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Mobile Home Parks Are a Viable Investment

By U.S. News & World Report

It’s hard for small-time real estate investors to imagine competing with the likes of Sam Zell and Warren Buffett. But while the average investor can only dream of attaining those lofty heights, opportunities exist in the mobile home park marketplace to profit in a different product type from normal brick and mortar.

“We don’t want to be in the home business. We want to be in the land business,” says Frank Rolfe, owner of the Mobile Home University based in Cedaredge, Colorado. Rolfe, along with his partner Dave Reynolds, boasts being the sixth-largest owner of parks in the country, with 170 parks totaling more than 15,000 lots in 22 states. “We want the park tenants to own their own homes.”

When it comes to sheer number of mobile home parks (lots owned) the competition pales in comparison to Zell’s Equity LifeStyle Properties (ticker: ELS), a real estate investment trust that owns more than 140,000 lots in 32 states and British Columbia.

[See: The 10 Best REIT ETFs on the Market.]

And for park owners who need to replace outdated mobile homes, or for future park tenants who want to buy their own mobile home, the largest builder and financier of manufactured housing these days is Clayton Homes, purchased over a decade ago by Buffett’s Berkshire Hathaway (BRK.A, BRK.B).

Still, Rolfe estimates that of the roughly 50,000 mobile home parks in the country only about 10,000 are professionally owned, leaving the remainder of the market up for grabs by small investors looking to either diversify their portfolio or change direction with a whole new investment strategy.

Why mobile home parks? Mobile home parks provide a viable form of affordable housing — especially for the nation’s low-wage earners and people living at or below the national poverty level.

According to the U.S. Census Bureau’s 2016 Poverty Guidelines, a family of four that earns $24,300 or less is living in poverty. Last time it was measured (2014), the Census reported the nation’s official poverty rate was 14.8 percent, or 46.7 million people.

A report released in May by the Social Security Administration notes that 38 percent of all wage earners in the U.S. make less than $20,000 a year.

This April, the Census Bureau reported that the national median asking price for vacant rental units was $870. Rolfe estimates that roughly 8 percent of the U.S. population or 20 million Americans presently live in mobile homes. At the state level South Carolina has the most with 16 percent of its population living in mobile homes, he notes.

“In an era where the nation’s middle class is steadily shrinking, and aging baby boomers may be looking to cut back on their housing expenses as they head into their retirement years, mobile homes (manufactured housing) may be a viable alternative,” says Rick Sharga, chief marketing officer at Ten-X, an online real estate marketplace. “For the right kind of real estate investors, this presents an interesting opportunity.”

As with any sort of investment, due diligence is key. The current owners may have set rents that are much below the current market. Checking out the local economy along with on-site interviews with paid staff, local police and the current owners are essential in order to get a complete picture.

Even though he estimates that no more than 10 parks are built in a year, Rolfe remains confident on the upside of owning mobile home parks for investors:

— They have the highest capitalization rate of any real estate niche, he says, roughly 7 to 12 percent, much higher than apartment buildings.

— There are very few, if any, new parks being built while the demand for them remains high — so parks continue to go up in value.

— They can still be bought from the original mom-and-pop investors who have owned them for years and many times those owners will carry the financing so there’s no need for a bank loan.

— In the majority of cases, the mobile home owner/tenant does not want to pay to relocate a mobile home when they move, so the homes tend to remain at the park, allowing the park owner to sell them or rent them out.

“Personally, I feel that the niche is very non-market dependent, which is why I like it so much,” says Derek Harms, an investor from San Diego. “It’s not totally insulated from outside forces, but in real estate I feel it is one of the best. Even if interest rates go up real high, people still need a place to live and you’re providing affordable housing. People are going to come to you first.”

[See: Artifical Intelligence Stocks: 10 Companies Using AI Extensively.]

Learning the ins and outs of park ownership. Like many investors, Harms credits his mentor for helping him establish his career. For him, though, it wasn’t some big real estate guru — it was his father. Upon graduating from Sonoma State University, Harms received as a gift from his father a vacant lot in Arkansas. From there he attended seminars to learn about real estate investing.

Today at age 30, Harms is a veteran investor and a real estate agent for Berkshire Hathaway in San Diego. Right out of college he started buying Fannie Mae foreclosures, and tax deeds at auction in Florida — mostly in the Tampa Bay and St. Petersburg areas.

While doing business in Florida he picked up two mobile homes on a single lot. That spurred his interest in mobile home parks — along with his father, who had been investing in them for more than five years by then.

“I had the luxury of partnering with my dad. I can’t imagine getting into this business without some partner who can coach you through deals,” Harms says. “It’s different from other types of real estate investing. Mobile home parks are definitely not for everyone. You have to have a whole different mindset. It’s not like apartment buildings. You have to be more willing to bend and work with these people than in the standard apartment business.”

As Rolfe explains it, there are five issues an investor needs to watch out for when considering buying and owning mobile home parks — the infrastructure associated with the lots including utility access, local laws regarding maximum density per acre, the historical net income of the park, the age of the homes and the location.

[See: 7 Global Goats That Could Bring Market Mayhem.]

“The best parks are the ones in real expensive areas,” Rolfe says. “You will stay packed and will have a waiting list. You want to be the cheap alternative in an expensive world.”

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Mobile Home Parks Are a Viable Investment originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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