‘Mobile Home Gurl’ finds her niche
In her own words, the woman known to some as “Mobile Home Gurl” is an entrepreneur, a dreamer, a thinker. A doer.
She started investing in real estate with single family homes, but her mind was captivated and heart captured when she immersed herself in the world of mobile home investment. And she’s taken quite a few of us on the ride with her, in her blog and in the book “Adventures in Mobile Homes” and others.
Rachel Hernandez, as she also is known, operates in the vicinity of San Antonio, Texas. She prefers to buy locally to regionally, and rather than looking for parks she has concentrated on purchasing individual mobile homes, and and more recently securing the land they sit on or a good parcel where they can be placed.
“I focus on the area first and then find the deals,” Hernandez said. “As an experienced investor, I’ve learned to find motivated sellers. Usually, I can tell over the phone whether a seller is motivated or not.”
Most of the deals Hernandez pursues are unadvertised. She has an education and background in sales and marketing, and networking is among her greatest strengths. She leverages that capability and relies on her industry interactions and relationships to find opportunity.
Her first deal took about a year to complete, and she continues to take it relatively slow. She purchases one or two homes at a time, and puts her “sweat equity” into them.
“Usually, I get them up to apartment standards,” Hernandez said. “New carpet and paint at a minimum.” She fixes the leaks, fills any cracks or holes and gives a thorough cleaning. Then she offers the home on a rent-to-buy plan.
“Most people appreciate this hybrid as it’s not like a mortgage where you’re locked in, but at the same time you’re not just renting,” she said.
Her inventory is on the rise, to the point where she owns in quantity what would be a small mobile home community. She does receive regular offers to partner, but has resisted the urge to purchase an entire community outright. She remains on the lookout for land, and does work in communities buying both homes and pads, operating just on the fringe from that investor who looks to buy or infill on a larger scale.
Meet the Challenge
And while she appreciates having all of the particular on paper, she mostly “follows her gut” when deciding what to pursue and what to leave alone.
“It’s more the person than the price. If the person I’m talking with on the phone does not seem trustworthy, or seems like they’re covering something up… I back off immediately,” she said. “No matter how good the deal sounds, an untrustworthy seller is a deal breaker for me.”
Still, Hernandez has run into problems.
“I imagined buying a home, filling it and moving on to the next deal,” she said. “Though I did this for many years without many issues, I started taking back more homes as my inventory grew.”
A rent-to-own resident loses a job, goes through a divorce or wants to move closer to family, and sometimes the only solution is to reclaim the home and find someone new for it.
“I knew taking homes back was part of the business. But I didn’t plan on it being a large one,” Hernandez said. “So, I had to learn to work with contractors. There was no way I could fix up all these homes myself.”
Another difficulty has nothing to do with residents and everything to do with one of her favorite parts of the vocation… the prime location.
“Unfortunately, sometimes local ordinances may place more scrutiny on mobile home parks, as an asset class,” she said. “There’s still that mindset.”
The not-in-my-back-yard attitude, the general concern of reduced property values, and the perceived threat of residents who pay less tax than many for the same municipal services, often can be difficult issues to navigate when looking to obtain rezoning or a new use permit – regardless of the great need for more affordable housing.
All part of the journey, Hernandez said.
The take-back and fix-up strategy, as well as the municipal hurdles, have resulted in another of her books, this one entitled “Real Estate Investing Sucks: How to Deal with Change and Find Success as a Real Estate Investor”.
“I document my entire experience,” Hernandez said. “I persist. I know what I want and keep going. Success takes time.”
Kevin Bupp will tell you he’s in a better place today than he was just three years ago.
That’s saying something for a guy who’s spent two decades in real estate successfully buying and capitalizing on single-family homes, commercial properties and apartment buildings.
There are worse fates.
And, Kevin wears a big smile and readily shares his joy about where he and his associates have landed.
“We’re still small fish in a medium sized pond, because the industry is still not as large as it could be,” said Bupp, a resident of Clearwater, Fla., and co-owner with Charles DeHart and Brian Spear of Sunrise Capital Investors. “Manufactured is all we focus on now.”
Bupp and his partners are seasoned investors who purchase and improve what most often are referred to as “mobile home parks”, though a true mobile home, by definition, hasn’t been manufactured in the U.S. since June 1976. Since then, and today, manufactured homes are stamped for quality by the U.S. Department of Housing and Urban Development (HUD).
Some of the communities Sunrise purchases have homes that pre-date the 1976 regulatory change, but most are small to mid-size communities with homes from the 1980s and ’90s, some newer.
Their investment targets represent a middle-market niche that larger investors and owners overlook, though less so in recent years.
“We’re really value add guys,” Bupp said. “We are really good at taking a community that is in distress, but in a good market, and taking out the bad elements, bringing in some improvements and making things work.”
It’s a niche that’s gaining stability and wider recognition all the time, largely because the ROI doesn’t lie.
“It took us a year to buy the first park, then it’s been one or two in those in between years,” Charles DeHart said. “In the last 18 months, we’ve purchased six parks.
“We have five more parks currently in contract (pending sale) that represent 430 spaces,” he said.
Sunrise has raised more than $2 million in cash during the last two years from the attraction of 10 dedicated outside investors, and they look to raise $3-5 million more to purchase another six parks – perhaps 800 land-lease spaces – during the next 12 months.
It’s not BIG business investing, but it’s been shown as a way to steadily grow wealth. And, if you ask the Sunrise partners and similar investors, it’s a way to improve affordable housing stock – for the metro area and for the park residents.
“We’re in a niche that allows us to earn a very reasonable return for our investors,” DeHart said. “And also provide quality housing for people who may be coming into home ownership for the first time in their lives or even in their family’s history.”
How it’s done
They don’t buy through a broker. Brokers typically want to work with higher volume investors, and also make sizable commissions. Rather, Bupp and DeHart delve into county records within a geographic area of interest. They find out where the communities are and who owns them. If they’re fortunate, they find a phone number for the owner.
After that, it’s sales 101; they make cold calls, employ heavy use of direct mail and sometimes put out bandit signs.
“We typically have five or six unique owners in the system at any given time, and check back with them three to four times per year,” DeHart said. “It’s not just finding the right seller, it’s about finding the right seller at the right time.”
Often, they’re in front of a prospective seller before the owner of a property realizes they’re in a good position to sell. So, checking back often is key to being in the right place at the right time.
They work some of the prospects themselves, but commonly put out a post to acquire a “trainee broker” who can visit communities of interest, take photos and notes, and possibly make an introduction to get talks underway. That trainee broker also learns how to access county records that are unavailable online, and does this on their own time and earns a commission when a sale is made.
In training these brokers, Sunrise is creating more than a strategy, more than a company brand. They’re helping to build an industry. Along those lines, the three operate Mobile Home Park Academy, which teaches others how to do what Sunrise does. Charles and Kevin host a podcast on the topic, and also are in the final throes of writing a book on mobile home park investing.
“We intend to be in the business for a long time. We really enjoy it, it’s lucrative and we appreciate being able to provide a critical affordable housing segment,” Bupp said. “We only buy stuff that makes sense. If we only buy one community in a year, that’s good with us. It will be the one we want to buy.”
Big Investors Move to Find Best Deals Before Market Levels
From Bellingham, Wash. to Newnan, Ga., Jon Harrison scans the map for just the right patch of land. He talks to brokers, scours county records and relies on whatever information he can gain from inside sources.
All in the name of finding the prime manufactured home community.
Harrison isn’t looking for his retirement place. He’s not looking for the simple yet ideal coastal getaway for the family. He works for Inspire Communities, not the largest of the community owners, but certainly entrenched in the top quarter of the industry.
A former broker himself, Harrison is in acquisitions, and always is looking for the perfect mix of placement and amenities that can be a great home for 200 hundred residents or more – and no less important, a stellar portfolio addition for the company owners and investors.
You’ve heard the term “Investment Grade Property”. Increasingly, that label is being applied to entities in the manufactured housing sector.
A general surge in employment, rising home prices – particularly in sizable metro areas – and the largest demographic of aging Americans in our country’s history are all playing into the demand for affordable housing, which has investors of all types eyeing manufactured housing. From massive trusts to the niche investor, mobile home parks and manufactured home communities have become the apple of the eye for many.
Manufactured housing Real Estate Investment Trusts in the U.S. during 2016 posted a return of 28.5 percent, 9.7 percent better than apartment REITs and more than 15 points better than single-family home REITs during the same period.