All Forum Posts by: Russ Wallace

@Belinda Lopez One of the first items on my MHP development checklist was to investigate the quality of the new housing that's available today. I've toured mfg facilities for national brands and one-location companies that produce HUD and modular products. And I was surprised to learn a select few companies have prioritized quality over quantity. These mfrs use #1 and #2 grade framing lumber to build floors/walls/ceilings in jigs that yield panels with very tight dimensional tolerances. Some are even building HUD homes with 2x6 exterior walls, radiant barrier roof decking, a full house moisture barrier, low-e vinyl windows, extra roof/wall/floor insulation and high efficiency HVAC systems. And big money has taken notice. Marriott, Google and Equity Residential have all begun to embrace manufactured housing.

@JC K. You're correct; our decision to pursue developing a new MHP is based on demographic data and economic employment analysis (aka, base employment analysis) which, when coupled with other specific reference points, clearly indicates an opportunity. The cost to develop a pad depends primarily on the jurisdictional authority's land development ordinance (LDO). Some are carefully worded so as to make new development infeasible. But, all LDOs are not written in the same manner. My tip: spend enough time studying one to realize a narrative that can evolve into a concept which can be refined with continuous DCFA into a viable project. 

@Aaron Mazzrillo I disagree with the first sentence and agree with the second. First, real estate development (when done properly) is effectively a wholesale cap rate investment play. Why buy a ~30 year old MHP at a retail rate if a new one can be built for a wholesale rate? Secondly, DCFA will prevent that from happening. That's one of the reasons it's taken years to devise the strategy. Lots of impediments to eliminate, mitigate or incorporate, a practice based on another well-worn adage...."when eating an elephant, take one small bite at a time".

Recently attended the SECO (SouthEast Community Owners) conference in Marietta GA. Only two people out of appx 300 attending were interested in developing new mfd housing communities. I am one of the two. My reasons for pursuing this type project rather than another single family detached subdivision are too many to list. Suffice to say I've been involved with enough residential and commercial development to learn how NOT to shoot myself in the foot. And, over the past 5-6 years I've studied the subject carefully in an attempt to learn how to make a new mfd housing project viable. I believe I have devised a winning strategy. We will be self-financed, developing property that is zoned "by-right" for the intended use, using public water/individual septic tanks, constructing DOT spec roadways, installing concrete sidewalks and offering high-speed cable TV and internet service. Homes will be new 16x80s or 32x80s on 10,000 SF lots. And there are a few other key development/operational details I choose to not divulge. Plan to release civil engineering firm to start site planning process in early January. Entitlements will take 4-6 months so site work should commence early to mid-summer and first homes installed by early fall. Will be attending SECO 2018 to provide update on project in case anyone is interested.

Alex, I suggest locating an experienced commercial broker who specializes in industrial and/or flex space leases and is willing to work with a start-up business owner. They should be able to navigate the process of securing a satisfactory location without you having to do anything unnecessary, e.g, paying one year's rent in advance . Do yourself a favor; get competent help finding the right location so YOU can focus on the business being successful.

@Zachary Betters I have experience underwriting the development of single family residential subdivisions, manufactured housing subdivisions and manufactured home parks. A good starting point for assessing these type projects is compiling data on the county population, weekly wages, employers, housing inventory, rental rates, etc. This should help you determine whether an unmet demand opportunity exists. If so, hire a civil engineer to draw a sketch site plan and prepare an entitlements budget. The sketch plan will be used by a general contractor to prepare a development budget. The two estimates will be the basis of multiple pro formas which use alternative implementation strategies and will allow you to reach a "go", "no-go" decision.  

@Vin Powell I respectfully disagree with Charlie; everything isn't negotiable in real estate. For example, the investors and developers I work for will not negotiate representation. Either sign-on as exclusive rep for them or find another client. Second, dual agency effectively makes the broker a referee. My clients want a broker on their sideline, not in the middle of the field. Personally, I prefer exclusive representation work because it facilitates an opportunity to develop trust and confidence between client and broker. And by focusing on what's best for my clients, I no longer have to network for new business. I simply answer the phone when it rings. 

@Mark Layton I suggest the following for developing general knowledge: "A Field Guide to Commercial Real Estate Evaluation (The Site Book)", Richard M Fenker Ph.D; "Principles of Commercial Real Estate Underwriting", Mortgage Bankers Assoc of America, Dearborn Real Estate Education; "Fundamentals of Real Estate Appraisal", William L Ventolo Jr/Martha R Williams. If you're interested in group acquisitions of investment property, try "It's a Whole New Business (Real Estate Syndication)", Gene Trowbridge and "Investing in Retail Properties", Gary D Rappaport. For multi-family properties, try "Practical Apartment Management", Edward N Kelley. 

@Robert Lenfestey you shouldn't assume more homes can be added to the mobile home park (MHP) until you've confirmed same with the appropriate jurisdictional authorities. Many land development ordinances include "trigger" clauses that mandate improving the entire park in order to expand the existing footprint. This is how jurisdictional authorities effectively "kill-off" older MHPs (and discourage development of new ones). Improvements can include widening/paving all interior roadways (to DOT standards), adding off-street paved parking, adding street lights, up-sizing onsite water/sewer lines, and site topo alteration (to enhance stormwater management). Expansion can also mandate the inspection of current homes by the public health authority which could result in the loss of rental income due to a home being declared uninhabitable. If the RE broker you mentioned is acting as your rep, he/she will know all of this if they have experience with managing due diligence investigations of MHPs. And, they should be willing to compile the following due diligence information for your review: who is jurisdictional authority; what is current zoning district; when were onsite water/sewer lines installed; who owns (maintains) onsite lines; when were onsite water/sewer lines last inspected; does seller have copies of onsite water/sewer lines "as-built" plans; if seller doesn't have as-builts, can they be obtained from jurisdictional authority; does seller have clear title to all park owned homes (POH); who are POH manufacturers and when were homes built; etc. In short, you should thoroughly investigate the site before commencing investigation of the property's financial performance or potential acquisition financing options. You may discover CapEx issues that wreck the property's appeal/valuation thus negating further investigation. Good Luck.

@George Chen several years ago the Coldwell Banker Commercial "emerging broker training" program I took was top-notch. If it's still offered, it's well worth the time and expense. Four months of classroom and remote interaction learning skills by applying them in real time. Teams compete on assignments and students compete with classmates. There were VPs, broker/owners, newbies and seasoned pros from across the country in the class. The two students with the highest cumulative points total in our class received certificates covering the cost of a Certified Commercial Investment Member (CCIM) Institute Financial Analysis for Commercial Investment Real Estate class (CCIM 101). The trainers were highly successful instructors (with dozens of intriguing and motivational "war stories") who challenge you to become the best in whatever area of CRE you choose - investment properties, retail tenant rep, land development, etc. And I agree with Tyion; the CCIM four course curriculum is excellent financial/market analysis training that will "separate you from the herd".