted attempts to pull salient numbers together. Bottom line?

First, there’s the 23 year old, comprehensive state-level study of economic impact, relative to RV & MH manufacturing, employment, related industry and tax revenues in the state of Indiana, debuted during 1997. Then, ‘silence’, until 2013, when the Manufactured Housing Institute (‘MHI’) hired Dr. Stephen C. Cooke to peg the ‘production value’ (only) of a new HUD-Code home coming off the assembly line. And today, beyond the annual ALLEN REPORT, there’s even less published $ data, relative to 50,000+/- land lease communities nationwide, e.g. total rent $ collected and related benchmark statistics. Even Foremost Insurance no longer publishes its’ popular description of manufactured housing homeowner demographics. That’s the whole sorry picture!

To this day, that’s all we have to work with, when lobbying state and federal legislators in behalf of the HUD-Code manufactured housing industry and land lease community real estate asset class! In my opinion: ‘No wonder, as an industry and income-producing property type, we’re so generally ineffective in Washington, DC.!’

So, what’s the answer to this manufactured housing Economic Impact desert? One or another of our industry/asset class three ‘national advocates’ should buy into the timely and strategic need to research and publish $ data supporting the manufacturing and marketing of HUD-Code manufactured homes; and yes, recreational vehicles (since so many HUD-Code housing manufacturers now produce RVs and ADUs…or accessory dwelling units, these days) as well. There are already published studies afoot, featuring RVs, that MH would do well to emulate. And the ALLEN REPORT gives us a well-grounded head start where land lease communities are concerned.

So, where to begin? Two places, for sure:

• A template. An $8 Billion Building Block for Indiana’s Economic Success, ‘A Study of Economic Impact’. This slick 8 ½ X 11 print report was commissioned by the Indiana Manufactured Housing Association/Recreational Vehicle Indiana Association (‘IMHA/RVIC’) in 1997, and continues to influence, in political and trade association circles, more than two decades later. A copy of said report is scheduled to be part of the August or September issue of The Allen Confidential! business newsletter – as a prod to MH national advocates, to consider commissioning a standalone, or joint economic impact study, during year 2021.

• Refreshment. This industry observer has been told, on more than one occasion, MHI plans to renew Dr. Stephen Cooke’s economic impact research beyond just the production value of new HUD-Code manufactured homes. And the enlarged project might possibly include independent (street) MHRetailers & ‘company stores’ sales and service; as well – maybe – as new and resale home sales within land lease communities; plus, the value of rental homesite fees collection over time. So much fertile ground to till.

Know what? This proposed research and reference track reminds one of the ‘gift horse’ metaphor – where ‘equine substance’ and ‘teeth inspection’ are concerned. Huh? First the horse. Today’s circumstances are similar to what I encountered during late 1980s, when challenged by peers to identify and describe ‘consolidators’ (i.e. property portfolio firms specializing in – then, manufactured home communities) in what became known as the ALLEN REPORT. Today, 31 years later, it’s not only the oldest statistical compendium, in MH & LLCommunity matters, but is highly respected and frequently referenced within and outside the industry/asset class. The ‘teeth inspection’ allusion? In this instance, I learned early to ignore what had been said and published before 1989, as no one had good or accurate data to contribute.

Point? It’d be GREAT if MHI, MHARR, and or NAMHCO would take this project on, as a valuable service to the industry and realty asset class! However. If they don’t, then no one should be surprised if EducateMHC, or one or another freelance MH consultancy, picks up the baton and runs with it. Sure, the ‘first time out’ is always difficult – if done right and comprehensively. But once the reliable template is in place and known, then one’s present ‘professional cred’ and future industry reputation are all but assured! Someone out there seriously listening? If so, and you ‘can’t’ wait’ to get started, and would like a copy of aforementioned Economic Impact template document, let me know via gfa7156@aol.com and I’ll mail it to you.

And know this. Anyone who picks up this EIA challenge, and produces a credible working document, will find a national publishing platform at EducateMHC. Simply let us know of your intent, time frame, and scope of work, so we can reserve some ‘white space’ for you.

GFA

II.

EVERGREEN (‘always relevant’) Issues for Manufactured Housing & Land Lease Communities

Well, here it comes, the annually-updated Resource Document that identifies and prioritizes more than a dozen EVERGREEN Issues we deal with, day in – day out, as manufactured housing professionals and land lease community owners/operators. A good reason to keep this list handy for reference throughout the year ahead! Where to find it?

Watch for it as the Resource Document attached to the August issue of The Allen Confidential! business newsletter – PRIME edition. To subscribe, visit www.educatemhc.com

***
George Allen, CPM, MHM
EducateMHC