Re: MHP Business Plan - Posted by ray@lcorn
Posted by ray@lcorn on February 07, 2000 at 14:29:31:
Long time no hear! I see your project is still kicking. Hope to see you in Atlanta.
Doug described some good sources for the info you need. I would add to his list to check any old appraisals for any commercial property in the area… maybe even contact an MAI commercial appraiser for some boilerplate market info for the community. Then you can fine tune your projections accordingly. But the bulk of this work you need to do whether it is included in a loan package or not.
One piece of info I think is critical to a development package is hard population data. For an MHP, I like to see steady growth in population, a slight decline in number of people in a household, and stable to rising income. Low unemployment is true in most parts of the country, but don’t overlook the statistics. If it is low in your area, know where and why people are working. Similarly, know where and why people are moving to the area, or staying in the area. There are two sources that I routinely use for demographic profiles. CACI in Arlington VA can do some very specialized reports including housing breakdowns, buying patterns and rental populations. (Remember your best prospects are now in an apartment). The other source is National Decision Systems. I deal with the office in San Diego but understand they have branches nationwide. Their reports are also subject to customizing, but I have found their data groups to be more suited to commercial projects as opposed to residential. If you can’t readily grab the phone numbers for these places let me know and I will look in my files.
On the property inventory issue, do a detailed competitive survey of all comparable MHP’s in a fifteen mile radius. Chart amenities, rents, included items, and vacancies. Know your competition and account for them. Don’t be too generous in estimating the initial market share of a new community. There is a resistance among people to be first when picking a place to live, whether it be in a new subdivision or a MHP.
Solid trends in the number of building permits issued in the community over a three to five year period are good indicators of a high demand for housing. Some jurisdictions track mobile home permits seperately, and that makes it easier.
All of this information goes into calculating your absorption rate, and hence your build-out time. Every development project has ongoing carrying costs, and if not accounted for based on a realistic build-out schedule, they can and will sink the best of properties. (There’s an old saying in the development biz that says the second guy is the one who makes the money, after the first one goes broke!) Knowing these elements of the market will also point to the most efficient break points for phasing the project. Obviously, it would only be in the rarest of instances when you would want to deliver 300 lots to the market at once no matter how good the market is. Knowing how many to build, and when, is often the difference between making a profit and filing bankruptcy in this game. Every development deal has profit in it, but many developers never get to it because of unrealistic forecasts. I have learned that if a deal doesn’t work on paper, it never gets any better on the dirt.
I usually include in a development package a roughed out marketing plan. I like the lender or investor to know that I have thought about things like billboard costs on major commuter routes, ongoing newspaper ads, radio, grand opening and open house promotions, dealer incentives, commissions, etc. You don’t have to lay out every item of a marketing plan, but you need to convey enough to show that you know how, and expect, to ask for business in a public arena. If you’re not willing to ask for the business then you don’t deserve it. You will also want to include a detailed preliminary marketing budget for at least the first years operation.
Last tip: Focus on finding your USP… that’s what the marketing guys call a “Unique Selling Proposition.” It is what makes you different, what makes you stand out from the crowd. Whether it be your location, a particular amenity (golf, lake, gated, etc.) you need some kind of identifier that is easy to associate with your community. Then pound the he11 out of it in all of your marketing materials.
Hope this helps. Good luck!