Be Careful What You ‘Read & Believe’ About LLLCommunity Investing Today

Blog # 411 Copyright 2016 COBA7® @ 28 August 2016, community-investor.com

Perspective. ‘Land-lease-lifestyle Communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’

This blog posting is the sole national advocacy voice, official ombudsman & historian, research report & online communication media for North American LLLCommunities.

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 transform & improve MHBusiness Model Performance.’

INTRODUCTION. Part I is self-explanatory. Beware sharp-tongued commentators who posit numbers and claims to describe particular investment pictures of their liking. Part II is reminiscent of Randy Rowe’s warning in 2002, to an intimate group of business friends, of the near collapse of housing finance that’d occur five years later. But that’s a story for another day….

I.

Be Careful What You ‘Read & Believe’ About
Land-lease-lifestyle Community InvestingToday

(a.k.a. manufactured home community)

During the late 1970s, until 1986, the sales pitch was, among ‘mobile home park’ syndicators focused on getting doctors, dentists and lawyers, to buy tax loss positions in limited partnerships. When this practice was outlawed, the Resolution Trust Commission (‘RTC’) enjoyed a heyday, 1989-1995, liquidating manufactured home communities for cents on the dollar – as is. Then came the little real estate investment trust wave of 1994 & 1995, when ‘everyone wanted a piece of that action’, but only five REITs actually materialized, three of which remain to this day. Well today, two decades later we’re seeing a somewhat different investment scenario unfold, within the pages of an advertising-supported trade publication, and among certain land-lease-lifestyle communities across the U.S.

So, what does a property portfolio firm do, that’s been acquiring marginally-performing LLLCommunities, at a pretty good clip, to attract buyer attention to their realty holdings? They might make interesting, and at times confusing claims, like these:

• ‘Income capitalization rates (‘cap rates’) for LLLCommunities are not as generous as those awarded conventional apartment communities!’ True. In other words, ‘Pay us more for our investment properties because you’re already doing so with another (multifamily) realty asset class’ – albeit, one that’s more attractive to Millennials and victims of the year 2007 housing finance debacle.

• ‘Our site rent rates are way too low!’ In other words, ‘Buy our properties and jack the rents right away, to recoup your cash investment!’ Everyone does it. Our gift to you!

• ‘Or, your professional property managers can raise site rents substantially!’ In other words, we might want to do so, but prefer to leave that truly golden opportunity to your professional property management team.

• ‘There are still a lot of ‘mom & pop’ operations out there, owned by the Greatest Generation. And they too have vacancies to fill, rent rates to raise, and more.’ In other words, go buy those ‘deals’ and leave the larger properties, with 100+ rental homesites, to us!

• ‘Hey, gotta love those private equity guys!’ They arrive with more capital than common sense and rarely any industry experience. They also tend to ‘bail’ after a couple years. Has anyone noticed how many of these storied transactions have been consummated of late? None worth mentioning; well, maybe one.

• ‘We must be doing something right. International investment monies are now in play, just look at YES! Communities two billion dollar deal!’ With negative ROI rate returns increasingly commonplace elsewhere in the world, all that means is we’re ‘better than nothing or less’.

With all that said, if you’re reading this blog posting with an eye to buying one or more LLLCommunities for personal and or corporate investment, be at the Marcus & Millichap-hosted Community Investors Symposium, from 4-6PM, the afternoon of 7 September 2016, at the Gaylord Opryland Hilton Resort Hotel & Conference Center in Nashville, TN. Dozens of LLLCommunities will be available for review and purchase as the M&M team, along with other real estate brokerages, showcase them during this two hour period kicking off the 25th anniversary of the Networking Roundtable, at the same location, on 8 & 9 September. For more information, us brochure attached to email introducing this blog posting, or simply phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

II,

Storm Clouds Gathering Once Again?

‘You could qualify for a home equity line of credit.’

Quoting from an undated CHASE bank direct mail solicitation letter, one mailed to homeowners – including me, pressing an 8 September 2016 deadline.

“Dear George. You may be eligible for a Chase home equity line of credit at a low rate. You can use the equity in your home to make home improvements, pay off high-rate bills and loans, or even college tuition. There are no application fees and no closing costs (except for cities, counties, and states that require payment of taxes and stamps) – only a $50 origination fee and a $50 annual fee. Plus, the interest may be tax deductible.”

Here’s how it works:

Line of credit balance = $50,000. Estimated variable APR* = 3.88% APR. And, Interest-only payments begin at $162 per month.

Hmm. How’s ‘no application fee’ different from a ‘$50 loan origination fee’?

*APR = annual percentage rate; but don’t overlook that word ‘variable’ in there…

Are homeowner and consumer memories so short, we/they don’t recall similar letters, circa 2006, enticing homeowners in the same manner, or worse? Only a scant decade in time has passed, and already it appears banks, who pay out little to nothing in personal savings account interest anymore, once again roll out the home equity line of credit as another income stream or profit center for their institution.

Sure hope we don’t see ‘the rest of this history repeat itself’ during the months and year ahead! How ‘bout you?

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