George Allen / EducateMHC Blog Mobile Home & Land Lease Community Advocate & Expert

August 2, 2014

On-Site PM Compensation & 2 New SSRDs!

Filed under: Uncategorized — George Allen @ 5:10 am

COBA7® via community-investor.com Blog # 308 @ 3 August 2014 Copyright 2015

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 a national advocacy voice, ombudsman press*, statistical research reporter, & online communications resource for all LLLCommunities in North America!

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 633-4674.

*ombudsman press. ‘Manufactured housing’s ronin, fielding inquiries, complaints., etc.’

Introduction to this week’s COBA7® blog posting at community-investor.com website:

For the record, there was no blog posting on 27 July 2014. Furthermore, this posting contains more exciting & timely information than most of the 307 blogs posted to date!

Hall of Fame Rocks! Monday, 4 August = memorable day in RV & MH Industry History

Important $ Project ‘in the works’ today. Finally: ‘How to Compute PM Salaries!’

Two New SSRDs Debut at Roundtable! ‘HUD-Code home manufacturers’ & RE brokers

What Do YOU Think? When will MHIndustry stop selling ‘more house than needed’?

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I.

Hall of Fame Rocks!

Class of 2014 Hall of Fame Inductees Attract Largest Banquet Crowd to Date, & RV/MH Authors Meet at Museum for 1st Time!

More than 425 past and present RV/MH Hall of Fame members, their families, close friends, business associates, and honored guests, will be on hand for this year’s Gala Event in Elkhart, IN! Hope YOU are among that august group of RV & MH industry pioneers, association leaders, businessmen and women.

4 August begins with the RV/MH Hall of Fame annual golf tournament. And while this is going on, would-be and published RV/MH authors will convene for the first ever writer’s event – from 9:30AM – Noon. A dozen RV/MH industry authors, active in business, mystery, and history genres, have been invited – and several have already committed to be present among their peers. Hope to make this an annual gathering….

And frankly, ‘Anyone who’s Anybody’ in the RV & MH industries will likely be present at our dual industries’ equivalent to the professional baseball and football halls of fame induction ceremonies! May not be too late for YOU to sign-up, and ‘come on down – or up’ to Elkhart, IN. for the festivities! Phone (547) 293-2344 and talk to Charlene! Truly hope to see YOU there!

II.

Important $ Project ‘in the works’ Today

‘How Do You Decide How Much to Pay Your On-site Property Manager or Team?’ That is ‘the question’ that’s dogged owners/operators of land-lease-lifestyle communities (A.k.a. manufactured home communities) for seven decades! And the formulaic answer just might be on the 23rd International Networking Roundtable horizon, 10-12 September 2014 in Peachtree City, GA!

In general terms, here’s how the Five Step Process is penciling out to date:

1. Just as the ‘3Ls Secret to Real Estate Success’ is considered to be ‘location, location, location’; ‘LHM’ is a leading indicator when computing on-site manager (or team) compensation – LHM being the ‘local housing market’ in which one or more subject LLLCommunities are located. Therefore, identify LHM by its’ four digit postal zip code, then ascertain, via zipskinny.com or other similar website, its’ Annual Median Income level, or AMI. Two examples. National AMI has been stagnant-to-declining during the past several years, as macro economy recovers from recession. It’s now pegged close to $51,000. Whereas a typical suburb of a major Midwestern city (SMSA), during 2013, might be $36,000. AMI.

2. Reference the recently published 2014 Compensation Study, by the Institute of Real Estate Management®, or IREM®, to ascertain benchmark compensation (i.e. average annual income) for Certified Property Managers®, or CPMs®, and Accredited Resident Managers®, or ARMs®…the latter, roughly equivalent to MHEI’s Accredited Community Manager®, or ACM® designation, and PMN Publishing’s Manufactured Housing Manager®, or MHM® designation. Note. Use CPM® data when compensating corporate executive PMs. (312) 329-6000.

3. Estimate subject property’s (i.e. LLLCommunity) Gross Potential Income for the year – or ‘properties’, if an on-site manager or management team is (or is to be) responsible for two or more like properties within the same LHM or one nearby. Be careful to indicate whether calculation is based wholly on present day performance (i.e. physical & economic occupancy) or anticipated improvement to same, during and after a turnaround effort, at the subject property(ies).

4. Using the widely-referenced ‘Allen Model OER (operating expense ratio) Chart’, thoughtfully effect labor expense allocations (from ‘administrative labor’ &/or ‘maintenance labor’ operating expense categories) in dollars. Do this in accords with property size (i.e. number of rent-paying rental homesites), and in light of planned or expected operational improvements – or not, to subject property(ies).

5. Effect reconciliation of accumulated data relative to LHM’s AMI; the IREM® ‘standard’; & allocated OER $s per one, two, or more salaried and hourly employees – again, in accords with 1) property size (i.e. income reality & potential), 2) property condition (present & anticipated occupancy %), 3) marketing/operations expectations; and, 4) employee(s) capability and experience.

This procedure, besides, pegging property manager, and supporting team compensation, also helps demonstrate the importance of keeping separate books, certainly for independent home sales operations on-site, as well as marketing and operation of rental units on-site.

And remember; ‘as a rule’, LLLCommunity management is generally a part time job until physical and economic occupancy exceeds 100 rental homesites, some say 150. (e.g. 100 sites X $300/month X 7.5% combined admin & maint. OER percentages X 12 months = $22,536 in salary alone, not adjusted for on-site housing expenses, etc..

There’s more to come; specifically applied numbers and case studies. The goal is to have this material prepared and ready for distribution at the 23rd International Networking Roundtable, 10-12 September 2014. Have you registered yet? Easy to do so; just telephone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

III.

Two New SSRDs to Debut at Roundtable!

SSRDs spring from direct inquiries to the ‘ombudsman (press) function’ of COBA7®, e.g.‘Who are the HUD-Code home manufacturers in the U.S.?’ &, ‘What real estate brokerages specialize in marketing land-lease-lifestyle communities nationwide?’ What inquiries can COBA7® research for you? Call the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

Frankly, we were surprised to learn, while fielding these two inquiries to the ombudsman (press), ‘No such directories exist!’ In the first instance, there’s MHI’s membership directory at MHI.org, but the MHARR keeps their member list confidential.

Well, the HUD-Code home manufacturer directory presently contains contact information for nearly 40 firms domiciled throughout the U.S. And, like the dozen already existing Signature Series Resource Documents, this one too will be updated annually, then distributed to Community Owners (7 Part) Business Alliance affiliates with a monthly edition of the Allen Letter professional journal. Are YOU affiliated?

And the real estate brokerage directory presently contains contact information of more than a half dozen such firms that list and sell LLLCommunities nationwide. We fully expect this directory to increase in size as more and more real estate brokerages learn of its’ existence and efficacy. Again; for COBA7® affiliates! YOU affiliated?

So, be at the 23rd International Networking Roundtable, 10-12 September 2014, at the DOLCE Conference Center in Peachtree City, GA., to receive your FREE copies of both directories, as well as the aforementioned Five Step Process for calculating on-site property manager compensation.

But most important, come prepared to participate in the two National Public Forums scheduled for the morning of 9/11/2014! To that end; when you register, you’ll be mailed (mid-August) a WHITE PAPER describing the ‘stats’ and trends characteristic of the MHIndustry & LLLCommunity asset class. This is designed to ‘ready’ you for said National Public Forums: ‘Future of manufactured housing as ‘housing’ vs. ‘trailers’; and, ‘Future of LLLCommunities as ‘lifestyle’ & ‘investments’. Be present and Be part of manufactured housing industry history!

IV.

What Do YOU think?

The popular ‘Ah Ha! & Uh Oh! Worksheet’ is at an Impasse (‘deadlock’).

The question is, ‘Whether to continue using the widely known and applied 30% Housing Expense Factor (i.e. income percentage set aside to cover ‘housing costs’) in said worksheet, or increase it to 45% HEF, allowing for the combination of such ‘front end debt’ (i.e. aforementioned 30% HEF) with ‘car loans, child support, alimony, & student loans’ as ‘back end debt’ or DTI (debt-to-income) not to exceed a 45% HEF limit?!’

Most of the material in the previous introductory paragraph is quoted from ‘Contemporary Archetype of Affordable Housing in the U.S.’, published in chapter #6 of Bruce Savage’s book, The First 20 Years!, PMN Publishing, 2013. This COBA7® resource available via Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

The ‘45% max DTI limit’, however, was quoted during a McGlinchey Stafford presentation regarding ‘Ability to Repay’ at MHI’s Summer meeting in Indianapolis, IN., in June 2014. The entire Power Point slide is quoted as follows:

“Underwriting must take into account the consumer’s proposed monthly housing cost: principal, interest, taxes, insurance and mortgage insurance (‘PITI’), credit history, current income, installment debt (such as car loans and credit card debt), alimony and child support, and debt-to-income ratios (‘DTI’) income must be ‘expected income the consumer is reasonably assured of receiving’, verified and documented. DTI must be determined based on a fully amortizing loan.” 15 U.S.C. 1639b

FYI.’ Housing cost’, as described in the previous paragraph includes PITI – and according to presenter, ‘rental homesite rent dollars’, but nothing more! There’s no allowance for ‘household expense’ utilities (e.g. heating fuel, electricity, water, sewer). As ‘Ah Ha! & Uh Oh! Worksheet’ users know, these ‘phantom but real’ housing costs when factored into said 30% HEF result in more ‘affordable’ home pricing, but when omitted, are labeled – in the worksheet proper – as being ‘risky’ investments.

So, where to go from here? ‘Leave well enough alone and the unsuspecting public be damned!’; OR, raise the HEF limit from 30 to 45% to include back end DTI; OR, ‘take the guts out of’ the 30% HEF (i.e. household ‘utility’ expense allowance), and commence ‘playing the numbers game like most other mortgage lenders’? Tough choice!

What say YOU? This inquiring mind would like your considered opinion! Mine? Leave the household ‘utility’ expenses intact, and encourage conservative borrowing (i.e. ‘buying less home with less risk’ instead of ‘more home with more risk’) on the part of most, if not all, prospective homebuyers and homebuyers/site lessees.

Know what? This has been a major wakeup call for me, after 35 years in the housing industry. Specifically? Seeing how lenders, up and down the line, apparently prefer to sell more house to individuals than they can affordably handle, because bigger loans mean bigger commissions and greater returns to said lenders.

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