Coles Point River Club

The vast majority of mobile homes in the country are single-wide homes, with a small footprint of 700 to 1200 square feet. As the tiny house movement continues to grow and more people see the advantages of downsized living, mobile home parks will become increasingly popular. In well managed parks the stigma of the mobile home park slowly goes away and the resident base begins improve. Our end goal is to create parks that we would personally want to live in.  

SECURITY

Stable Low Income Housing. For many people, mobile home parks are the least expensive housing option available. There is no cheaper place to live. This can be a benefit for the park owner because residents are motivated to stay current with rent and, during individual hard times or a recession, parks will maintain their residents while people in more expensive rentals will downsize.

Low Turnover. Many residents in our park have lived there for seven or more years, a few for 20 years or more. Their mobile homes are their single largest asset, and often, the park neighbors are their family. In an apartment building, it’s easy for unhappy tenants to pack up and move out. Coming up with the money to move a mobile home, $2,000 to $4,000, is more difficult. Even if they are unhappy for a period of time, residents rarely leave our mobile home park. Good park owners work through issues with residents who then become very long term tenants.   

Market Rents. When Elkhorn Group purchases a park, it is often neglected and has very low rent. As we improve the park, we raise rents and pass through utility expenses that were previously paid by the park. It is difficult for residents to justify the thousands of dollars in expense to move their home and leave the park. In addition, they have no guarantee that the other parks will not also raise rents to keep up with the market. As long as we maintain a quality standard in our communities, our residents are okay with maintaining market rents.  

RETURN

Less Maintenance than Apartments. Mobile home park owners own the land and utilities that service the mobile homes. In most cases, residents own the mobile homes and pay a space rent to the park. The park is typically not responsible for painting, replacing carpets, fixing appliances, or any other home repair. The park is only responsible for maintaining the utilities and common areas. Apartments, in general, have 30% more maintenance expense than mobile home parks.

Tax Advantage. In mobile home parks, the improvements and goodwill (difference between the price of the park and the price of raw land) depreciate over 15 years. Apartment buildings are generally depreciated over 27.5 years. The increased depreciation over the first 15 years in mobile home parks is a major tax benefit for many investors. 

GENERAL STRATEGY

Upside Potential. There are nice parks with 200 homes that sell in the 5-8 CAP range. Many large investors with low risk tolerance compete for these parks as they are stable and well run with content residents. 

Mid-sized parks are often owned by individuals, not professionals, and are loosely managed. When these parks come up for sale they have many vacancies, stay on the market for a long time, are hard to finance, and have unhappy residents. These parks sell in the 8-12 CAP range, based on their current not potential income. We can add the most value to this type of park and can greatly increase the quality of life of the residents within a few months of ownership. 

Negotiation. You often hear people say that real estate investors don’t make money when they sell a property; they make money when they buy one. Elkhorn Group excels at finding motivated sellers and then negotiates a significant discount on the purchase price. We negotiate to ensure that our company and the owners, sellers, and buyers that we represent aren't overspending. 

Off-site management and bookkeeping. Setting up a park for success takes some time and effort, often done on-site. After the initial stages, we closely watch the progress of park rehabilitation and operations with off-site management and in-house accounting. We are highly motivated to better the park, decrease expenses, collect timely rents, and keep paying residents happy. Weekly calls with the on-site manager keep us up to date on the park and its cash flow. 

All the bookkeeping is done in-house. On-site management sends a weekly report of park operations and we are able to confirm the report with deposit details, expense accounts, and bank reconciliation.

While looking at parks for sale, it is often apparent that they are poorly managed. The owners are desperate to be rid of them and will sell at a discount. It took our group five months to get a park near Yosemite from 55% occupancy to 90%. When we buy and operate a troubled park, the old owner gets out of a tough situation, the residents get a cleaner and safer community, and the park becomes fully occupied by paying residents.

DETAILED STRATEGY

Replace or retrain the on-site management. Good management is the key to fixing parks. When we purchased our park in North Fork, there were residents openly using drugs, breaking windows, and not paying rent. Some residents hadn’t paid rent in 6 months. After retraining management to demand that rent be paid on time, three residents (and their families) left and two more were evicted. Sure enough, the residents who weren’t paying were also the ones causing trouble in the park. The other people living there were happy to see them go and one long-time resident told us repeatedly that we were the first people in 10 years to pay attention to the park. Replacing or retraining management is often enough to turn a park around.

Peace and Community. We aim to foster a strong sense of community in our parks. Our resident selection process, paid for by the applicants, makes sure that each resident is setup for success with a house they can afford. We have a zero tolerance policy for violence, illegal activity, and sexual offenders. 

Resident owned housing. We believe strongly that park communities are better, for both the residents and the owner, when all the homes are owned by the people living in them. Elkhorn Group utilizes a process called "rent credit" where residents can buy their homes month by month. 

Fill Vacancies. Vacancies are bad for park morale and cash flow. Using our dealers license we can fill parks with new homes and finance them to new residents. Alternatively, we can bring in used homes, renovate them, and fill them using a rent credit program.

Public Utilities. We have a strong preference for public utilities. In the past, we have helped free our owners of the liabilities surrounding gas and electric utilities (billing, receivables, customer service, and deteriorating physical assets) and lower the liability associated with private water and sewer. In general and when possible, we like our park residents to get all utilities from professional utility providers; it is better for the residents and the owners.