NEW Opportunity, NEW Paradigm, New Private Equity Fund! & ?
Blog # 260 Copyright 2013 25 August 2013
Perspective. ‘Land lease lifestyle communities, a.k.a. manufactured home communities, & earlier, ‘mobile home parks’, are the real estate component of manufactured housing.’
Purpose of this blog. ‘To be a national Advocacy voice, statistical Research reporter, & communications Resource for LLLCommunities, of all sizes, throughout North America!
Opportunity to respond. ‘Critiques, reactions, & suggestions for future blog coverage: firstname.lastname@example.org or Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.’
$$$ EXPECTATION DISCONNECT OF THE YEAR =
a MANUFACTURED HOUSING OPPORTUNITY!
Where Others Fear to Tread…
‘The Question’ & Manufactured Housing’s Past, Present, Future Paradigms.
BERKSHIRE HATHAWAY Home Services Revisited!
Would YOU Like to Increase Your Cash Flow?
Getting Ready for MHI’s annual meeting
& the NCC division Meeting, 1 October…
$$$ EXPECTATION DISCONNECT OF THE YEAR =
A MANUFACTURED HOUSING OPPORTUNITY!
MONEY magazine recently polled subscribers, and asked this question:
‘What’s Most Important To You When Deciding On a Great Place to Live?’
35% responded, AFFORDABLE HOUSING; followed by 30% wanting top – ranked schools; 21% desiring lots of stuff to do; and, 14%, simply, good, high – paying jobs. (September 2013)
Well, here’s the Disconnect, cited by MONEY, and other news media stories of late:
$214,200 is typical price for a four – bedroom home in the U.S. these days! Nothing ‘generally affordable’ about that unless one is making more than $75,000.00 per year.
What an Opportunity for HUD – Code manufactured housing, and its’ real estate component, land lease lifestyle communities, IF we could get our (National Brand Marketing ) act together NOW or in the near future, introducing the American home – buying public to truly affordable housing & professionally – managed community living!.
Recalling last week’s blog (#259) posting at this website: community-investor.com…
‘Hey, Clayton Homes, Inc., the Manufactured Housing Institute, and Berkshire Hathaway Home Services, are YOU interested in accessing this ‘once in several decades manufactured housing opportunity, just waiting to happen or not? or !
Where Others Fear to Tread….
‘The Question’, & Manufactured Housing’s Past, Present & Future Paradigm Answers….
The Question: ‘How Will Land Lease Lifestyle Community Owners/operators Participate Effectively in the Present Paradigm Shift Occurring Throughout the Manufactured Housing Industry?’
This question was posed recently by a housing design consultant, known and respected nationally, for his expertise in breathing new life into old, often functionally obsolete LLLCommunities on the West coast. How would YOU answer the question?
Well, first off, ‘Just what paradigm change is being referenced by the question?
To answer, we must take a look back at 50 years of manufactured housing industry history. While opinions will vary, most MHIndustry veterans would likely agree there’ve been at least two major paradigm shifts to date, and we’re now in the midst of an emerging third. Here’s how they pencil out:
1970s; the Early Heydays. That was when 80+% of new ‘mobile home’ shipments were 80+% ‘singlewides’ destined for placement in new ‘mobile home parks’ being developed from coast to coast, with 20+/-% ‘doublewides’ headed elsewhere and on – site. This first paradigm shift started prior to implementation of the HUD – Code, legislated in 1974 and enforced in 1976. Then followed a 20 year hiatus, where the (now) manufactured housing industry, essentially and effectively, ‘made lemonade (i.e. via performance – based, federally preemptive building code) out of the federal regulatory lemon’ forced upon it.
1990s; the Big Box = Big Bucks days. That was when 80+/-% of new manufactured home shipments were 80+/-% high – priced multisection homes intended for installation on ‘scattered building sites conveyed fee simple’, with 20%+/- singlesection homes placed on rental homesites in nearly full (now) land lease lifestyle communities (a.k.a. manufactured home communities) from coast to coast. This second paradigm shifted during the turn of the century, as a consequence of 1) widespread chattel capital abuse; 2) widespread portfolio consolidation of properties – oft accompanied by too soon, too high site rent increases; and in some regions, 3) tract developers siphoning away the front half of the industry’s traditional market, the ‘newly wed & nearly dead’. Said shift escalated, as independent (street) MHRetailers failed in their bid to compete, as general contractors effecting ‘land & home packages’, against site – built housing stick builders; with some MHRetailers acquired by HUD Code manufacturers and converted into ‘company stores’. And then, factories closed by the dozens. This second paradigm shift has pretty much run its’ course, and we’re now headed into a third one….
2010 and beyond. The new, oft less expensive, single and multisection home mix, trends toward more of the former going onto some of the estimated 250,000+/- vacant rental homesites scattered among 50,000+/- LLLCommunities nationwide. This emerging and different paradigm is characterized dissimilarly from the previous two, in significant fashion.
Today, LLLCommunity portfolio owners/operators, near routinely buy single, even multiple quantities of new HUD – Code homes (When they can’t find good quality resale or ‘repo’ homes to relocate), including specially – designed, smaller Community Series Homes, a.k.a. CSH Models, featuring durability – enhancing features like asphalt shingles, wood cabinetry, non – plastic sinks & tubs, and more. These new homes are utilized either as rental units or sold ‘on contract’, for little or the usual profit margin. More on this in the following paragraph. At this point in time, however, few single property owners actively participate in the purchase and resale of new HUD Code homes on – site, unless they’ve paid down their realty mortgages and have excess cash to invest in this do – it – yourself infill process.
Why and furthermore? Given the steep attrition among independent (street) MHRetailers nationwide (According to MHI, from 1100 down to 400+/- after turn of the century), including company stores, LLLCommunity owners are forced to effect their own infill, to the point of engaging in various forms of self – finance, ‘captive finance’, and manufacturer – partnered finance programs, to consummate on – site, new home sales and resale transactions. And where are the independent, third party chattel capital sources these days? While the heretofore ‘Big Four + 1’ chattel lenders, with the debut of Green Hill Financial, has become the ‘Big Five + 1’, chattel capital remains inaccessible, due to stiff underwriting standards, to the majority of would – be homebuyers desiring to live in LLLCommunities.*1
So, what else characterizes this post 2010, emerging manufactured housing and LLLCommunity paradigm? Besides buying new homes (‘Who’d have thunk it?’, 30 – 40 years ago, when ‘street dealers’ were omnipresent and king?) and self – financing them, there’re additional necessities of 1) ‘making do with what you’ve got’, and 2) ‘installing whatever type housing, permanent and temporary, that can be legally and practically installed on vacant rental homesites’. In the first instance, owner/operators now closely evaluate whether to have vacant (abandoned) homes removed from their property or rehabilitate them, versus incurring the purchase and carrying costs of acquiring, including transportation, newer model homes. In the second instance, the presence of ‘other types housing’ on – site, has become so prevalent across the country, that the 1980s & 90s term of choice, ‘manufactured home community’ is being supplanted with the more accurate, image – enhancing, descriptive handle, ‘land lease lifestyle community’, or in its’ abbreviated form, LLLCommunity.*2
There’s a corollary to this ‘post 2010 paradigm shift’, and it involves taking LLLCommunity – sited homes, new and old, to an enhanced level of energy efficiency, even to the point of removing them entirely, at times, from the local power grid, even most water usage! Think I jest? Here following is the best three part composite summary, of this emerging trend, I’ve read to date. It’s penned by Steven Lefler, VP of Modular Lifestyles, Inc., and lifestyle Services, Inc. Edited and reprinted here with permission:
“…a new product, the ‘Solar Powered Manufactured Home’*3, introduced into existing LLLCommunities, where pre – 1978 homes already exist, may be Key to improving consumer perception and success in achieving greater cash flow, dealing with chattel capital issues, and effecting migration to a mix of existing new rental and contract sale homes.
Furthermore, property owners must move away from street dealers! They, for the most part, ‘have no skin in the game’, when it comes to improving the home product in LLLCommunities, since they continue to offer (in some, if not many cases) cheaply made, not so low cost homes. And the home manufacturers they buy from, appear complacent in their business model, even the status quo of low shipment volume. No one is looking five to 10 years out, where housing Research & Development is concerned.*4
Finally; our younger generation is priced – out of the traditional housing market, suffer high unemployment, and are encumbered with student loan debt. But if they’re to be our target market, for rental, and eventual homeownership, we must find and have the right housing (low price, low cost to live) product! High mortgage debt, and the accompanying mortgage interest deduction, do not make for a good housing market, but rather create housing bubbles and eventual financial losses.”
In a recent (8/13/2013) online article, ‘What makes solar power contagious?’, the writer, Brooke Clark cites a recent paper by two marketing professors, ‘Peer Effects in the Diffusion of Solar Photovoltaic Panels’, to this end: “10 extra solar installations by someone in the same (local housing market) area, increased the incidence of additional solar power by 7.8%, (&) there’s a 10% increase in the number of people with solar panels, in a like area, when solar panel adoption occurs within the same postal zip code.”
So maybe we need to take a closer look at retrofitting existing manufactured homes, and ordering new ones, with solar panels and extreme water conservation devices….
A little more from Steven Lefler. Here’s a self – description that makes one desire to learn more about the contemporary reality of low carbon footprint, off grid, low water use manufactured and modular homes designed for in – LLLCommunity installation.
“…I am the only dealer/builder/community owner/community management company representative, and real estate agent (in the U.S.), diligently working toward proving our company’s 2020 California – compliant manufactured and modular ‘Net Zero’ Homes Work Well For Real People! Our goal is to establish this proven brand, using diverse climate communities as testing grounds, then to subcontract and license out to housing factories, a proven and affordable home model design, for scattered site and in community build – outs. As a company, we’ve been doing this for five years, and remain one of but a handful of home builders to receive the ‘CALIFORNIA ADVANCED HOME’ rebate.. Our motto? ‘If you built it right, they’ll come back to your community!’ “ Reach Steven Lefler by visiting modularlifestyles.com
Well, there you have it. The description of the new paradigm shift in which we now live and work as manufactured housing and LLLCommunity aficionados. And to top it off, there’s the additional challenge of making our already affordable, quality manufactured homes even more energy and water efficient, from end to end.
NOTE. This is one of those rare occasions where every reader should take time to read the End Notes to Part II, located at the end of this blog posting. GFA
BERKSHIRE HATHAWAY Home Services Revisited!
Recalling last week’s blog posting, ‘BERKSHIRE HATHAWAY Home Services, a precursor for affordable manufactured housing?’, know one blog flogger (reader), after perusing the column, forwarded an online article from MODULAR HOME BUILDER, titled: ‘Who Speaks for Residential Modular Housing?’ This was a fascinating ‘read’! Why? Because it turns out the modular housing folk have the same darn shortfall as HUD Code manufactured housing: NO National Brand Marketing effort in place now, or envisioned anytime in the near future!
Here’s the most telling quote from this article: “…there is absolutely No
Nationwide Modular (Brand) Industry Marketing Plan.”
And when this not so rhetorical question was posed, ‘Who speaks for modular housing?’, the writer identified
1) NAHB’s Building Systems Council, commenting. “What is missing from their website is any kind of marketing for residential modular homes.” STRIKE ONE!
2) Modular Building Systems Association. Here the writer pens, “I give this a ranking of three out of 10 on the Modcoach, ‘Excellence in Marketing scale.” STRIKE TWO!
3) MHI’s Modular Housing Council’s website is characterized as “…they offer next to nothing in the way of marketing modular homes to prospective new home buyers.” STRIKE THREE!
For some reason, the writer does not describe the Modular Building Institute. Maybe because this trade body has a commercial structure bent, but it has had residential modular builders as members in the past, if not the present. In any case, residential modular housing, just like HUD – Code manufactured housing, effectively ‘STRIKES OUT!’ when it comes to (Not) having a National Brand Marketing!
Again, is all this surprising or not surprising to you; since many, if not most, HUD – Code home manufacturers also build modular units? Bottom Line: Neither the HUD – Code manufactured housing industry, or the modular housing industry, have a National Brand Marketing program in place, or one even on the drawing board!
Kinda ‘splains’, as a past employer was known to say to me at times, ‘Why factory – built housing, as a whole’ is languishing when it should be vanquishing hi – priced, site – built housing! And until the present day No National Brand Marketing reality changes, given we have two types of quality factory – built housing in hand, ‘housing affordability’ in the United States will continue to go a – begging!
Hey Warren, Kevin, Joe, Nathan, and Danny & John, are you reading, listening, paying attention to what restrains your/our respective factory – built housing business models today? An inquiring national audience would like to know….
Would YOU Like to Increase Your Cash Flow?
Do YOU have empty rental homesites within one or more land lease lifestyle communities that need filling? Are YOU confident your property has a high local housing market demand for good quality homes, if they were available on – site? And, are you dismayed at the lack of accessibility to competitive chattel capital funding at this time?
Well, we’re a couple land lease lifestyle community owners/operators who’re also tired of the lack of chattel capital financing available for buying and reselling homes into our properties, and want to discuss options and develop some practical solutions! All options are open, including arrangements with financial institutions, manufacturers, even the creation of a private equity fund, to provide such capital to qualified, participating LLLCommunity owners!
We will be at the 22nd annual International Networking Roundtable, 18 – 20 September 2013, at the Hilton Chicago Indian Lakes Resort; specifically, Thursday afternoon, September 19th at 4PM. Specific in hotel location will be announced during the Roundtable earlier in the day. And the forum will be open to anyone interested in participating.
To register for the Networking Roundtable, phone the Official Manufactured Housing Industry HOTLINE: (877) MFD-HSNG or 633-4764.
Note. The creation of a private equity fund has become a topic of lively interest of late. Know that the September issue of the Allen Letter professional journal will feature an article co – authored by LLLCommunity owners/operators also very interested in taking this unprecedented step in manufactured housing industry history.
Getting Ready for MHI’s annual meeting,
& the NCC division meeting, 1 October…
Coming soon. A position paper relative to the National Communities Council division
1. Big Five + 1 = 21st Mortgage Corporation, CU Factory Built Lending, Triad Financial Services, Inc., U.S. Bank – Manufactured Housing Finance, and Green Hill Financial. Major regional and national chattel capital sources.
2. Types of housing now found in land lease lifestyle communities: pre – HUD ‘mobile homes’, post – HUD manufactured homes, modular homes (DE & elsewhere), ‘park model RVs’ (i.e. less than 400 square feet in size), ‘RVs for a season’ (seasonal & worker transient populations), even stick – built homes constructed on – site to look like HUD – Code homes (in FL. After hurricanes).
3. Reference to the Quest home (and its’ successors), exhibited at the 21st annual International Networking Roundtable in San Diego, during the Fall of 2012. According to Steve Lefler “… the Quest is a concept and educational tool used to attract people to Newport Pacific’s 80+ LLLCommunities – where the strategy is to position the firm’s communities as ‘Best in their Zip Code’, letting others stagnate in their operations. The purpose of the Quest home was not to sell industry folks, but be showcased at communities, fairs, and expos. There are only nine in existence today.”
4. Steve Lefler goes on to indicate the designers of the Quest home “have perfected a low cost HUD version; however, most are unaware of its’ existence.” This comment was in response to a veteran LLLCommunity owner’s observations after examining the Quest home: “My views are essentially the same as Steve Lefler’s – the economic circumstances of the 20 – 35 year time segment, combined with the sustainability ethic, make a Net Zero manufactured home (i.e. Quest home) the perfect solution. Here’s the problem. The Quest home, exhibited at the Roundtable prices out in the $70K range and is equivalent to the $25,000 HUD code home we just purchased (sans the remarkable energy efficiency). Why the high price? Because it’s a one – off, rather than mass – produced.
George Allen, CPM & MHM
Box # 47024, Indianapolis, IN. 46247