Posted by Tony Colella on March 24, 2006 at 09:16:19:
Swimming up stream is something we run into every time we try something new and usually because we are trying it in the wrong location (be it parks or banks).
Keep in mind that it only takes ONE park to get started and in many cases only one or 2 parks to keep rolling.
I do not believe that all park owners have the same mentality, goals, financials (or access to cash), desire to work in their own parks, the understanding of working in their own parks or the energy (pre-burn out).
I suspect that what the speaker you heard may have been addressing was the fact that in years past, park tenants who needed affordable housing simply went to a dealer who sold and financed them a home to put on a lot in a local park.
I agree this happens less and less and anyone who has been on this site or read Lonnie’s book understands that this is one of the reasons Lonnie’s system works. We were always able to buy low, finance reasonable prices and make a great return on a spread.
The new mobile home dealers went nuts watching us buy and sell homes in their favorite parks. I had 2 of them complain to the park manager on separate occassions that I was selling home too FAST! They were convinced the park was diverting their prospects to me somehow. One of the dealers called and offered me a job. I declined of course but did tell him that I was owner financing my deals. He could not believe I would do that. Oh well, “you make your money your way, I’ll make it mine,” was my response.
Even back then I wondered, especially with larger parks with dozens of vacancies (or more), just how they could sit and wait in the hopes that new home buyers would fill their vacant lots. It is too long a process, especially after the reduction in the lenders willing to finance mobile homes without land after the bankruptcy of several of the largest mobile home lenders.
This combined with the low interest rate lending market that is willing to approve even a faint heartbeat for a mortgage on a stick built home, makes the expectation that dealer home buyers will fill empty lots for park owners, unreasonable in many cases.
So yes, it will be up to the park OR an Investor to do so. Karl Kleiner is a great example of just how this can work out for both the investor and the park owner.
Park owners (especially those of small to medium size parks) may not have the capital to fill their lots. Let’s a park has 20 vacant lots. These park owners are not often familiar with the Lonnie deal concept so they think of paying retail for “nice, new homes.” Even if they bought nice, wholesale, new homes, lets say they hammer the price down to $10,000 a piece (not including move, set up etc.). Just in home purchases, the park owner will need to come up with $200,000. Then they have the cost of move and set up, decks, skirting, utility hookup, which may add another $50,000 or more to the deal.
All of that just to get lots filled? See why an investor who is willing to use their cash to fill the lots offers a value to the park owner?
So yes, I agree that the parks will have to take on the responsibility of filling their own lots but this does not mean they can’t use investors, it just means that the new dealers may becoming less and less effective.