Issue link: https://read.dmtmag.com/i/146145
COMMUNITY CONSULTANT Three Failed MH Community Business Models: Danger Ahead BY FRANK ROLFE Manufactured home communities are stable vacant manufactured home community lot in looks. In my small town in Missouri, there's a money-makers for thousands of owners. But Baton Rouge at a price roughly triple of what guy who engages in slum lording on single famthere are a few business models that have they went for (but you had to include all utili- ily homes. He's a nice guy and fairly wealthy, proven to be risky and frequently unsuccessful, ties). Everyone got all excited about what a but he just can't seem to stop his slum lording and you need to be aware of what they are so great business model that was, until FEMA habits, so the city is condemning his rental you can understand the dangers involved. dropped all their leases a few years later and homes. Of course, many a community owner Man Camps many community owners ended up in bank- has made a fortune buying a failed slum lording We get calls on this type of property all the ruptcy court and in default of their loans. community at a fraction of the note value from time. They are communities that were built for Slum Lording the bank – I've just never seen the slum lord the sole purpose of housing oil & gas workers Has this model ever worked? The concept is ever make a profit. And even beyond the fi(and sometimes construction workers). The that you do absolutely no repair or capital im- nancial aspect, there is something horrid in locations are normally taking advantage of extremely rural, and your residents and offerManufactured home communities are stable ing an awful product at there is not real demand or customer base other a lousy price. In a world money-makers for thousands of owners. But there than the workers who with an insatiable deare in the middle of mand for affordable are a few business models that have proven to be drilling new oil fields or housing, it's crazy not risky and frequently unsuccessful, and you need to building some large to simply provide this project. This has beproduct with honesty be aware of what they are so you can understand and respect. come a very common type of manufactured Pouring Homes into the dangers involved. home community in Bad Locations with North Dakota, but also Low Lot Rents exists in many other areas. This business model provement to the property, and take out every This model is prevalent in the southeast. has a number of flaws including over-reliance dollar as cash flow. Of course, what you end up What happens is that someone buys a manufacon one industry and one employer, lack of de- with is a community that is a disaster, and then tured home community at a cheap price with a mand when those workers leave, inability to hit the city moves in to exact its revenge in the ton of vacancy (think 100 lots vacant out of revenue figures with less than corporate spon- form of fines and potential closure. I've never 125, for example). They then pour a hundred sorship (some oil & gas workers, for example, seen a slum lord come out on top, but seen homes into the community, and sell them with pay $1,000 per month per manufactured home many shut down. What's amazing is that you'll virtually nothing down to the local residents. bedroom), and lack of municipal water and see this business model in nice areas in which Essentially, they have created a time bomb sewer. I always remind people, who are con- the rents support traditional, respectful busi- and, before they can re-sell the property, the sidering these type of investments, of what hap- ness. But I think that maybe slum lording is a tenants start defaulting at the speed of light. pened with FEMA and Louisiana after Katrina. state of mind – almost an addiction – and peo- And before they can sell the property, they For those who were not around, following Hur- ple who tend to believe in this model just can't come to find out that nobody is going to buy a ricane Katrina, FEMA rented just about every help themselves, regardless of how stupid it manufactured home community for $800,000 AUGUST 2013 18 THE JOURNAL