Business advice

[Gob]

The number one rule is stated twice, once in the classroom and once on the bus: “Don’t make fun of the residents.”

Welcome to Mobile Home University, a three-day, $2,000 “boot camp” that teaches people from across the US how to make a fortune by buying up trailer parks.

Trailer parks are big and profitable business – particularly after hundreds of thousands of Americans who lost their homes in the financial crisis created a huge demand for affordable housing. According to US Census figures, more than 20 million people, or 6% of the population, live in trailer parks.

It is a market that has not been lost on some of the country’s richest and most high-profile investors. Sam Zell’s Equity LifeStyle Properties (ELS) is the largest mobile home park owner in America, with controlling interests in nearly 140,000 parks. In 2014, ELS made $777m in revenue, helping boost Zell’s near-$5bn fortune.

Warren Buffett, the nation’s second-richest man with a $72bn fortune, owns the biggest mobile home manufacturer in the US, Clayton Homes, and the two biggest mobile home lenders, 21st Mortgage Corporation and Vanderbilt Mortgage and Finance Company. Buffett’s trailer park investments will feature heavily at his annual meeting this weekend, which will be attended by more than 40,000 shareholders in Omaha.

Such success is prompting ordinary people with little or no experience to try to follow in their footsteps.

‘Don’t make fun of the residents’

On a bright Saturday morning, under the Floridian sun, Frank Rolfe, the multimillionaire co-founder of Mobile Home University who is the nation’s 10th-biggest trailer park owner, conducts a tour of parks around Orlando, Florida. A busload of hopefuls, ranging in age from early 20s to late 70s, hangs on his every word.

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As the tour approaches its first stop, Rolfe repeats a warning which earlier flashed on to a screen in a conference room of the Orlando airport Hyatt hotel: “When we are on the property, don’t make fun of the residents, or say things that can get us in trouble or offend anyone. I once had a bank come to a mobile home park and say in front of my manager, ‘Only a white trash idiot would live in a trailer.’”

Then comes a second, more unexpected warning: “Now, guys, I’ve got to tell you this park, I believe, is a sex-offender park. Everyone in here is a sex offender. I could be wrong, we’re going to find out, but I think that’s the deal on this one. So stay together as a herd.”

He’s not wrong. Signs at the entrance to Lake Shore Village, on the north-eastern outskirts of Orlando, warn: “Adults only. No Children.” The park is described on the owner’s business cards as “sex offender housing” and a “habitat for offenders”.

On the forecourt the owner, Lori Lee, tells Rolfe’s students she dedicated the park to sex offenders 20 years ago – and hasn’t looked back.

“We were a family park when we first started. [But] about 20 years ago, I couldn’t get on the property because a drug dealer had separated from his girlfriend in the park across the street ... and there was a long line of cars because she was undercutting her boyfriend.”

Lee, 70, says she was advised that if she took in sex offenders the drug dealers would leave. “So, I started taking in sex offenders, and I have a very clean property. Sex offenders are watched by the news media, the TV, the sheriff’s department, probation, the department of corrections ... so when they are in there, the drug dealers and the other people don’t like to be around.”

Sex offenders have been good for Lee financially, with park occupancy running at “1,000%”. She rents trailer pad spots for about $325 a month. The trailers are either owned by the tenant or rented from a third party. Many trailers are divided into three bedrooms, for which tenants are charged $500 a month per room.

Lee claims she was once offered $5m for Lake Shore Park, which is home to about 50 trailers.

“Last year I bought a park down the street, got rid of all the families, the drug dealers, the prostitutes, and brought in convicted felons. And then I bought the property across the way,” she says. “Once you’re into it and you’re making money it’s easy to say, ‘One more, one more’.”

She has her eyes on a fourth park, “but then I’m through. I’m 70 years old and I don’t want to own any more”.

Asked by an eager investor how regularly tenants leave her parks, Lee says: “When they die. [They] stay forever, they have no place to go.”

Lee’s strategy impresses Rolfe’s students.

“I thought it was a brilliant idea, brilliant,” says Mitch Huhem, who is looking to buy a trailer park with his wife, Deborah. “These people need a place to live, and they don’t want to mess around.

“They’ve got to live somewhere, so you combine them in a certain place. They don’t go out to hurt people. I think it’s a community service, because if not they will be in your neighbourhood. Now they’re all in one place, you can watch them all in one place. And they pay well and won’t mess things up. I mean, why would you not? I think it’s a brilliant idea.”

Rolfe, who with his business partner Dave Reynolds owns about 160 parks across the midwest, is unsure about taking in sex offenders. But he is certain Lee could make even more money if she raised the rent.

“She could definitely raise the rent,” he says, as the tour group gets back on the bus. “She’s got a definite niche, but she is definitely under the Orlando rent; she might be under by $100 a month, maybe.

“Raising the rent is typically part of the day one purchase, because often the ‘mom and pop’ [previous, family-run owner of a park] has not raised the rent in years so it’s far below market.

“[The rents] do not go down, that’s one thing that’s a safe bet in the trailer park world. Our rents do not go down.

“We traditionally raise our rents by an average of 10% a year or something like that, and it’s pretty much true for the industry. Our world record [rent increase] went from $125 to $275 in one month.”

Rolfe, who bought a pistol for personal security when he bought his first park, 20 years ago, says he sent a letter to every tenant at that park in Grapevine, Texas, telling them the rent was going to more than double but was still below the market rate of $325.

“If you don’t like this or you think you can do better, here’s a list of all the other parks in Grapevine and a list of the owners,” he said in the letter. “Go ahead, call them if you want to move. How many customers do you think we lost? Zero. Where were they going to go?”

Rolfe, who started Mobile Home University seven years ago and now runs boot camps every couple months in cities across the country, tells his students they can easily increase the rent even at parks that are already charging market rates, because there is so much demand for affordable housing and local authorities are very reluctant to grant permission for new parks.

He quotes US government statistics showing that in 2013, 39% of Americans earned less than $20,000 – less than the government’s poverty threshold income of $20,090 for a three-person household.

“That’s huge. No one believes that number – people say: ‘You’re crazy, this is America, everyone is rich.’ [Being on an income of $20,000 or less] means you have a budget of about $500 a month for your housing, but the average two-bedroom apartment is $1,109 a month. There’s not a lot you can do.”

Kenneth Staton, a 58-year-old, disabled tenant at a nearby (non-sex offender) trailer park, knows it.

“It’s a profitable investment, but raising the rent is what hurts because people like myself, we’re on a fixed income and we can only afford so much,” he says, on the dirt road outside his trailer. “I’m on disability, and I go around and collect aluminium cans to see myself through a little bit.”

Asked if he thinks he will see out his days in the trailer park, Staton says: “It kinda looks like it, unless I can find a house somewhere I can afford. I only get $830 a month; $500 goes for rent, about $95 goes for electric. It don’t leave much to live on. Luckily, I get food stamps.”

Back at the boot camp, Rolfe, who runs his empire from the tiny town of Cedaredge, Colorado, is in full swing.

“Today there’s a huge number of poor people, and there’s more poor people like every day,” he says. “Some of our parks get 100 calls a week from people that are looking for a mobile home to rent.”

He tells his students tenants are more likely to be encouraged to put in a few more hours at Walmart or other low-paying jobs than find the $3,000-$5,000 it costs to move their trailer – the majority of tenants own their trailers and rent the pad space beneath – to another park.

The students are sold on the idea. Thomas Hawcett, a navy veteran from Long Island, vows not to go home until he’s found a park to buy.

“The first park I’m going to look at is a 279-pad park,” he says, over a “team dinner” at Orlando’s Bonefish Grill. “I won’t tell you where. I’ll spend a week, and if I have to spend another week I’ll spend another week. I brought enough money that I can write a cheque and give a good deposit if I see one.”

Taylor Boyd, who already owns a trailer park but has yet to step inside a trailer, says the economics of trailer parks are “compelling”.

“What’s that thing? ‘Sell to the masses and eat with the classes’,” he says, touting the inside of a dilapidated and mould-infested trailer in Overland Village, another Orlando trailer park owned by Lee. “There’s a lot more poor people than there are rich people, and they’re not making any more trailer parks.”

Is he planning to follow Rolfe’s advice and raise the rent? “If you’re a landlord, you’re going to raise the rent, but you’ve got to keep it low enough for the people to be able to afford to be there.”

A few trailers over, Chuck Newton is sitting on the steps of his trailer, shooting the breeze with some friends as Boyd and the other students excitedly explore the park and plan their burgeoning business ideas.

If the investors were to buy this park and put up his rent, Newton, who collects disability payments of $700 a month and pays $550 a month in rent, fears he would be forced on to the street.

“I would have to find another low-rent place to move to,” he says. “I would probably end up having to be homeless.”

[Econoline]

“We traditionally raise our rents by an average of 10% a year or something like that, and it’s pretty much true for the industry. Our world record [rent increase] went from $125 to $275 in one month.”

And of course you have to remember that anyone this near to the bottom of the income ladder is probably NEVER going to see a 10% increase in their annual income even ONCE, let alone year after year.

If LoCAtek were still around here I bet she'd have some choice words about this brilliant get-rich-quick scheme....I imagine there's a pretty good chance that the trailer park she lives in is either owned or soon-to-be-owned by one of these schmucks.

[rubato]

San Jose has rent control so she might be somewhat protected. But trailer parks have been a very exploitive and extractive business for the unscrupulous for decades.


yrs,
rubato

[rubato]

The other point that is worth mentioning is that trailer parks began as a way of ripping off local governments. The two important driving economic forces for all of this was the fact that you don't pay property tax on a trailer, just a nominal vehicle tax, and of course that the structure itself was made in a factory (using glue and staple guns) and covered with thin sheet aluminum like a beer can. But it was considered a 'clever' retirement strategy to avoid paying for all of the services of local government while still receiving them.

Trailer parks are an ugly little outcrop of an economic system based on getting everything you can while doing as little as possible for anyone else. They are a 50-year long regulatory failure, in other words.


yrs,
rubato

[Long Run]

But, I know first hand that they make a satisfying BAM! when hit by a snowball.

[Lord Jim]

Before anyone wants to invest in a trailer park, they might want to consider that they are also tornado magnets...

[Econoline]

Jim - But of course if you don't actually own the trailers, all the damage is done to somebody else's property...so it's all good. New tenants, more rent, what's the problem?

LR - Why yes, they do!

rubato - Mobile home owners don't (generally--depends on the state and locality) pay property tax on the trailers, but don't the park owners pay tax on the land?

[Big RR]

Mobile home owners don't (generally--depends on the state and locality) pay property tax on the trailers, but don't the park owners pay tax on the land?

they do in every state I'm aware of, and that cost is passed on to the mobile home owners through their rent.

[rubato]

"...

rubato - Mobile home owners don't (generally--depends on the state and locality) pay property tax on the trailers, but don't the park owners pay tax on the land?

That would be tax on a lot w/ no structure . Nominal.

Yrs,
Rubato

[MajGenl.Meade]

Definition of Mobile Homes

Mobile homes are referred to as manufactured homes in California's tax codes, even if they are located in a mobile home park. A mobile home is a structure that is on a permanent chassis, is transportable whole or in sections, and is at least 8 feet wide or 40 feet long or 320 square feet. It must contain a full dwelling unit that is designed for ongoing residential occupancy.Recreational vehicles, campers, trailers and buses are not considered mobile homes.


Division of Property Taxes

Mobile homes that are placed on land owned by the mobile-home owner are subject to property taxes just like traditional homes. However, if the mobile home is located on another person's land, such as in mobile home park, then the property tax treatment is different. The mobile-home owner only will be liable for taxes based on the value of the mobile-home structure and not for the land it's on. Any property tax related to the land's value is assessed and charged separately to the land's owner.


Property Tax Assessment

Because the property tax assessment is supposed to be based only on the value of the structure itself, the county tax assessor will use the cost replacement method of property valuation. This method uses the cost of the structure as new minus any depreciation for age and condition. The structure's value includes the mobile home and any attached improvements, such as awnings, decks or porches. The actual annual tax amount is limited to a maximum of 1 percent of the assessed value. The assessed value can be increased no more than 2 percent per year.

http://homeguides.sfgate.com/california ... 50896.html

[wesw]

ya ll are funny.

[Lord Jim]

I have to say that even as a pragmatic-conservative Republican, that I have to question the morality of a business model based on:

"We've driven out all the drug dealers by bringing in sex offenders"....

The improvement there is not immediately apparent to me...

[wesw]

just for my own amusement, please tell me when the last time either of you debaters of trailer parks was actually in a trailer park.

townships don t count, no hillbillies there....

[Gob]

Mobile homes are referred to as manufactured homes in California's tax codes,

To distinguish them from homes which are not manufactured?

[MajGenl.Meade]

No

(a) to distinguish them from homes that are mobile
(b) to include non-wheeled homes that are manufactured

You know there is a difference between 'manufactured' and "built', right?

Oh I'll be surprised....

[Gob]

man·u·fac·ture (măn′yə-făk′chər)
v. man·u·fac·tured, man·u·fac·tur·ing, man·u·fac·tures
v.tr.
1.
a. To make or process (a raw material) into a finished product, especially by means of a large-scale industrial operation.
b. To make or process (a product), especially with the use of industrial machines.
2. To create, produce, or turn out in a mechanical manner: "His books seem to have been manufactured rather than composed" (Dwight Macdonald).
3. To concoct or invent; fabricate: manufacture an excuse.
v.intr.
To make or process goods, especially in large quantities and by means of industrial machines.

[Crackpot]

So you are agreeing with Meade?

[MajGenl.Meade]

Exactly my thought, CP - but I didn't want to gloat. I never do. It's modesty, ya know? Obvously the answer to my question was, "No".

[oldr_n_wsr]

My Nana and Gramps (mothers parents) lived in a trailor in a trailor park in St Peterburg Fla. Nice park with a pool and shuffle board courts and a club house. No one could walk on the shuffle board courts, they were serious about that.
We visited them once a year in the spring time. Caught plenty of lizards during our visits.
This was back in the mid to late 60's early 70's. I think the area has built up a little bit since then.

[BoSoxGal]

I represented a lot of trailer park clients when I was with legal aid in Yuma, Arizona. It was heartbreaking to see folks losing their only homes at an advanced age and when living on fixed incomes, all due to the greed of landlords. The laws were not sufficient to protect clients in most cases, because they are written by the landlord association lobby.