Archive for September, 2018

‘We’ve Got A Problem!’

Tuesday, September 18th, 2018

Blog # 503; Copyright @ 16 September 2018; community-investor.com

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

This blog posting is the sole national advocate, voice, official ombudsman, historian, research reporter & online communication media for all North American LLCommunities

To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance,
a.k.a. COBA7, use Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764

COBA7 Motto: ‘U Support US & WE Serve U!’ Goal for its’ print & online media =
to not only inform & opine, but to transform & improve Huskiness performance!
_____________________________________________________________________

INTRODUCTION: What follows, ‘Says a Lot’ & ‘Does Little’, beyond expressing angst & frustration concerning the state of land lease community investment in the U.S. today.

We’ve Got A Problem!

Consolidation of Land Lease Communities into Property Portfolios,
While a Mature Trend For This Unique Income-producing Property Type – Since Syndication Days of the Late 1970s – Appears to Now Be Out of Control & Reason

The problem? Often, but not always, ‘outside money’ (i.e. foreign investors, hedge funds) coming into this realty asset class,

1) Willing & able to pay ‘whatever it takes’ (i.e. inflated value) to corral one or more ground lease communities from the limited and stagnant national supply;

2) Almost always increasing rental home site rates out of proportion with other forms of rental housing in the same local housing market;

3) Then buying new HUD-Code homes they have no idea or experience ‘how to sell’, let alone ‘how to finance’ – leaving them vacant or pressed into service as desperation rentals.

Consequences? In general, sell-out to next fool willing to part with his/her money;

OR, divide the property portfolio up among disgruntled limited partners;

OR, ‘continue to march’ as if nothing untoward has happened, hoping for some degree of capital recovery upon disposition of the property or properties.

All three consequences are occurring simultaneously, in different regions of the country.

All the while, do these ‘Johnny come lately’ property portfolio builders, including those who’ve been around for awhile (i.e. decades) take active and or leadership roles in state manufactured housing association matters, lobbying, education, and networking? Not usually – unless there’s a landlord/tenant legislation challenge, or threat of regulatory action (e.g. rent control), that directly affects them..

Also (almost) gone are the days when sole proprietors developed raw land into land lease communities! Local regulatory barriers to all forms of affordable housing (Recall the deadly zoning triad: NIMBY, her sister LULU; and of course, BANANA!*1) continue to prevail throughout the U.S., despite federal efforts to the contrary. And have you tried to find development capital of late? Good luck with that. Consequently, land lease communities continue to be a scarce investment opportunities – whether ‘under development’ or as acquisition trophies.

Did you know? There is a published list of the ’10 Good Reasons to Own a Land Lease Community’. It’s Appendix II (page # 151) in the second edition of SWAN SONG, ‘George Allen’s History of the LLCommunity Real Estate Asset Class’ & ‘Official Record of MH Shipments (1955-present day)’; COBA7, Indianapolis, IN. 2018. Available for only $24.95 (post paid) via the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

In any event, relative scarcity of the property type is ‘reason # 1’. This followed by 2) low annual turnover @ 5-10 percent per annum; 3) stable, competitive rent (usually, in the past); 4) lower operating expense ratio or OER @ 20-40 percent, compared to conventional apartments @ 50+%.; 5) economy of scale; 6) affordable home ownership & equity; 7) recession proof; 8) more opportunities to ‘add value’ (Think ‘Alternative Income To Rent’ measures proposed by RE consultant Allen Cymrot); 9) more versatility (Contemporary presence of modular homes, Park Model RVs, Vs for a season, ADUs*2 & more…); 10) opportunity to serve society – as low cost housing and prime source of ‘affordable housing’.

So, as a realty asset class, or unique income-producing property type, ‘We have a problem!’. What can be done about it? Not much, unfortunately. This is a Free Enterprise economy, and folk are certainly free to be profligate with their money if they desire to do so – and as we all know, ‘Fools continue to be born every minute’, where buying into the use of OPM (‘Other Peoples Money’) is concerned!

The only hope I see for salvation here; resolving this problem, is for the asset class to ‘grow a resident-focused conscience’ and implement principles of professional property management into all properties, small and large, from top to bottom! Will these two measures occur? Not likely.

It’s just that, after four decades in this business, seeing the same and similar mistakes made time and again, I truly desire to step in ‘more than as a freelance turnaround specialist’; but rather, as a ‘homeowner/site lessee advocate’, to ensure fairness and reasonableness for our customers, clients, residents! Unfortunately, the present day land lease community business model is not structured to function, and self-govern, in such an altruistic (‘benevolent’) fashion.

Bottom line? As long as land lease communities are plagued with profiteering taking priority over resident relations, we’ll not MAKE MANUFACTURED HOUSING GREAT AGAIN! anytime soon.

End Notes

1. NIMBY = Not in My Back Yard; LULU = Locally Unwanted Land Use; &, BANANA = ‘Build Absolutely Nothing Anywhere Near Anyone!’
2. ADU = Accessory Dwelling Units, a.k.a. Granny Flats

George Allen, CPM, MHM
COBA7, a division of GFA Management, Inc., dba PMN Publishing
Box # 47024,
Indianapolis, IN. 46247
(317) 346-7156
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Post-Musings & State of MHIndustry Trade Press/Media

Thursday, September 13th, 2018

Blog # 502; Copyright @ 9 September 2018; community-investor.com

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

This blog posting is the sole national advocate, voice, official ombudsman, historian, research reporter & online communication media for all North American LLCommunties

To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance,
a.k.a. COBA7, use Official MHIndustry HOTINE: (877) MFD-HSNG or 633-4764.

COBA7 Motto: ‘U Support US & WE Serve U!’ Goal for its’ print & online media =
to not only inform & opine, but to transform & improve MHBusiness performance!
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INTRODUCTION: Not needed this week. For some, this will be a casual ‘read’; for others, well, let’s just say, a convicting if not motivating one…

I

Moving from Musings (per blog # 501) to Doings!

MH evergreen issues. Matters, concerns perennially fresh, interesting, & challenging!

While outside the purview (‘scope’) of matters to be addressed at this weeks meeting of HUD’s Manufactured Housing Consensus Committee (‘MHCC’), one wonders WHY the following evergreen issues, matters, & concerns aren’t part of this group’s foci.

Following triad has to do with HOW TO ‘Make Manufactured Housing Great Again!’

First priority is to lobby U.S. Department of Housing & Urban Development (‘HUD’), the federal regulator of manufactured housing, to not only identify our type factory-built housing as being eminently affordable, but forthwith (‘at once’) & henceforth (‘from this time forward’), aggressively PROMOTE it as a significant part of the practical answer to the ‘affordable housing’ crisis evident in the U.S. today!

Furthermore; lobby HUD to ameliorate (‘make more tolerable’) unnecessary and expensive regulations relative to retrofitting existing rental homesites prior to installation of new HUD-Code manufactured homes within said land lease communities. Present ‘state of indecision’ is effectively stifling new HUD-Code housing shipments in 2018!

Once and for all, stop setting our prospective homebuyer/site lessees up for failure! How so? Chattel capital lenders should begin including PITI (mortgage principal & interest, as well as taxes & insurance), AND household utility expenses (electric, gas, water, sewer), within the target 30 percent Household Expense Factor (i.e. One of six measures of affordable housing*1) touted by HUD, regulators, ‘housers’, and others.

II.

A Word, or Two, About the Manufactured Housing Trade Press

The Very Good News is we’re no longer stranded in a desert wasteland of manufactured housing news and journalism! Since DATACOMP’s MHInsider magazine debuted a year or so ago, we’ve enjoyed professional coverage of manufactured housing matters, land lease community news, and the RV/MH Hall of Fame. Patrick Revere, editor, was at the 27th Networking Roundtable last week in Indianapolis, recruiting and teaching would be writers how to prepare manuscripts for publication. We haven’t seen that happen in quite some time!

More Good News is Kurt Kelley continues to publish the credible online ezine, Manufactured Housing Review. He’s developed a broad stable of contributors, and that’s also good. But in this observer’s opinion, should ‘mix it up a little’ and avoid showcasing the same writer or two, issue after issue. There’s plenty of MH news out there to be had, if one goes and looks for it.

The Allen Letter professional journal, a COBA7 affiliate-supported monthly newsletter for land lease community owners/operators, begins its’ 30th year of publication at the end of 2018. And the Allen CONFIDENTIAL! – that high-priced source of ‘confidential MH news before it occurs’, also a COBA7 offering, has been serving LLCommunity folk for more than a dozen years. Taken together, they cover the entire spectrum of news relative to 50,000+/- communities nationwide.

These three print, and one online trade publications, pretty much cover the manufactured housing trade media as it exists today. Sure, there’re online mimes afoot, but this quote from Jane Friedman’s The Business of Being a Writer, aptly describes how

“…there is little barrier to entry and low overhead cost. Anyone, anywhere, at any time, can launch an online publication that costs little aside from their time and energy, and can distribute it through the same channels used by established publications. This is at once a blessing and a curse. It allows publications to exist that would’ve never been possible before, and it allows for dramatic failure as people with little to no experience try to gain attention or revenue for their efforts.” p.64

Isn’t that the truth – as we’ve seen, read and suffered now, for more than a decade. How so? Friedman goes on to describe how…

“…it’s easy to end up in a race to the bottom, creating headlines that entice people to click on low-quality content (clickbait), producing stories or slideshows that require visitors to click multiple times, or aggregating content from other sources to increase the number of articles published – and thus traffic.” p.65

So, be vigilant, be selective about what and who you read in support of business decisions. Do you have confidence in the industry knowledge, journalistic talent, and employment history of the person or persons you trust for manufactured housing and land lease community information? If not; in my opinion, move on to someone else..

End Notes:

1. Six Measures of Affordable Housing & Housing Affordability featured in Book of Formulae, Rules of Thumb, & Helpful Measures, George Allen, PMN Publishing, IN., 2012, p. 38. Specifically: 30% Housing Expense Factor or HEF; Housing Opportunity Index or HOI; Housing Wage or HW; Workforce Housing or WFH; Income to Home Value Ratio or IHVR; and, the ‘One Who Believes….

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George Allen, CPM, MHM
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

Musings on Eve of 27th annual Networking Roundtable

Monday, September 3rd, 2018

Blog # 501; Copyright @ 2 September 2018; community-investor.com

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

This blog posting is the sole national advocate, voice, official ombudsman, historian, research reporter & online communication media for all North American LLCommunities

To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance, a.k.a. COBA7, use Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764

COBA7 Motto: ‘U Support US & WE Serve U!’ Goal of its’ print & online media =
to not only inform & opine, but to transform & improve MHBusiness performance!
_______________________________________________________________________

INTRODUCTION: And here I thought this would be a brief blog posting. Was I ever wrong. Got to writing in a ‘stream of consciousness’ fashion – something generally foreign to this otherwise left brain (logic) guy; only to see musings pour, it seemed, from my pen (actually, the PC). Had to stop myself where I did, else you’d be reading until well after arriving at the 27th Networking Roundtable Wednesday afternoon.

If you’re reading this, and not present at the networking roundtable event this week, I feel sorry for you. Why? From the MHM class Wednesday, thru the Art of the Deal presentation by top notch RE brokers, onto three superb keynote offerings Thursday morning, there’s – frankly – nowhere else to be in the entire manufactured housing industry that’ll be more intellectually stimulating than this venue! Seriously.

At last count there’re 30+ speakers and panelists coming in from throughout the U.S. to share their knowledge and experiences with august land lease community owners.

Just this afternoon I met with Rick Roethke, head of Barrington Investments. Know what we talked about? The soon coming together of affordable housing supply siders, intent on cross pollinating public and private sector policy and funding sources and experiences, for the greater good of solving the affordable housing crisis in the U.S. today! How can you not want to be part of this conversation and actions going forward? Stay tuned here, during weeks ahead, for more information….I’m pumped! History is about to be made.

Musings on Eve of 27th Networking Roundtable

If products & services of Community Owners (7 part) Business Alliance, or COBA7, are important to owners/operators of land lease communities nationwide, why is sit so difficult to identify someone to step into the role of leadership: 1) ensuring distribution of the statistically valuable annual ALLEN REPORT beyond 30 years; 2) as well as updating & distributing a dozen other SSRDs; 3) continuation of one, if not both monthly newsletters, featuring community-related news & views, as well as HOW TO information; 4) & 5) gala interpersonal networking & deal-making opportunities; 6) professional property management training & certification via Manufactured Housing Manager program; and, 7) national advocacy, ombudsman & historian services when need be? are you that, as yet, unnamed successor?

Seems everyone talks about the affordable housing crisis afoot in the U.S. today, but few take definitive steps to address the situation with resources already close at hand, e.g. HUD is federal regulator of manufactured housing but does little to promote this type factory-built housing as one ready remedy for said crisis. Here our housing product costs, per square foot, are 50 percent less (not including underlying realty value) than traditional site-built housing, but do you hear or read of HUD ballyhooing this major advantage? No. But maybe HUD Secretary, Dr. Ben Carson will finally get that important message.

One faux trade journalist takes me to task for saying and writing what follows – because he fails to understand how I can be a member of one and fan of the other, but overtly critical of both at the same time. The Manufactured Housing Association for Regulatory Reform (‘MHARR’) and the Manufactured Housing Institute (‘MHI’) evidently satisfy their dominant HUD-Code housing manufacturer members, where lobbying and national advocacy – in their behalf – is concerned. However, it’s no secret at all, having two national trade entities in Washington, DC., representing the same ‘manufactured housing’ industry, seriously lessens their legislative influence and regulatory control clout. I’ve been in Washington meetings and seen it occur first hand. Unless MHAARR & MHI function in concert, where proposed legislation and regulatory overreach are concerned, legislators and regulators simply play one trade body off against the other. Doing so serves no one well at all. This has been going on since 1985 when MHARR was formed.

Has consolidation, among HUD-Code housing manufacturers and land lease community owners/operators, been good or not so good for the industry and realty asset class? Financial fortune-wise, for some if not many, has certainly been the case. In 1977 there were 25 ‘mobile home’ manufacturers, today we generally think of just the Big Three: Clayton Homes, Skyline Champion, & Cavco Industries, plus a few regional firms. A decade later, in 1987, we identified 25 portfolio owners/operators of (then) ‘mobile home’ parks; today – during 2018, we know of 500+/- property portfolios containing an average of 36 land lease communities apiece, with an average community size of 210 rental homesites. Consequences? Since 1994, three real estate investment trusts (‘REITs’), then five, and now, only three. Membership ranks of state MH associations have been decimated as portfolio ‘players’ generally do not encourage support of, or participation in, state and local matters, education, and lobbying.

New (HUD-Code) housing installation. Clearly, in my opinion, a ‘damned if you do (retrofit old rental homesites with expensive new concrete) and (potentially) damned if you don’t – and risk being found out by state or federal regulators – even if properly using the Frost Free Foundation system, originally approved by HUD for this application! This is no way to run a business – except ‘into the ground’!. And this is no way to hold the threat of government intervention (enforcement) over the heads of businessmen and women. What’s the answer? Right now, spend the money, or buy and fix up older manufactured homes to put on existing rental homesites to then sell or rent. Furthermore, HUD’s indecision risks stalling new HUD-Code housing shipment volume, preventing it from keeping pace with the need for new manufactured homes to replace old ‘mobile homes’ While we’ll likely ship more than 100,000 new HUD-Code homes by year (2018) end, it’s estimated the figure would have been closer to 125,000 new homes or higher.

Beware scammers! They’re already here, in the manufactured housing industry and among land lease communities nationwide! How so? In the later instance we have profiteer pitchmen actively soliciting outside naive investors with promises of inflated investment returns, using prospectus documents understating operating expenses and overstating potential income. And where housing is concerned, sad to say, one or more independent third party chattel capital lending firms are no longer checking business bonafides and reality of office locations (i.e. shadow offices, oft in states offering specific corporate identity, as well as legal protections), to ensure they’re not lending to Ponzi Scheme – like operators.

Stop picking on the post-production segment of the manufactured housing industry! The manufactured housing industry cannot ignore its’ post-production segments for decades, then when easy access to chattel capital disappears, as it did during the early 2000s, expect them to quickly rally and become capable, experienced, motivated national advocates for manufactured housing. That’s what these sectors thought their national association dues were going for all along. Yes, there’s ‘work to be done’ in this area, but not the way it’s being proposed from one quarter. In fact, I’ll go so far as to remind: ‘If you’re not part of the solution, you’re likely part of the problem!’ Point? Instead of chiding various folk to step forward and lead in ways unfamiliar to them, expand your bully pulpit and officially include them into your membership ranks, then lead them into effective national advocacy in favor of manufactured housing and land lease communities.

Yes, there’s an official definition of affordable housing out and about these days. If you’d like a copy of said document, just let me know. In the meantime, however, why do we continue as an industry, lenders, and realty asset class, to NOT include household utility costs (e.g. electricity, heat, water, sewer) in the Housing Expense Factor (‘HEF’) measure of affordable housing? In accords with some HUD programs, and most ‘housers’ I know, including this ‘up to’ 25 percent impact $ figure’, in calculating how much house one can afford to purchase or rent to pay (if an apartment dweller or homeowner/site lessee), takes the new home purchase from ‘risky’, over to being truly affordable! Think about it. And if you’d like a FREE copy of the weirdly-named but easily understandable – and convicting, ‘Ah Ha! & Uh Oh! Worksheet’, simply ask for it when you phone the Official MHIndustry HOTLINE; (877) MFD-HSNG or 633-4764. Wonder how many reading this have been, unintentionally, setting customers up for failure and not success?

While we’ve had a history-changing paradigm shift in place now, in the manufactured housing industry, since the turn of the century, but especially since our shipment nadir year of 2009 (Recall only 49,789 new homes shipped), I don’t see HUD-Code manufacturers embracing land lease community owners/operators, of all sizes, as their new housing market, replacing independent (street) MHRetailers. Sure, they enjoy selling bulk quantities of new HUD-Code homes to property portfolio firms, but what about sole proprietors of one or two smaller (i.e. less than 100 rental homesites apiece) communities? Yes, there’s some movement in the Midwest, where the IMHA/RVIC, every two years, trains these folk how to buy, sell & seller-finance new homes. But know what? We need more than that to happen! In 2009 , only 24 percent of aforementioned 49,789 new homes went into land lease communities. By year end 2015 that percentage had jumped to more than 40 percent of the 70,544 new homes shipped that year (That works out to be a jump from 11,949 to 28,218 units!) By rights, if HUD-Code housing manufacturers were aggressively selling to this new market, 50 percent of this year’s estimated 100,000 new homes shipped, or 50,000 would be so-destined. Is that happening? No. And even if it was, the shipment volume would still be insufficient to meet the immediate need to replace ‘mobile homes’ being taken out of service.

OK, it’s time to stop musing and get along to Greeting 200+/- land lease community owners/operators soon arriving at The Alexander Hotel in Indianapolis, IN. Know the closest held SECRET this year? The nature of the FREE gifts given to attendees every year; always valuable; always practical; always with a meaning. All will soon see…

GFA/cc

George Allen, CPM, MHM
COBA7, a division of GFA Management Inc., dba PMN Publishing
Box # 47024, Indianapolis, IN. 46247

(317) 346-7156 & gfa7156@aol.com

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