Wouldn’t it be great if you could help low-income families have a better life and fulfill the American dream of home ownership while making a profit? That’s what we do. We do this by purchasing undervalued and neglected properties and bringing them back to life while adding value to the community. By doing so we help fellow Americans live in safe, affordable, family-oriented communities.
How does 1 + 1 = 3? We use our expertise and entrepreneurial know-how to purchase undervalued properties and systematically unlock huge hidden values. Additionally, we know how to operate efficiently and create more value than we consume, as well as where to focus our efforts. We closely monitor and allocate CapEx budgets to make sure we continually provide our most valuable customers, our residents, with improved value. Our example exemplifies pride in ownership and a sense of community among residents. As a result, this also produces hidden value for everyone.
Affordable housing is always in demand when the economy is booming. During an economic downturn, the demand for affordable housing increases dramatically, while many other sectors collapse. In difficult economic times, the need for lower-income housing remains strong because of an aging population in America (many with little or no retirement savings) along with growing income disparities, government stimulus programs, and overall affordability.
20% of U.S. households earn less than $20,000 per year. There are currently 10,000 baby boomers retiring every day and relying on social security checks that average only $14,400. Affordable housing demand is growing every day. It is expected that this demand will continue to grow for the next decade and beyond.
Low-yield money market returns don’t even match today’s high inflation rates. But inflation is not a concern with our investments. As with any income-producing-property we are able to adjust rates and pass inflation costs on to the consumer. As price levels rise, and the value of the dollar continues to decline, our real estate assets actually become even more valuable.
Another advantage we offer is that we can adjust rates to match inflation very quickly, due to our short lease terms with residents, as opposed to some other forms of real estate in which tenants (and landlords) are locked into long-term contracts. At the end of the day, no matter how bad inflation becomes, we still own a tangible asset with intrinsic value, similar to gold.
Investor Warren Buffet advises looking for businesses with a “virtual moat,” which is an advantage a company has to protect itself from outside competition. The mobile home park industry is able to take advantage of a government-backed barrier against new competition. Mobile home parks are also in high demand, however the supply is decreasing, so they are becoming more valuable.
The majority of towns and cities refuse to allow the building of new mobile home parks. How come? Due to the heavy cost burden (mobile home parks cost cities money as residents do not pay enough taxes to cover government obligations) and the stigma attached to mobile home parks. Also, the “Not in my back yard!” (aka NIMBY) mentality occurs when property owners are opposed to mobile home parks or other perceived detractors of the value of their property being built nearby. These problems are often caused by negligent operators and a negative media portrayal of the industry.
In spite of the fact that this might seem like a concern for our investments, it actually benefits them. Approximately 100 mobile home parks are razed for land repurposing every year, while only 10 new parks are constructed. It’s no surprise that Buffet thinks that mobile home parks have a “virtual moat”, as evident by the fact that he owns the largest mortgage company for financing mobile homes (21st Century) as well as the largest mobile home manufacturing company (Clayton Homes).
The mobile home park industry is incredibly fragmented. In the US, only 4% of the approximately 40,000 parks are owned by institutions. Most mobile home parks were constructed during the 1950s or 1960s and are typically still owned and operated by the original “mom and pop” owners or their heirs. As many of them prepare to retire, buyers are presented with a once-in-a-lifetime opportunity to acquire these properties. In recent years, the mobile home park market has begun to consolidate, and more people are realizing what an awesome asset class they are. Soon, this window of opportunity will close, mom and pop will sell and retire, and consolidation will follow, making this current opportunity nonexistent.