In part 1, I wrote that we were attracted to mobile home parks because of profitability and stability. Howard and I, however, needed more from an investment (or any business venture). If we were going to invest significant amount of time, energy, and passion into a venture, it needed to do more than just making money. It needed to be meaningful. In this post, I will talk about the potential benefits to the society we saw in mobile home parks investment. These were the other reasons that helped to create our company Certis.

Better Affordable Housing

We saw that mobile home parks provided higher quality housing than the alternatives.

According to US Census, about 20% of households makes below $20,000 a year ⁽¹⁾. It is generally accepted that affordable housing cost is about 30% of household income ⁽²⁾.  If you do the math, that comes to be about $500 a month ⁽³⁾.

Where can you live for $500 a month? Well, you could rent a low-rent apartment. There, you will find lack of privacy and low quality of housing. Tenants in these low-income apartments move in and out all the time. Because they do not have ownership of the apartment, they have no vested interest in the building nor the community. Sense of community comes from pride of ownership and sense of belonging. There is no such thing here.

With the same $500, you can live in a mobile home park instead. In a mobile home park, you get all the amenities of a single family house – no shared walls, a driveway, a deck, and a yard. There is also a sense of community in a mobile home park. People can own their mobile homes instead of renting. It is not a place where people move in and out every 6 months. It is where they decided to live for years, often for decades. In mobile home parks, you will see that people know their neighbors. People take care of their homes and their community.

Affordable Home Ownership

We also saw an opportunity to help the working families become homeowners.

Home ownership is very difficult for the working families. After the sub-prime mortgage melt-down, banks are no longer lending to them. Without financing, working families are stuck being renters. When you rent, there is no ownership. With no ownership, there is no sense of community.

We could provide affordable rent-to-own programs where families could own the homes after renting for 4 to 6 years. Because of the newly vested interest in the homes,  they were now invested in the community. Community improves with the new-found sense of ownership. It gets better. After the homes becomes theirs, they only pay the rent on the land. Now, living in the park has become even more affordable.

Providing home ownership makes business sense as well. When we give the homes to the residents, we don’t have to maintain the homes. It cuts our expenses and it makes our operation easier. On top of that, we now have more stable community with stronger sense of ownership and lower turn-over rate. It benefits the residents, communities, and us.

Turning Around Mismanaged Parks

We could also benefit communities by turning around mismanaged mobile home parks. Just like any business, there are mobile home parks that are not run right. Through mismanagement and bad business practice, they help create stigmas that are associated with mobile home parks – low standard of living, low quality tenants, high crime rate, etc.

We could acquire parks that are not running well, and turn them around. That improve the quality of living for the residents. There are many things we can do. Here are some examples of improvements we could make:

• Enforce rules and regulations that restores order in the community
• Improve the management through training and setting up more efficient management system
• Remove tenants who insist on causing problem for the community and the residents
• Make physical improvements – improve road, landscaping, etc

What We Are Doing Now

Now we have formed a company called Certis. We are now working with private investors to acquire and turn around distressed/mismanaged mobile home parks throughout the country. We are seeing a lot of opportunities in the market where we can create value for our investors and our residents. I will continue sharing our experience in acquiring, running, managing mobile home parks in this blog.

If you any question/comment/suggestion on anything in this blog, please let me know.

Sources

1. US Census 2006 Economic Survey, income data

2. Housing and Urban Development – Affordable Housing

3. Why Investors Like Warren Buffett Are Bullish on Mobile Home Parks