THE BLESSINGS OF BEING A “WEIRD” REAL ESTATE SECTOR By Frank Rolfe

THE BLESSINGS OF BEING A “WEIRD” REAL ESTATE SECTOR

Mobile home parks have always been the “black sheep” of the real estate family. The stigma against mobile home park residents (commonly called “trailer trash”) and mobile home park owners (considered “evil” by the media) has long rendered the mobile home park industry off-limits to those who lack the bravery to overcome these stereotypes. But there are many positive factors to being the only sector of real estate that nobody seems to like or respect.

Sam Zell identified the first benefit

Sam Zell once said“this has always been a fatal flaw in U.S. real estate: the volume of development has been related to the availability of funds, not to demand.”We’ve all seen this play out over and over, with massive over-construction by developers in search of fees and not really concerned about their investors. Others always have this attitude that “even though the market is over-built, my office building will be the one that actually works” – and, of course, ends up in foreclosure three years later. Mobile home parks can’t be over-developed due to the fact that city governments across America will not allow any new ones to be built (at least in any suburb that people would want to live in). This moratorium on new mobile home park construction ties back to the negative stigma that all Americans harbor against mobile home parks (also called “NIMBY” which means “not in my back yard”).

Lower competition because of fewer buyers

While millions of Americans speculate on single-family houses and apartments are the bastion of a massive number of investors, mobile home parks don’t make most people’s hot list. Not even close. The average mobile home park owner doesn’t even know the name of another one in their community. It’s a rare breed that buys “trailer parks” and this reduction in investors yields better pricing and terms for those who do. It’s basic economics of supply and demand that would suggest that with fewer buyers you get a better deal. And mobile home park buyers and owners are typically embarrassed to even talk about what they do so it’s highly unlikely this quality will change any time soon.

Little desire by lenders to go “crazy”

It’s been a fact of life for most real estate sectors that, at some point, the lenders contribute to the ultimate collapse of that niche. The problem is that they throw caution to the wind in search of hitting larger lending goals and competing with other banks. We all know that the 2007 Great Recession was built upon “zero down/no documentation” lending. We’ve also seen periods of similarly dangerous commercial property lending over the decades. But not on mobile home parks. Because it’s a “weird” sector that nobody truly trusts, lenders have always stuck with basic fundamentals and this has created an environment where mobile home parks have one of the lowest default rates of any type of loan in the U.S. That has insulated mobile home parks from major calamity for over a half century.

Creates much of the opportunity in bringing old properties back to life

There are no “Flip or Flop” or “Flipping Las Vegas” shows for mobile home parks on cable television. There is no Magnolia magazine that encourages mobile home park renovations or explains their cost. And there’s no blue book value for mobile home park sellers. Because of this vacuum of information, many moms and pops are completely unaware of the true value of their property or even how to make it nicer to command a higher price. Because the average American has no interest in “trailer parks” it is not a part of any college curriculum and is completely avoided by all real estate authors and late-night infomercials

Conclusion

Being “weird” is not a good thing in high school, or if running for political office. But it’s served mobile home park investors extremely well for decades. So every time some media outlet bullies park owners or residents and creates a negative stereotype that’s unfair and politically incorrect, by happy. It’s that wrong narrative that makes us the most profitable niche in U.S. real estate.

By Frank Rolfe

Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with around 20,000 lots spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.