Saturated Market?

Question

Ken Rishel · Answer

Ron: What are Shareware Gurus?

Regarding your comment about "owning a park", I absolutely agree it isn't easy and far too many people get into an ownership position thinking it is. Regarding rich, I might have to disagree with you, but it does depend first on your definition of "rich" as most people never really consider themselves rich unless or until their net worth changes from M to B.

Here is what I know about the subject of land lease manufactured housing communities:

• Sam Zell of ELS was a millionaire when after reading George Allen's book he discovered land lease communities. He became a billionaire through his investments in land lease communities starting in the 1980s;
• Bud Zeman, one of my best friends, bought his first park with a net worth of $25,000 in the early 80s. Like many of us he borrowed lots of money in the beginning. He was a billionaire when he died in 2002.
• Maurice Wilder, and my first partner in my first park, started with one park in 1970, died earlier this year with a net worth of almost a half a billion dollars even after giving up over $100,000,000 in a divorce settlement several years ago. (He and Suzanne were only married for eight years, so she had a good career choice.)
• My best friend in the business recently sold out and netted about $16,000,000. While the amount is not as high, it becomes worth consideration when one knows the back story. In the mid 1980s he started in the manufactured housing industry as a seller of homes. He had to borrow $5.00 for gas from his new boss to get to work for his first day of work.
• My wife and I are good friends with a guy and his wife who are considering selling out and if they do will net about $30,000,000. He started out by finding a park for someone else in the early "90s and then being hired to manage it. He was selling local print advertising for a throwaway at the time.
• I am the former chairman of the Illinois Manufactured Housing Association (2015-2016) and a long-time board member. None of the community owners on the board are worth less than $15,000,000 dollars and most are worth quite a bit more. One of them got into the business after 2008.

There is no doubt that starting with money makes things easier, if only because those fortunate ones should have an understanding of how the world of money works. But, I know many people with a lot of inherited money who invested in communities and lost their shirts just as I know many who started with little - or nothing - and did very well.

So why do some people do better and some worse? From my observations, it is all about drive and passion. I used to have the drive and passion and I worked seven days a week and 16 hour days were normal. I went 20 years and never took a vacation, or bought a new car, or even a fancy house. Until my son was born in 1984 I lived in a 900 square foot ranch on a slab. When I was on site in my out of state communities, I slept and showered in my office. Anything I made went back into the business. I ate oatmeal 2-3 times a day and did not own a television set.  Most people are not that dedicated and it shows.

The passion I have left for this business is because it is a mechanism to fulfill "the great American dream" of upward mobility they used to teach in high school Civics. I am still working at it to help others reach their dreams if they are willing to work very hard and very smart.

Ken Rishel · Answer

Like many questions that appear at BP, Ronald did the right thing by asking a follow up clarification question.

As I understand the question, you, Dave, were asking about park availability.

First, while the numbers are nowhere near what they used to be when I first started, developers are building new parks that will at some point be on the market.

Second, there are over a thousand parks on the market right now. I get at least 2-4 offerings every other day or so from various brokers.

Now for opinion and advice:

Not everyone is suited to owning communities. Done correctly, it is hard work and requires an enormous amount of specialized knowledge. Unlike Ronald, I strongly believe in paying for knowledge before even considering putting down any money to buy. For a "newbie" courses like those offered by Frank Rolfe and Dave Reynolds are important in the process of getting ready to buy a park. So also is the paid help from a qualified and knowledgeable appraiser like Bruce Nell, and the help of an experienced acquisition's attorney. A good broker who specializes in smaller parks like Joanne Stevens is also a good idea.

Knowledge is very, very important and when you don't have it you may not even know what you don't know. Like it or not, in life, you have to pay in some manner to get that knowledge and experience.

I have been doing this since 1975 and I still use paid professionals to help me. Here are two examples where knowledgeable and experienced friends made mistakes:

• A well established park owner bought a park and paid for it without separating the good will and equiptment from the actual land in the purchase because the contract was vague in that area. As a result, the property tax went up by 300%. He is still fighting the taxing authority in court over this.
• A large community was sold to a less experienced buyer who in cutting corners failed to determine that the water supply was contaminated by Radon. They spent $1.5 million correcting that problem.

Back in 1998, I saved a good friend over a million dollars by sharing with him something I knew about a community that he did not and he was less than 72 hours from closing on the park. I am in the process of putting together a deal with a newbie community owner who is giving up because he didn't realize he needed a dealer's license and relationships with manufacturers to fill a community, let alone a sales force and a captive finance company. I'm going to end up with a community for far less than he paid for it a year ago that will end up being worth at least eight times what I will invest in a couple of years. Knowledge is power.

Once you have purchased the community, you are going to need even more help and you are going to have a number of legal and compliance issues to deal with. Are you following all the state and federal laws that plague all community owners today? Even experienced operators have trouble keeping up with all the new laws and changes in regulation. Who do you turn to for help? A large law firm and their community owner client just paid a huge fine in California over the law firm's bad advice over SCRA.

Now, Ronald is correct that Frank and Dave are your competitors to some extent. I will go farther and state that I do not agree with everything they teach. However, I consider their offerings an unbelievable bargain for newbies and I strongly believe that their materials give people a strong organized basis for building their base of knowledge.

I also don't think you can generalize about finding communities. The last community I bought came from a direct mail piece and I sold it by word of mouth. Zeman uses extensive direct mail and phone calls and personal visits as well as monthly ads in The Journal for acquisitions. Brokers also play an important part in the process for many. I know that at least two people who read and post here on BP have bought their first communities this year using Joanne Stevens.

Just my two cents.... Good Luck!

Bill Neves · Answer

@Ronald Bourgeois

I'm not sure people realize how much competition there is in being a 'Real Estate Agent'? People are still taking classes and getting licensed. Right? Isn't that a waste of time and money?

Before the crash of 2008 there were over 1 million licensed agents who averaged 2 sales/year. People are still studying RE today. How many spend a bunch of money on getting licensed, paying desk fees, gas, time, energy, marketing, hitting up all their friends, relatives, Top 200 list, to be a wash out. Who stops them from wasting their time and money?

The 'Real Estate Agent' game is not as easy or as profitable as other Guru Agents lead you to believe.

So if someone wants to pursue owning parks, isn't that ok?

Just sayin'!

Rachel H. · Answer

There are opportunities everywhere. The great thing about this industry is the ability of the asset to be moved from one location to another. Parks are only one option. But as @Ken Rishel stated, you'll be open to regulation as well as the politics involved. I know many investors who gone in different directions in this industry who are happily retired. Though, they did not get into the "hype" of things. I think this is the key to being successful: not following the herd. Unfortunately, a lot of new investors fall into this trap and can be taken advantage of. Keep your eye on the ball and do it quietly. You'll get there eventually. Good luck!

Ronald Bourgeois · Answer

@Ken Rishel

Ken, your reply is awesome.

OK you take two lumps of sugar in your coffee and I drink mine black.  It's still coffee.  :)

I've always had respect for your post's, insight and experience.

Thanks,

-ron

Marc C. · Answer

I do direct mail to 30-100-space parks and get good results. They aren't getting many letters.

Ronald Bourgeois · Answer

Some of my concerns and research experience with Mobile Home Parks  MHP

*  Shareware Guru's  (Oh I could go on for hours on this subject alone.) but just ask yourself this Honest question.  There is no need to post your response here, but just be honest with yourself.  Question: If you had a Cash Cow would you really share it with us or feed your family?  Do you really think a shareware Guru has your best interest at heart?  Run, when you hear the statement "oh there's plenty to go around"  really?

* GREED  if you think owning a park is easy and your going to get rich ....  Well maybe, but ehhh no.  Only the rich get richer.  Just look and see who owns the largest parks, it's the people that have been in the game since day one or Corporate America.  Now if you want a small family park where you can make a modest living, they are available but you have to search hard to find them.  The smaller parks are generally owned by a now aging senior population who are not the least bit interested in emails or campaign letters. (Junk Mail)  If this your route, it would really be in your best interest to visit the park and take the owner out to lunch.  OLD style prospecting.

* Your really a Land-Lord and you have tenants and that number of tenants depends on how many lots you have.  My old mentor would chant, 100 tenants and you'll have 101 problems.  He was right.

* Guru's Seminars;  OK they put you on a bus, give you the big tour of some parks, and hand you course-ware, some good some not so good you'll also get some entitled Mentorship Program were you'll discuss leads with your mentor ( who is really a guru competitor, if you get the drift. ) then suddenly your opportunity is gone.  Gee how did that happen? By the way, how much did you pay for that Seminar?

There are other opportunities with the Guru-Seminars who will pay you a (bird-dog fee) if you find them a legitimate opportunity.  OK nothing wrong with that approach, but how much did it cost you to attend that seminar?

* Visit some Parks near you.  strike up a conversation with the residents of the park and ask them how they like the park?  Tell them your thinking of moving into a MHP.  Get ready for an earful. LOL but you may also obtain some tid-bits of useful information about the park and/or neighboring parks.  If your new to this, you'll be surprised how much information the residents are ready to share with you.

* My best advice for newbies in Real Estate and Investing.  If you don't like meeting and talking to people, stop right here and get out of the business right now, your wasting your time!  This business is Face to Face and not Fa__book.

I know I've bounced around a lot in this post but please do a lot of research before you jump and ask yourself is this really for me?  If yes, and your thinking of taking a course being offered just keep in mind is this course in my best interest?  Google the Latin term "Cui Bono"

I hope that for some of you just starting in this area that my ranting here will open your mind.  The MHP game is not as easy and profitable as the Guru's lead you on to believe.

-ron

Ronald Bourgeois · Answer

Please define what you mean by; "too crowded" as in would be buyers vs opportunities?

Saturated Market?

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