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Mobile Home Parks have High NOI Growth Opportunities




SHOW NOTES


Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. This is the last episode in the series where Andrew discussed the 12 reasons why you should be investing in trailer parks. Today Andrew discusses reason #12 as to why you should invest in mobile home parks: mobile home parks are an asset class that offers one of the highest opportunities for net operating income growth (NOI). There are plenty of ways for an operator to raise the NOI of a mobile home park property, which can make the mobile home park property more valuable. Ultimately, this value add component can increase returns when investing in mobile home parks.


Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 1,300 lots under management. His team currently manages over 20 manufactured housing communities across nine states – AR, IA, IL, IN, MN, NE, OH, PA and TN. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew's story at AndrewKeel.com.


Would you like the pre-investment checklist that I use to review mobile home park deals before I invest in them? We are offering this as a free gift if you go to iTunes and leave a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email at passivemhpinvesting@gmail.com. In the email, please tell us who you are, what screen name you used to leave that review, and we’ll send the pre-investment checklist, directly to your inbox.


Talking Points:

00:20 - Welcome back to the Passive Mobile Home Park Investing Podcast

00:40 – Reason #12: Mobile home parks have one of the highest

opportunities for net operating income growth

01:06 - Net Operating Income (or NOI) and how to increase it

02:45 - Charles Becker statistics on lot rents

03:08 - Frank Rolfe’s opinions on why lot rents are 100% too low

04:58 - In conclusion

03:27 - The pre-investment checklist



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Links & Mentions from This Episode:

Keel Team's official website: https://www.keelteam.com/

Andrew Keel's official website: https://www.andrewkeel.com/

Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel

Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPin...

Andrew Keel Instagram page: https://www.instagram.com/passivemhpi...

Twitter: @MHPinvestors

TRANSCRIPT


Welcome to The Passive Mobile Home Park Investing Podcast with your host, Andrew Keel. This is the podcast where you can get the education you need to invest 100% passively in a highly profitable niche of mobile home parks.


Hello and welcome to The Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel, and today, we are going to discuss reason number 12 as to why you should invest in mobile home parks. This is our final episode in this series where we discuss the 12 reasons why you should invest in mobile home parks.


Reason number 12 is because mobile home parks is an asset class that offers one of the highest opportunities for net operating income growth. Let me explain. Mobile home parks are income properties, meaning they’re valued based upon the income they produce. It’s a simple equation, really. More income equals a higher property value. The property’s net operating income, or NOI, is equal to the gross rents received minus all other property expenses like repairs and maintenance, management, utility expenses, et cetera.


It’s important to note that this does not include debt service payments of principal and interest. If an operator can find a way to increase the net operating income of an 8% cap priced mobile income by just $100 a month, they can add $15,000 to that property’s value. And as you walk through mobile home parks, you can find lots of ways to generate $100 a month.


For example, in a mobile home community that we recently purchased in Minnesota, we approached the city and put in a request for them to provide trash service directly to our residents. Prior to us doing this, there was $9600 in trash expenses on the property’s books for the prior year. When the city accepted our proposal, this increased this 8% cap property’s value by $120,000—completely removing this expense from our profit and loss statement. And all it took was a couple of phone calls.


Another way to increase NOI is through modest rent increases. Mobile home park lot rents are historically low in comparison to other asset classes. According to Duke University Economics Professor Charles Becker, lot rents may be as much as 40% undervalued across the country right now. Charles did a report back in December 2019 about the determinants of manufactured housing rents, and his report showed that rents just haven’t kept up in the market.


Also, according to Frank Ralph, who is an owner and top educator in the industry. He thinks that mobile home park lot rents could be as much as 100% too low right now. Frank thinks lot rents are low for a couple of reasons. Number one, mobile homes that were built pre-1999 now have no mortgage on them, and this will allow for tenants to have more room in their monthly budgets to cover additional rent charges. And number two, the next best option is an apartment or single-family home rentals, which can easily cost over $1000 a month.


Another reason mobile home parks have high NOI growth opportunities is because most owners are moms and pops that have little or no debt on the communities. They don’t feel the pressure to squeeze as much out of these assets as they once did. Higher vacancy is very common. Many moms and pops would do the repairs to vacant mobile homes themselves when they were younger and more capable. But now that they are older, may mobile homes just sit empty when they go vacant.


Sometimes, after acquiring a new mobile home park property, we can spend as little as $3000 renovating some of the vacant homes. And once these are occupied, this can increase the property’s value by $30,000-$40,000 per home, and that’s obviously depending on the market. But that’s a huge number for investing only $3000. Deferred maintenance is common, and sophisticated, professional investors can squeeze higher profits from these assets somewhat seamlessly.


In conclusion, mobile home parks have one of the highest opportunities for net operating income growth, and this can potentially provide higher returns for investors.

This concludes our 12-part series on why you should invest in mobile home parks. Join us next week for the start of our second series that will dive into how you can invest in mobile home parks. We will start with an episode on the mobile home park real estate investment trusts that are making waves on Wall Street. Thank you for tuning in.


Would you like the pre-investment checklist that I personally use to review mobile home park deals before I invest in them? We are offering this as a free gift to those of you who go to iTunes and leave our podcast a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email to passivemhpinvesting@gmail.com. In the email, please tell us who you are and what screen name you used to leave that review, and we will send out the pre-investment checklist directly to your inbox. It's that easy. Once again, that email address is passivemhpinvesting@gmail.com. Thanks again for tuning in.

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