George Allen / EducateMHC Blog Mobile Home & Land Lease Community Advocate & Expert

SOME OPPORTUNITIES FOR YOUR INPUT….

Ideas for 21ST Networking Roundtable Agenda & Presenters?

You Using Private Investors or P2P to finance home sales on site?

Last Chance! Volunteer to be a ‘New 18’ LLCommunity Pioneer?

Want a copy of the LLCTT 3 Step Plan for Takeover/Turnaround?

*****

Ideas for 21st Networking Roundtable Agenda & Presenters?

No other manufactured housing, and or landlease (f.k.a. manufactured home) community national venue, offers more education options (i.e. 24 topics and panels during two days), better interpersonal networking (i.e. ten social events for 200+/- registrants), and deal – making opportunities, than the annual International Networking Roundtable.

This year’s 2012 event is scheduled for 12 – 14 September at the Hilton Resort Hotel on Mission Bay in San Diego, CA. The 2 ½ day agenda of timely, cutting edge topics is being crafted NOW. If YOU have practical suggestions for topics and or presenters, communicate same to me, ASAP, via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or via email: gfa7156@aol.com

What’s already tentatively scheduled? Read this blog during the next few weeks to stay abreast of what’s going on, and to become truly excited about attending this year’s 21st annual Networking Roundtable. Even considering having a well known author and humorist on hand for the Thursday luncheon….

*****

You Using Private Investors, P2P, or P2B, to finance home sales on site?

Here’s the situation. For the most part, our ‘Big Four + 1’ independent, chattel (personal property) finance lenders and mortgage originators, are ‘dead in the water’ when it comes to financing in – landlease community home sales transactions! Sure, ‘financing’ is available, but only to credit – worthy borrowers with high credit scores – well above 600; certainly not the ones, oft with bruised credit, many of us are seeing these days. And, in my opinion, we’re not going to see this static situation change anytime soon. So, what might be practical alternatives during this impasse?

For starters, one ‘light at the end of the (finance) tunnel’, might be 21st Mortgage Corporation’s C.A.S.H. (‘Communities Affordable Spec Homes’) program, introduced here, in last week’s blog posting at this website. Did you read about it? If not, here’s the exciting new concept: ‘21st Mortgage Corporation will participate, with approved LLCommunity owners/operators, by purchasing new homes and siting them within their properties, at no cost to the operator.’ And there’s much more you need to know about the program. To do so, contact Lance Hull via (800) 955-0021 X 1218 or (865) 405-9121. You’ll likely be glad you did. And he’ll be at the NYHA Super Symposium III in Albany, NY., this week, 28 & 29 March (Phone 518/867-3242 to register!), as well as the Manufactured Housing Congress in Las Vegas @ 11 & 12 April. (Phone 703/558-0400 to register!)

Next. Here’re pithy questions and answers to consider, and maybe respond to this week. Are YOU presently using private investor funds, or P2P (peer – to – peer) & P2B (peer – to – business) – a.k.a., ‘crowd’ or ‘social funding’ to acquire homes, and or underwrite home mortgages on new and or resale homes, sold and sited within your landlease community(ies)? Why am I asking? Because a movement is already afoot, and has been established for awhile now, among sole proprietor and smaller property portfolio LLCommunity owners, to grow this ‘private finance’ concept, through education and communication – like what you’re reading here. For that matter, there’re some large property portfolio players who’ve already created their own in – house home finance programs, using equity funds they’ve raised.

In any event, once private investor funds are raised, two common approaches to applying them are 1) via lease – option transactions, in states where this methodology is acceptable, and LLCommunity owner is comfortable and compliant within the procedure; and, 2) via one or another ‘captive finance’ methodology, where home loans are effected under the auspices of a stand alone finance firm indirectly affiliated with the property owner, and mortgage servicing is handled by an independent, outside, financial services firm like Ken Rishel Consulting (217) 971-3968 (This is not a blanket endorsement, simply recognition that this sort of specialized service is very difficult to find in the manufactured housing industry).

In the meantime, what’s ‘peer – to – peer’ and ‘peer – to – business’ funding, P2P & P2B or ‘crowd’ or ‘social funding’ all about? Well, it’s when many investors contribute funds to finance one transaction (e.g. a manufactured home) at a time, often via common interest websites (e.g. prosper.com & lendingclub.com). The investment practice(s) are regulated by securities law, where prospectuses are filed, etc.. So, how’s this different from aforementioned ‘private investor funds’ – long in use by landlease community owners? Here, a private investor places savings, and or funds from a self – directed IRA account, into a transaction that stands on its own, e.g. one loan from one investor for one home purchased and or financed by the property owner, with investment ‘returns’ paid directly, over time, to the private investor.

Now, back to those two key questions: 1) Are YOU presently using private investor funds to acquire home(s) that’ll be seller – financed? And, 2) How ‘bout the similar, but newer alternative, referred to above as P2P and or P2B ‘crowd’ or ‘social’ funding?

With this blog posting, we’re launching an online, and in time, print effort to gather experiential information, successful and otherwise, to produce and distribute a Standard Operating Procedures (‘SOP’) of sorts, for landlease community owners seriously interested in ‘How to raise private investor funds, and via P2P & B2P’, for the purpose of filling vacant rental homesites! Also plan to identify additional resources providing independent mortgage servicing to firms engaged in any and all variations of self – finance (a.k.a. property owner finance) methodology, relative to manufactured homes in landlease communities. Anyone else out there into this (servicing) line of work, and or using private investor funds?

So, if YOU are into one or another aspect of using private investor funds, and P2P & B2P; and, routinely ‘service’ chattel mortgages on manufactured homes in landlease communities, contact Spencer Roane via (678) 428-0212 or via spencer@roane.com and or the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. When you contact Spencer, also know he’s knowledgeable and experienced in the use of the lease – option (Not ‘lease – purchase’), relative to manufactured homes sited in landlease communities, especially in the states of Georgia and Texas.

Spencer Roane, along with Ken Rishel, and ‘yours truly’, are participating in the NYHA’s Super Symposium III in Albany, NY., this week (Complete with Community Series Homes on display!). And all three of us will be panelists during either the National Communities Council Forum on 10 April, and or Manufactured Housing Congress on 11 & 12 April, in Las Vegas, NV. To register for any one, two or three of these seminal and timely national events, use contact phone numbers listed in an earlier paragraph of this blog posting.

*****

Last Chance to Volunteer as one of the ‘New 18’ LLCommunity Pioneers?

OK, we’re just about there! Each week, for the past three weeks, landlease community owners have been stepping forward to be one of the ‘New 18’ pioneers*1, committed to plan the future nature and direction of research and resource products and services utilized by LLCommunity owners/operators throughout the U.S. and Canada! We’re now at a dozen ‘New 18 pioneer’ businessmen and women. Should we count you, a landlease community owner, as being among this august body of our peers? If so, let me know soon, via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or via gfa7156@aol.com You’ll likely have to ‘leave a message’ as I’ll be in Albany, NY, the week of 26 March, attending and participating in the NYHA’s Super Symposium III. How ‘bout You? To get information and register, phone Nancy Geer via (518) 867-3242.

*****

Want a copy of the ‘LLCTT 3 Step Plan’ for Takeover & Turnaround?

Wow! We haven’t even made it to Albany yet (see previous paragraph), and folk are calling – in, wanting a copy of this stunning, one page summary of Lessons Learned during 30+ years of ‘taking over’ and ‘turning around’ troubled landlease communities!

As you learned here, in last week’s blog posting, I’ll be distributing a DRAFT copy of this unique, first time ever ‘handout’, at the Super Symposium III in Albany, NY. Once ‘back home in Indiana’, I’ll effect edits, reflecting critiques received from some of the 125+ LLCommunity owners/operators in attendance at the symposium, to make the ‘LLCTT 3 Step Plan’ even more applicable and valuable than it is today. And, unlike the DRAFT copy distributed to Super Symposium III folk in Albany, the ‘revised’ version to be distributed in Las Vegas, will feature an updated version of the highly popular ‘Ah Ha! & Uh Oh! Worksheet’ on the reverse side, likely using $64,000. as the ‘common denominator starting point’ for this unique, truly ‘affordable housing’ computation methodology.

Coincidentally, that $64,000. figure, is not only the ‘national average Area Median Income or AMI for year 2011’, it also ‘just happens to be’, according to the Wall Street Journal, the average price of a HUD code manufactured home during that very same year (2011)! How ‘bout that?

Next distribution will occur in support of a showcase panel presentation at the MHCongress in Las Vegas. Specifically, I’ll be moderating a panel comprised of three capable and experienced landlease community ‘turnaround experts’, between 2:45 & 4PM on 11 April. But you’ll need to be present at the panel presentation to pick up a copy of this finished work: the ‘LLCTT 3 Step Plan’, before, during, and after the ‘takeover’ and or ‘turnaround’ of any landlease community!

The third general distribution of this new PM (‘property management’) tool will occur for subscribers to the Allen Letter professional journal; as the new training handout, will likely be a lagniappe (freebie) enclosed in the May 2012 issue. How can YOU not want this handy form in your briefcase, ready for the next time you ‘takeover’ and or plan the ‘turnaround’ of a LLCommunity; and, need to clearly know what ‘housing price points’ will sell in particular local housing markets identified by postal zip code? Then, perhaps sometime in June or later, this terrific Lessons Learned one pager will be made available for general distribution to LLCommunity owners/operators nationwide.

*****

End Note.

1. The moniker ‘New 18’ is a nod to the ‘original 18’ landlease community owners who gathered, in Indianapolis, IN., on 8/31/1993, to take the first steps to ensuring appropriate and effective national advocacy, in behalf of their unique, income – producing property type. Result? Initially, formation of the Industry Steering Committee or ISC; then as of 1/1/1996, launch of what is now the National Communities Council division of the Manufactured Housing Institute. If you’re not already a direct, dues – paying member of this body, and own/operate one or more LLCommunities, phone (703) 558-0666 for information and to join.

***’

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

‘The LLCTT 3 Step’; ’18 New Pioneers’; & C.A.S.H. for Landlease (f.k.a. manufactured home) Community Owners!

I.

‘The LLCTT 3 Step’: Before, During & After, Takeover & Turnaround of any Landlease (f.k.a. manufactured home) Community, anywhere in the US

Will you be attending the National Communities Council (‘NCC’) FORUM and Manufactured Housing Congress in Las Vegas on 10 – 12 April 2012? If so, look me up, so we can ‘talk shop’ awhile! Seriously. To register, phone (703) 558-0400.

One of the sessions you shouldn’t miss, if you own or ever hope to own and operate a landlease (f.k.a. manufactured home) community is ‘Acquiring & Rehabilitating Distressed Properties’ panel presentation scheduled for 2:45 – 4:00PM on 11 April. Why? Two good reasons: First, the three panelists, Jamie Dougherty, MHM®, of Community Management Group, Greg Harmon, MHM®, of GHP Marketing, and ‘Mac’ MacClanahan, MHM®Master, of Indy Mac, are experienced landlease community turnaround owners/operators. So, if you’ve ever wondered ‘how to do it’ or ‘do it better’, sit in and learn from these capable, experienced, and motivated professionals.

Yet another reason? Finally, after having engaged in ‘property takeovers & turnarounds’, involving more than 1,000 rental homesites during the past 30 years, I’ve culled my Lessons Learned into a tri – part, 16 point, one page summary, that’ll be distributed only to those in attendance at this particular MHCongress session! Titled
‘The LLCTT 3 Step’ – short, for the ‘The Landlease Community (before, during & after) Takeover & Turnaround Three Step Procedure!’, it’s the most accurate, brief, clear, concise & complete (A nod to the ‘ABC-3 Rule of Effective Communication!’) description of this tactical process ever published! So, be present to pick up ‘your copy’!

II.

18 New Pioneers

Well, we’re getting close! Already a third of the way to identifying ‘18 New Pioneers’, all landlease community owners, who’ll make the aforementioned 27 February 2012 epiphany a reality!

Remember my sharing the personal and corporate epiphany experienced on 27 February 2012, while attending MHI’s annual Legislative Conference in Arlington, VA? The one where I recollected how

“18 years ago, it took 18 (then) MHCommunity owners, to convene, on
8/31/1993 in Indianapolis, IN., to get our asset class national advocacy (i.e.
today’s NCC division of MHI) movement started!”

And how today,

“On 27 February 2012, the quiet search began, for a ‘New group of 18
LLCommunity owners’…to ensure statistical research, property management
education, communication resources, networking and deal – making opportunities
continue for landlease community owners/operators throughout the U.S.”

Who are we seeking? Landlease community owner volunteers, from throughout the U.S., who believe the success of their business interests, in this unique realty asset class, depends on a healthy mix of personal and corporate management skills, national political advocacy (via the NCC); and, ready access to key data & helpful information – like ‘The LLCTT 3 Step’ described earlier in this blog posting, property management education & MHM® certification, regular print & online communication, as well as opportunities to engage in interpersonal networking & deal – making among peers!

More than a half dozen landlease community owners have already stepped forward, volunteering to be among the ’18 new pioneers’ (Compared to the 18 who did so 18 ½ years ago). So far the geographic spread includes property owners from the Midwest, Middle Atlantic States, and New England; with inquiries in from the Southeast, West coast, and Pacific Northwest regions. And it appears we have at least one woman owner in the mix as well. SO, if YOU own one or more LLCommunities, have a passion for this business model, and want to be part of manufactured housing’s recorded history, this is that ‘one chance in a career’ to be a change maker! Simply phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or (317) 346-7156, or email me today! GFA

III.

C.A.S.H. Program

Have you heard? There’s a new chattel (personal property) finance program afoot, the Communities Affordable Spec Home (‘CASH’) program, designed to ‘fill vacant rental homesites, in standalone landlease communities and or small portfolios, of this unique, income – producing property type’!

Yep; and here’s the exciting new concept: 21st Mortgage Corporation will participate, with approved landlease community owners/operators, by purchasing new homes and siting them within their properties, at no cost to the operator. Furthermore, 21st will cover all costs, including cost of the home, foundation, skirting, air conditioning, decks, steps, and other requirements necessary to prepare the home ‘for sale’. How so?

Once the new home is installed on – site, 21st will offer the home ‘for sale’, featuring an aggressive lending structure characterized by a reasonable down payment amount and rates, even for lower credit quality home buyers. The 21st program is made possible, by working with the owner/operator to allocate a portion of the monthly site rent, from this newly occupied homesite, directly to the principal balance of the new homebuyer’s home loan. This enables the new homeowner to realize an equity position they likely would not have been able to attain otherwise; in turn, likely ensuring loan performance and long term residency within the landlease community.

Yes, there are additional exciting details about this new and exciting program from 21st Mortgage Corporation. Suggest you contact Lance Hull via (800) 955-0021 X 1218 or (865) 405-9121 (mobile). Tell him ‘George told me to call!’
IV.

A Plan, based on accountability, to fix the manufactured housing industry!

Blogger’s Note. The following thoughts, lightly edited, were penned and submitted by Jim Carmichael, relative to ‘How we (might) fix the industry!’ Accordingly, therefore, “The biggest challenge is how do we get the message out, and motivate the right people (leaders) to implement it.” JC

“My plan is based around accountability at every level, in every sector, of the (manufactured housing) industry; from home manufacturing; to home finance; to the sale, set – up and move – in of the home buying customer.”

One caveat, at this point. ‘Does anyone think the S.A.F.E. Act and Consumer Financial Protection Bureau (‘CFPB’) regulations and enforcement actions will restore enough confidence in the secondary market to make a significant difference, or is this just part of the overall ‘challenge(s)’ facing the manufactured housing industry?’

With that said, “(Home) manufacturing standards must be set and loopholes removed, e.g. 2X4 exterior walls should be fabricated using actual 2X4 studs, not a 2X3 with three furring strip bands and Styrofoam.” And are we ready to ban particleboard floors from manufactured homes?

“Independent ‘street’ MHRetailers…must be licensed, from the general manager down to every sales person, as well as individuals responsible for home finance and ‘closings’.” This state – issued license should be in line with federal guidelines; maybe not as extensive as real estate salespersons and brokers licenses, but heady enough that licensees will think twice before risking relinquishing it for cause.

‘Finance – more complete auditing, no more padding deals with down payments, circa 1990s. But that appears to be covered via recent round of state and federal finance regulatory measures.”

“Set up permits to be required in every jurisdiction; use of only certified installers.” Regulatory groundwork is certainly in place for this, but state financing of enforcement mechanisms is not.

“Service, (Home) manufacturers and MHRetailers must be trained properly to do the work.” Plant visits should become routine and educational, rather than periodic fun junkets.

“Appraisers (of homes). Set forth standards requiring home valuations be based on more than just age and size of home, but also its’ condition inside and out”, as well as where it is sited, e.g. in a landlease community.

In conclusion, Jim asks: “How do we get the plan out, people on board, and implement it? I am reaching out for suggestions.” Got any? Let him know via this web site: www.community – investor.com

Do you pick up on the plaintiveness (as in mournfulness) off his plea? I surely do; and it’s far from being the first time I’ve read and heard similar frustrations ‘voiced over the years’; no, make that ‘over the decades’. I mentioned this once, recently, and guess it’s time to do so again

V.

Creative Finance Workshop scheduled in Chicago @ 15 & 16 May 2012.

If you market, sell, and self – finance new and or resale manufactured homes on – site, in one or more landlease communities, and haven’t attended this Captive Finance Workshop in the past, you should consider doing so! For that matter, if you’re considering implementing the practices described in the first sentence, it’s doubly recommended you attend. Why?

For starters, it’s the only such captive finance workshop presently being conducted in the U.S. MHI isn’t sponsoring any. Neither is MHARR. And certainly no one else! Furthermore, I’ve attended – and as happened when I took my real estate salesperson and broker licensure classes ‘years ago’, and George Porter’s MHInstallation class more recently, I walked away from Ken Rishel’s two day presentation a far wiser businessperson in the manufactured housing industry. Is that an endorsement? You bet it is!

Suggest you phone Rishel Consulting, via (217) 971-3968 and request additional information, maybe even register. And know what? You might see me there, as it’s high time to attend the workshop again, for refresher training, and to learn what’s changed (a lot!) on the financial regulatory front since the last session I attended.

***
End Note

MHI chairman Joe Stegmayer recently questioned why I regularly make the distinction of being a direct, dues – paying corporate member of the institute, presumably versus what that body refers to as its’ Certified Representatives – in their annual Membership Directory. Well, it’s really pretty straightforward. As the 20+ year owner of a manufactured housing – related business, I dig deep into my figurative pocket each year to pay dues (real money) directly to the Manufactured Housing Institute, in addition to what I pay to belong to more than one state MHAssociation. I’ve simply found it troublesome, to sit in meetings with some CRs, who treat their ‘seat at the table’ in a disingenuous fashion (i.e. ‘lacking in frankness, candor or sincerity’), take the importance of their role for granted, and even the event proper, little more than as an employment ‘benie’. Of course this is not true of all Certified Representatives.

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156 & gfa7156@aol.com

27 February 2012 Fallout Continues; an Emerging Trend;
& Much More….

I.

Sampling of Peer Response to Last Week’s Blog: ’27 February 2012 akin to 27 February 2008 & 2009?’

Here’re a few of the near immediate responses to our blog posting of 4 March:

“As always, your weekly blog postings are tremendously helpful and informative. This past Sunday’s (3/4/12) was particularly good, as those of us who were unable to attend the MHI Legislative Conference appreciate the updates and information sharing. As to your epiphany, and search for the ‘new 18’, you are absolutely right! It is critical we support your ongoing efforts to ensure we have data, communication, and numerous other services and resources you unselfishly provide our industry in the long – term. I’m available to assist you in identifying how we seamlessly transition to the next provider(s) of these critical services, once you decide to phase into retirement. Thanks again for everything you do for us.” A Pacific Northwest businessman. (No edits. GFA)

“Good post George. Obviously you can count me among the ‘new 18’ – if you feel I can contribute. And ‘formerly known as’ or ‘f.k.a.’ better describes the trade term transition from ‘manufactured home community’ to ‘landlease community’.” A Middle Atlantic states LLCommunity owner/operator.

And this. “I’ve copied (your blog posting to) a couple friends, since I’m not sure my instinct is correct. But here it is: ‘It appears all manner of things continue to get in the way of ‘How to Save Our Industry?!’, and we/the industry just continue to accept the state of affairs. And Okay George, you say we need the DC (advocacy) experience in lobbying, to deal with legislation and regulatory matters. Perhaps the reality is that DC cannot save us! We will, as an industry, be saved by producing and selling products that fit our customer’s needs and their ability to buy, period. Financing will, in time, fix itself; especially when we assure (product) quality, and service to our customers. Sounds too simple, I suppose, but this continual delay just plain ‘ain’t right’!” A Midwest businessman.

Bottom line? As I penned earlier, the MHInitiative® is ‘on hold’ for now, as we give Dick Jennison, MHI’s new president and CEO, “…space and opportunity to ‘learn our various business model(s)’; then address this (if still) timely and potentially fatal issue.” – that of ‘How to Save Our Industry?!’ GFA

II.

A Word about that ‘Wholly Unexpected Personal & Corporate Epiphany!’

The epiphany? “18 years ago, it took 18 (then) manufactured home community owners, to convene, on 8/31/1993 in Indianapolis, IN., to get their realty asset class’ national advocacy movement started!’ AND “As of today, 27 February 2012, I begin the quiet search for a ‘new 18’ veteran and successful landlease community owners, motivated and capable of ensuring their property owner/operator peers, large and small, throughout the realty asset class, have sufficient statistical data, educational opportunities, communication resources, networking and deal – making opportunities, now and into the future!” GFA

Within 24 hours of the Sunday blog posting, several landlease community owners stepped forward, via phone and email messages, volunteering to be among the ‘new 18’!

So, if YOU own one or more landlease communities, and are willing to commit, as these businessmen and women have, to meet later this Spring, and begin the planning process, to ensure the future of products and services needed in the everyday operation of our unique income – producing properties, as well as enhancing our industry’s reputation as a primary source of Affordable Housing, and our communities’ Lifestyle, let me know via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or email.

Frankly, I’m already humbled by the quality and character of landlease community owners who share this similar – but – different vision, from the one embraced by 18 forebearers, nearly 18 years ago! Will YOU be one of the ‘new 18’? I hope so.

In the meantime, know that the ‘original 18’ are already part of the recorded history of our industry and asset class, having been identified for posterity in the books: How to Find, Buy, Manage & Sell a Manufactured Home Community, in 1998; and recently in Landlease Communities, Manufactured Home Communities, Mobile Home Parks, Trailer Courts & Camps, and Affordable Housing, in 2011. For a list of their names, read End Note # 1. The question now is, will your name, in time, also become part of our industry and asset class’ recorded history, as preservationist of landlease community data, resources, communication, education, networking, and deal – making?

III.

An Emerging Trend?

It went public on 2 February 2012, when Ms. E. Dickens of the Manufactured Home Owners’ Association (‘MHOA’), at a Congressional Hearing – convened to examine WHY the Manufactured Housing Improvement Act of 2000’ hasn’t been fully implemented by HUD, unexpectedly slammed landlease (f.k.a. manufactured home) community owners/operators, for a variety of perceived affronts relating to rent increases and other matters. Ms. Dickens blatantly abused her member status, on HUD’s Manufactured Housing Consensus Committee (’MHCC’), to mount this bully pulpit in behalf of tenant rights, or as she seemed to view them – a lack thereof; a topic completely afield from the stated purpose of the Congressional Hearing.

Anyway, ‘the word’ out and about in Washington, DC., during MHI’s recent Legislative Conference was, with the retirement of Congressman Barney Frank, long a supporter of ‘manufactured housing – as – affordable housing’, tenant activists would likely no longer be held at bay, and could be expected to launch new initiatives against perceived abuses by the industry and realty asset class. Is this true? Only time will tell.

But in the meantime, a word of advice. Now is as good a time as any, to take a good hard look at all one’s landlease community operations! While doing so, pay special attention to the professional property management tenet: Ensure Good Resident Relations! Remembering though, that is just a third of the whole; where the ‘Six Rs of Good Resident Relations’ include Good Resident Relations = More Resident Referrals = Maximum Resident Retention! Is this being practiced at all your properties?

We have this opportunity to stop the threat of an emerging trend in its’ tracks. Is your business worth preserving, by taking the appropriate professional property management steps, at all levels, and among all on – site functions, to set matters aright? If your on – site and regional property managers have not yet been trained and certified as Manufactured Housing Managers® or MHM®s, now might be the time to ‘get the job done’! For more information, use the aforementioned MHIndustry HOTLINE. For that matter, are your rental homesite rents truly in sync with rental rates charged by other multifamily rental properties in each of the local housing markets your properties serve? If you don’t know how to do this, let me know….

IV.

f.k.a. does a better job than a.k.a. and completely eliminates ‘nee’….

Huh? Maybe you should reread last week’s blog posting tidbit on this subject. But then, it’s easy enough to ‘splain’ once again.

For a long time I introduced newsletter, book, and blog readers to the timely segue from ‘manufactured home community’ to ‘landlease community’, in trade terminology, by penning: landlease (nee manufactured home) community, the first time used in a narrative; then, from that point onward, simply ‘landlease community’, even ‘LLCommunity’.

Well, at MHI’s Legislative Conference in late February, chairman Joe Stegmayer (also CEO & chairman of Cavco Industries, Inc.) pointed out to me, ‘nee’ is an incorrect word choice (Go ahead, look it up; it’ll be worth the effort), and recommended I switch to a.k.a., as in ‘also known as’. Initially that sounded and read ‘OK’, but the more I thought about it, I knew a word was needed that suggested ‘manufactured home community’ was passé, and not just ‘also known as’.

Soon after last week’s blog was posted, as you already saw in one of the samplings quoted earlier in this blog, alternatives started arriving, namely f.k.a. (formerly known as) and p.k.a. (previously known as). Well, I’ve opted, as stated earlier, for f.k.a. to replace both a.k.a. and nee. End of story.

V.

The Young Turks, as in ‘the young and the restless’

Was prepared to conclude this blog posting, by introducing a new asset class trade term: the Young Turks. This won’t come as a surprise to long time readers, who’ve been introduced to Young Lions (i.e. Aggressive property consolidators & or portfolio builders) in past editions of the annual ALLEN REPORT (a.k.a. ‘Who’s Who Among Landlease Community Portfolio Owners/operators Throughout North America!’*1); even the Daring Dozen, a ‘bakers dozen’ of new investors, from nearly a decade ago, who started their LLCommunity firms during the most difficult of economic times – and today, only a few of whom continue in this business model

But I’ve decided the time isn’t quite right for this introduction. For that matter, if I wait awhile longer, I’m confident there’ll be additional names to add to this list of ‘the young and the restless’. Will give you a hint though: they differ from their present employers – often pioneers in our asset class, and who’ve often been their mentors, in several significant ways. The clue? With one notable exception, a lack of formal real estate and professional property management training and credentials.

*****
End Note.

1. The ‘original 18’: Jeff Kellogg; Randy Rowe; Gary McDaniel & Jim Grange; Jerry Ellenburg & Scott West; Thomas Horner, Jr.; Martin Newby (retired) & Dick Leiter; Ron Richardson: Bill Williams; Kamal Shouhayib; Lynwood Wellhausen (retired); Bill Geary, CPM; Martin Lavin; Eugene Landy; Brian Fannon, CPM; Ed Zeman; and, George Allen, CPM – the 19th & organizer.

2. To order the 23rd annual ALLEN REPORT (distributed 1/1/2012), subscribe to the Allen Letter professional journal for only $134.95/year (12 monthly issues) and receive it for FREE; or, buy said report for $134.95. Call the MHIndustry HOTLINE cited earlier.

27 February 2012; akin 27 February 2008 & 2009?*1

MHI’s Legislative Conference, NCC Division Meeting & the MHInitiative®

‘a.k.a.’ replaces ‘nee’; a wholly unexpected personal & corporate epiphany;

&, How to know whether a landlease community owner/operator is, by dint of rental homesite count, a small, medium – sized, or large scale participant!

I.

MHI’s Legislative Conference, NCC division meeting, & the MHInitiative®

First the numbers, then substance; followed by items covered & to be covered.

According to MHI’s Legislative Conference & Winter Meeting official list of attendees, there were 79 registrants, not counting MHI staff. Of this number, 17 were state MHAssociation executives; and 62+/- businessmen and women, of whom 16 were landlease community owners/operators, a dozen or so lenders and financial service representatives, eight HUD Code home manufacturers, and several MHRetailers.

Following Monday (2/27/2012) morning’s breakfast buffet, a general session featured presentations by the Honorable Carol Galante, acting commissioner of the Federal Housing Administration & Assistant Secretary for HUD; Tom Davis, Director of Federal Government Affairs for Deloitte & Touches, LLP; and the Honorable Judy Biggers, chairman of the House Financial Services Subcommittee on Insurance, Housing & Community Opportunity (One of two members of Congress who hosted the 1 February 2012 Hearing on the Manufactured Housing Improvement Act of 2000). Luncheon speaker was Mark Calabria, Director of Financial Regulation Studies, CATO Institute, a think tank in Washington, DC.

The National Communities Council (‘NCC’) division met from 2:30 – 4:15PM that day. There was a dozen NCC board members, all landlease community owners/operators present, plus a couple more in the audience. It was announced SUN Communities, Inc., rejoined MHI/NCC, so their CEO, John McLaren was proffered an invitation to serve as this year’s vice chairman of the council. Following the passing of the chairman’s gavel from Steven Schaub of YES! Communities to David Lentz of American Land Lease, the latter shared his thoughts on

• Importance of providing value, and a good customer experience, to homeowner/site lessee residents of our landlease communities

• Commonality of business interests among large and small owners of landlease communities

• Need for unity among NCC members, decrying what he views as self – serving decisions of the few, hurting the majority.

The remainder of the meeting agenda included a description of the 2012 NCC Forum prior to this year’s MHCongress in Las Vegas, NV., and briefings as to various federal legislative issues, particularly the MHCC Fire Sprinkler Position relative to landlease communities.

What else was covered? While not on the meeting agenda per se, it was noted that ‘lease option’, one of a landlease community owner’s self – finance methodology options, briefly discussed at MHI’s annual meeting in Phoenix during October 2011, will be one of the topics featured at the aforementioned NCC Forum this Spring. And the CAS Task Force, named at the aforesaid annual meeting, has not been forgotten, but will be supplemented with representatives from finance firms. Marc Lifset, esquire, briefed the board on the ‘manufactured housing de – titling efforts’ of the National Conference of Commissioners on Uniform State Law – apparently at a ‘stand still’ for the time being. MHI staff was encouraged to see if a landlease community owner/operator member of the NCC could be named to the ‘working group’ being formed by Congresswoman Judy Biggert, pursuant to further attention paid to implementing the Manufactured Housing Improvement Act of 2000. Finally, Steve Adler, an MHEI board member, presented that body’s request for guidance, as to what should be included in a new PHC® variant designed to teach ‘How to Sell Manufactured Homes within a Landlease Community!’

What wasn’t covered, but will likely be so, in the future? In the National Electric Code, 2011 edition, page # 70-489 (para. 550.32 Service Equipment) there’s a paragraph that reads in part:

“The mobile home service equipment (electrical pedestal) shall be located adjacent to the mobile home and not mounted in or on the mobile home. The service equipment shall be located in sight from and not more than 9.0m (30 ft) from the exterior wall of the mobile home it serves.”

Know what? This provision dates back to the early days of our industry (1970s), when manufactured homes were indeed ‘mobile’, and electric pedestals provided for relative ease and safety, when connecting and disconnecting electric power to ‘mobile homes’. There’s little to no reason to continue this archaic practice, as 95% of today’s homes are characterized by one site installation. Steps can be taken to have our contemporary manufactured homes treated as site – built homes, and said electric power brought into the home via service equipment affixed to the side of the home; or, as is more often the case these days, underground, removing eyesore electric pedestals from landlease communities once and for all! How to effect this change? Have a knowledgeable manufactured housing industry representative (including the possibility of a landlease community owner/operator) become a board member of the administering body, OR recruit an existing board member to ‘carry our coals to Newcastle’ – and there is such an individual in place. Bottom line? It appears this matter will finally be given explored.

MHInitiative®. As regular readers of this weekly blog posting know; I attended this year’s Legislative Conference, primarily to see whether MHI elected and salaried leaders would tackle the timely question, ‘How to Save Our Industry?!’ This remains a sensitive issue for many of us. But given the recent hiring of Dick Jennison, as president and CEO of MHI, it’s reasonable to give him space and opportunity to ‘learn our various business model(s)’; then address this (if still) timely and potentially fatal issue. GFA

And, if you aren’t presently a direct, dues – paying member of the Manufactured Housing Institute, and or it’s National Communities Council division, contact Lisa Brechtel via (703) 558-0666 to request membership information, and for the upcoming NCC Forum at the annual MHCongress in Las Vegas, NV., in early April 2012.

II.

‘a.k.a.’ replaces ‘nee’!

Yep, it’s as simple as that! Somewhere along the journalistic line, I came to believe using ‘nee’ in the following fashion, to be correct. It isn’t. For example: landlease (nee manufactured home) community. The correct rendering? Landlease (a.k.a. manufactured home) community. Frankly, a.k.a. doesn’t quite get the job done though, as I was seeking a word that communicates the modified word (i.e. manufactured home) is, or is about to become, passe’, or used less frequently than in years past. Suggestions anyone? In the meantime, I’ll go with landlease (a.k.a. manufactured home) community. Thanks to Joe Stegmayer, former college English teacher, present MHI chairman, as well as chairman & CEO of Cavco Industries, Inc., for that apt observation and correction! GFA

III.

A Wholly Unexpected Personal & Corporate Epiphany!

And that’s what it was; “a sudden, intuitive perception of, or insight into reality…often initiated by some simple, commonplace occurrence”, truly an epiphany. Webster’s Dictionary.

It was Sunday afternoon, 26 February, hours before leaving my hotel in Arlington, VA., to participate in MHI’s Manufactured Housing Educational Institute board of directors meeting. I was sitting there, quietly planning for the upcoming Legislative Conference and aforementioned NCC meeting, when all of a sudden, the following recollection and inspiration occurred to me:

“18 years ago, it took 18 (then) manufactured home community owners, to convene, on 8/31/1993, and get their realty asset class’ national advocacy movement started! And here we are 18 years later, and that ‘mid – 1990s, REIT formation – driven initiative’, appears to maybe be at an impasse, given that only 16 (now) landlease community owners/operators are in attendance at this year’s MHI Legislative Conference – and only one of those can be numbered among the original 18 Industry Steering Committee (‘ISC’) members! The good reality however, is that we do indeed have trade and advocacy representation in Washington, DC, via MHI’s NCC division.” GFA

Here’s the epiphany.

“As of today, 27 February 2012, I begin the quiet search for a ‘new 18’ veteran and successful landlease community owners, motivated and capable of ensuring their property owner/operator peers, large and small, throughout the realty asset class, have sufficient statistical data, educational opportunities, communication resources, networking and deal – making opportunities, now and into the future!” GFA

At this juncture, let me be clear; we’re NOT talking about national or regional political and regulatory agency ADVOCACY here! The epiphany is simply a logical means by which to ensure, along with the planned academic research emphasis of the Center for Manufactured Housing Research – and Affordable Housing, that perennial ALLEN REPORTs, Manufactured Housing Manager® professional property management training & certification, subscriber – supported monthly newsletters & Signature Series Resource Documents (‘SSRD’), weekly Official MHIndustry & LLCommunity blog postings, and annual International Networking Roundtables and periodic FOCUS Groups continue, rather than cease, when I bring my working career to an end during the next couple years. Previous attempts to merge with other bodies have failed, so this is a new and quiet beginning to ensure adequate resources for our asset class on into the future.

If you’d like to talk about this matter further; better yet, express sincere personal interest in being one of the aforementioned ‘new 18’ veteran and successful landlease community owners, motivated and capable of ensuring the future of our asset class in the manner just described, contact me via: GFA c/o Box # 47024, Indianapolis, IN. 46247 or the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

IV.

How to Know Whether a Landlease Community Owner/operator is, by dint of rental homesite count, a small, medium – sized, or large scale participant!

As you likely know; more than 23 years ago, the decision was made, that to be identified as a landlease community portfolio owner/operator, a sole proprietor, partnership, or corporation, would have to own and or fee – manage five such properties or 500 rental homesites. This remains the ‘portfolio qualification standard’ to this day, relative to the aforementioned ALLEN REPORT and other research documents.

Then, 15 years ago, this question was posed, ‘What are the individual and corporate – owned landlease community investment categories, within this unique income – producing property type?’ Well, that wasn’t as easy to delineate, but past and present practice goes like this:

• An Institutional &/or Investment Grade Landlease Community usually contains 175 – 200+ rentable rental homesites

• A Young Wealth – Builder Landlease Community is characterized as being 75 or 100 to 175 or 200 rentable rental homesites in size.

• A Mom & Pop – sized Landlease Community generally features 100 and fewer rentable rental homesites. This category constitutes about 85+/-% of our national inventory of this unique, income – producing property type.

Now, we turn our attention to the question about how to best differentiate among small, medium – sized, and large scale property portfolio owners/operators of landlease communities. Here’s what we’ve come up with to date.

Collectively, 10 to a maximum of 499 rentable rental homesites, in one or more landlease communities in one property portfolio, describes a small owner/operator.

Collectively, 500 – 2,000 rentable rental homesites, in one or more landlease communities in one property portfolio, describes a mid – sized owner/operator.

Collectively, 2001+ rentable rental homesites, in one or more landlease communities in one property portfolio, describes a large scale owner.

Now you know. Furthermore; if you have an opinion, or refining thoughts, on this subject, and are willing to share it; please let us know.

*** End Note: 1. 27 February 2008 & 2009 refer to the first two National State of the Asset Class (‘NSAC’) caucuses, held respectively in Tampa, FL., and Elkhart, IN., on those identical day/month dates in those consecutive years. See earlier blog postings for detailed descriptions of historic measures that came from both events.

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

Here’s What Your Peers Have to Say About MHMatters Today!

Collage of Observations and Opinions from Various Segments of the HUD Code Manufactured Housing Industry & Landlease Community Asset Class

I.

An MHIndustry business owner reacting to Richard Cordray’s (Director of the Consumer Financial Protection Bureau or CFPB) ‘Happy New Year’ request to consumers to ‘Tell us your (horror) story’ about the costs and risks of borrowing on credit. CM writes: “I’d like to send him (Cordray) some pictures of the trashed homes we’ve taken back, and see if he might also be interested in protecting some of us lenders from the fine Americans who ruin a perfectly clean and attractive place to live.” Lesson to be learned? There are indeed, always two sides to the story!

II.

Remember the uproar, mostly from landlease community owners/operators, when a tenant activist slammed our asset class during unchallenged testimony before the Congressional Hearing on 1 February? Well, here’s one attorney’s reaction to the sorry matter: “As a lawyer representing 100s of LLCommunity owners during the past three decades, this misinformation and distorted view not only cripples political and PR efforts, but from a legal perspective, influences judges and juries to assign liability to property owners, and sock them with undeserved damage awards. Rather than assigning blame for ‘being asleep at the switch’, let’s get MHI to afford us an opportunity to supplement the record, if possible, and develop other outlets, to get our message across. Much of that ‘testimony’ was demonstratively false…and ‘spun’ in completely misleading fashion.” RC
III.

Thinking back to the recent blog: ‘Four Ways to Restore Affordability’ to Manufactured Housing & Landlease Communities, here’s a ‘fifth way’ that’ll ‘knock your socks off’, figuratively speaking of course – for now. From an insurance executive ‘with his hands in the LLCommunity business’: “Here’s a 5th way to restore affordability! What Chinese manufacturing interests have done to the U.S. steel industry, that nation is about to do to the manufactured housing industry. Supposedly, the Chinese, within the next 12 months, will introduce 16X80 ‘metal on metal’ homes here, for about $12,000.00 apiece. Don’t know anything about the roof composition, but the interior will not feature plastic sinks and faucets, and all water lines will come equipped with cut offs. At that price, homes become very affordable.” JZ

IV.

And this from a blooger fan: “George, your determination and persistence reminds me of a quote I heard attributed to the author Jack London: ‘You can’t wait for inspiration. You have to go out after it with a club!’ And this related observation from a retired MHIndustry executive: “Your ‘aggressions’ are well – crafted and much needed. The industry will continue to shrink and suffer until the parties get together to make it better! Silence, lack of cooperation, and non – participation are the enemy. Perhaps this next generation lacks the hunger and interest in our loyal customers that we had? NB

V.

And we do have deep thinkers out there amongst the masses: “…the key to recovery for our industry is accountability. From manufacturing to the MHRetailer, then finally to the consumer. This alone will make (chattel) financing more readily available, because the secondary market for the ‘paper’ will open accordingly. No matter how nice the home, no matter how nice the LLCommunity, if we don’t find a way to make our ‘paper’ more marketable on the secondary market, financing will remain the key sticking point for homebuyers. Currently one company dominates the chattel finance sector because they can afford to do so. I cannot be in Arlington, VA., on the 27th (i.e. MHI’s Legislative Conference), but if there is a meeting in Chicago this Spring, I would like very much to attend!” JC
VI.

So, are you one of those who think the overall housing market is opening up and improving measurably? Well read the following and think again. An email communiqué from Portland Cement Association. Title? ‘Despite Improvement to Economy, Foreclosures Continue to Drag Down Housing Starts’ & ‘Processing delays create large ‘shadow’ inventory of foreclosures.’ OK, here goes: “Home foreclosures decreased dramatically in 2011, but industry experts are cautioning that this is not a reflection of improvements in the housing market, but a result of legal, process and ‘robo – signing’ issues. For example: ‘the 1.9 million foreclosures reported in 2011 is understated by more than one million, due to the processing delays…that are pushing foreclosures into 2012 and maybe even 2013. This is resulting in excess housing inventories and continues to drag down housing starts.’ And the PR goes on, but you surely get the idea.

***

Watch next week’s blog posting for a report on what happened and didn’t happen at MHI’s Legislative Conference in Washington, DC., 26 – 28 February 2012.

George Allen, CPM®Emeritus, MHM®Master, Consultant to the Factory – built Housing Industry & The Landlease Community Real Estate Asset Class. (317) 346-7156

Lest we forget….

‘Will MHInitiative®’s ‘How to Save Our Industry?!’ Challenge to the Manufactured Housing Institute, be Aired at its’ Legislative Conference in Arlington, VA., on 26 – 28 February 2012?’ GFA

Recalling recent manufactured housing & landlease community history….

The MHInitiative® movement (nee National State of the Asset Class caucuses or NSAC caucuses) began 2/27/2008 at the Fountainview Estates landlease community in Tampa, FL., when 100 property owners/operators convened, from across the U.S. to spend a day discussing their collective business experience in the face of a rapidly declining market for HUD Code manufactured homes. Result? Five Action Areas that continue to guide the realty asset class’ business model this day.

The following year, a mix of 100 HUD Code home manufacturers and landlease community owners/operators met at the RV/MH Heritage Foundation’s Hall of Fame, Museum and Library facility in Elkhart, IN. This time around, the joint goal was to ascertain what LLCommunity owners sought in new home design and price, to make it attractive and enticing to order new homes from the factory, something rarely done in years preceding; and, from the owners/operators point of view, answer the question, ‘What can and will you do to earn our business?’ Result? A new home design concept now known as the Community Series Home or CSH; and, appointment of nearly three dozen Business Development Managers, by these manufacturers, to specialize in marketing their housing product to LLCommunity owners/operators throughout the U.S.

Then followed two years with no MHInitiative® caucus. Why? First, it took time for the industry and asset class to digest and, partially implement the aforesaid advances, e.g. Five Action Areas, CSH homes, and BDMs. And frankly, it was hoped our national elected and salaried leaders would imitate this successful national forum, at its’ annual Manufactured Housing Congress in Las Vegas, or during one or more national meetings hosted by the Manufactured Housing Institute (‘MHI’). Well, neither venue was utilized for that purpose.

So, during the 20th annual International Networking Roundtable in San Antonio, TX., this past Fall, the notion of a MHInitiative® caucus was discussed. Focus of such an event? To discuss, brainstorm, and effect a plan regarding ‘How to Save Our Industry?!’ And in recognition of successes already achieved on two previous 2/27 dates, the third MHInitiative® caucus was tentatively scheduled for 2/27/2012. When preliminary ‘notices of intent’ were distributed to MHIndustry & LLCommunity businessmen and women, 150+/- committed to participate! However, it was learned this would also be the date MHI planned to host its’ annual Legislative Conference in Arlington, VA.

But that was OK. While the previous three MHI national meetings attracted barely 100 participants apiece, it was felt this might be an even better, intra industry segment forum at which to finally discuss, collectively brainstorm, and jointly effect a comprehensive plan regarding ‘How to Save Our Industry?!’ And there’s precedent of sorts, for such an MHI meeting, recalling a past working session in New Orleans, Louisianan, when (I believe) Barry McCabe was chairman. So, the third MHInitiative® caucus was postponed for the time being; to see what, if anything, materializes from the MHI meeting on 2/27/2012, actually 2/26 – 28. And, that’s where we are today, 2/19/2012, one week away from what could be a pivotal day in HUD Code manufactured housing history.

How and why pivotal? At least three salient reasons. First; the five month top salaried leadership position hiatus has apparently come to an end, with the hiring of Richard A. Jennison, as president and CEO of MHI..*1 Second; what proactive steps have been, and will yet be taken, by MHI in general, and its’ National Communities Council (‘NCC’) division in particular, to mitigate image and reputation damage to landlease communities nationwide, effected by a tenant activist’s testimony, on 2/1/2012, at the Congressional Hearing re the ‘Manufactured Housing Improvement Act of 2000’? And thirdly, having just learned the industry experienced, in 2011, its’ third year in a row of only 50,000+/- new homes shipped (Down from 372,843 in 1998) – in the minds of some, if not many, direct, dues – paying members of the institute; what will MHI definitively do to address, ‘How to Save Our Industry?!’ If not at this meeting, when and where, if ever?

Frankly, the answers to the last two questions will serve as proverbial ‘handwriting on the wall’ indicators, relative to where and how our industry and asset class accesses the road to ‘survival & recovery’ as a viable source of new, affordable housing; or we continue on the now decade – long path of decline to worse….Possible alternatives?

For starters, when and where to convene the postponed MHInitiative® caucus. Already some are suggesting Chicago later this Spring or early Summer. It’s easy to travel to, is home to more landlease community portfolio owners/operators than any other city in the world, and is within easy driving distance from Elkhart, IN., the birthplace of manufactured housing! To ensure your name is on the list of 150 already committed to attend, or seriously desire to add your name to it, send contact information via gfa7156@aol.com, or phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633.4764.

And, as you likely know, there’ve been repeated calls of late, from other reaches of the industry, to realign and reorganize advocacy efforts in our nation’s capitol. Specifically, to see the HUD Cod home manufacturing/distribution (i.e. ‘company stores’) segments of the manufactured housing industry (i.e. Home manufacturers large and small!) finally unite, to move forward on their own. This leaves ‘everyone else’ to hopefully reconstitute, or if need be, form a new advocacy body, that’s either inclusive of ‘all other segments’ of the manufactured housing industry, including landlease community owners/operators; OR, see that real estate investment segment finally ‘come into its’ own’, and like the National Apartment Association and other similar advocacy bodies, focus on advancing the interests of member income – producing property types.

An important disclaimer! Other assertions to the contrary, I have NO desire or interest in heading or leading an existing or new national trade or asset class advocacy body! My oft stated goal is to at least semi – retire during the year or two ahead, to pursue other interests. My hope is this will occur via a new, national, not for profit, quasi – academic center for manufactured housing studies and affordable housing. If this does not materialize however, I have no intention of leaving my landlease community peers and colleagues in the lurch, by ‘pulling the plug’ on 30+ years of research and service on their behalf, via GFA Management, Inc., dba PMN Publishing. And if necessary, we’ll cross that bridge together, when we get to it. GFA

Now, harkening back to the title of this week’s blog posting, ‘Lest We Forget…’; where do YOU stand on these timely and key industry and organization – related issues? As is oft said, ‘Inquiring minds would like to know’, and this weekly blog posting, now reaching out to nearly 600 MHIndustry & LLCommunity businessmen and women, as well as elected and salaried leaders, is offering YOU this opportunity to share your thoughts, opinions, frustrations, and the like….Better yet, be in Arlington, VA., on 2/27 to participate in either ‘making history’ regarding our mutual business interests; or leave there understanding, once and for all, why we’re in the decade – long state of business malaise we’re in; and, unfortunately, will likely remain so, for some time to come. To register, phone (703) 558-0666.

End Note.

1. In part, quoted from MHI’s Press Release: Jennison comes to MHI from Omni Solutions Group (a.k.a. Omni SG), founded in 1995, and headquartered in Montgomery Village, MD. For the past couple years, he was partner and Senior Vice President for Marketing and Business Development, overseeing and managing the firm’s substantial not – for – profit ‘tech support & IT services’ business practice. For nearly eight years before joining Omni Solutions Group, Jennison was president and CEO of the Brick Industry Association (‘BIA’).

***

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 4624 (317) 346-7156

Immediate Affirmation of ‘Four Ways to Restore Affordability’ to

Manufactured Housing & Landlease communities!

***

I hadn’t even turned off my PC, after sending this week’s BEBA (Blast Email Blog Alert) to 500+ recipients, when positive responses started arriving, & have kept coming – even today, three days later, as I post this special mid – week blog. Talk about striking a responsive nerve!

***

So, what’s the excitement about? If you’re reading this blog posting for the first time, my advice to you is to STOP RIGHT HERE, and scroll back through the previous two weeks of blog postings at this website (community-investor.com), to bring yourself up to date regarding the first practical plan designed to SAVE OUR (manufactured housing) INDUSTRY! And this isn’t ‘just my opinion’ either; it’s overt enthusiasm shared by businessmen and women across the U.S. today! The only question is, Are YOU paying attention, MHARR & MHI? (These are manufactured housing’s two national advocacy bodies, domiciled in our nation’s capitol.)

Moving forward and by way of brief review, the gist of this week’s blog posting, Sunday, 12 February, involved four major segments of the HUD Code manufactured housing industry taking simple but major steps to Restore (housing) Affordability to the industry and its’ landlease community real estate asset class.

1. 80 percent of all new HUD Code manufactured homes are built and shipped by two firms, both direct, dues – paying members of MHI. They’re challenged to switch emphasis from ‘big box = big bucks’ multisection and humongous singlesection homes, to Community Series Homes (i.e. CSH = smaller multisection & singlesection homes with durability – enhancing features), to fill an estimated 250,000 vacant rental homesites across the U.S. Also, price these homes ‘affordably’, and ‘keep score’ by counting new homes ‘sold’, not just the ones they’ve shipped – finally breaking 60 years of ‘trailer sales’ tradition!

2. Independent ‘street’ MHRetailers and ‘company stores’ number fewer than half that were in business ten years ago. They’re challenged, once and for all, to shed their 60 year business model of ‘hawking units like car dealers’, and begin marketing and selling new homes as Realtors® do. However, without an adequate supply of accessible chattel (personal property) capital for originating new and resale home loans, little will change, and business survival will be questionable.

3. Independent, third party chattel lenders face a tricky conundrum. They’re challenged to ensure mortgagor customers aren’t buying more home than they can afford; and, at the same time, to revamp loan origination and underwriting, restoring ‘household/utility expenses, but not telecom services’ back into the traditional 30% Housing Expense Factor (‘HEF’). Admittedly, not an easy break with a lending practice that’s been ‘going on’ for awhile – but it needs to be done, the sooner the better.

4. Landlease community owners large and small. These folk have a tri – part Restore Affordability challenge: 1) ensure rental homesite rent is ‘in sync’ within local housing markets; 2) when engaging in self – finance of on – site home sales transactions, make the same change to the 30% HEF as just described; and, 3) keep homebuyer/site lessee’s combined home payment (e.g. PITI & household/utility expenses) and site rent amount lower than they’d pay for an equivalent – sized site – built home in the same local housing market.

OK, there you have the four part plan in brief. Now, what have our online peers been saying about these challenges to Restore manufactured housing Affordability’, these past three days?

“The beauty of your affordability model, is easy to apply; and frankly, simplicity is a good way to avoid ‘paralysis by analysis’. The one piece I keep coming back to though, in terms of manufactured housing affordability, is the difference in annual gross incomes among prospective homebuyers, and prices of inventoried homes in different parts of the same local housing market. Is there a way to match groups of homebuyers with similar AGIs, with appropriately priced housing inventory(ies)? (lightly edited. GFA) Answer? ‘Not to my knowledge or experience, outside multi – retail sales centers owned by a sole proprietor.’ Anyone ‘out there’ have a different take on this query?

“I applaud your continuing efforts to defragment this industry, but seriously doubt ELS, Inc., and Clayton Homes have the ability to change their business models, and promote inter – segment cooperation. Nevertheless, keep the bully pulpit going.” cp

“Good thoughts George. Your excellent suggestions involve some major industry changes. For example, if HUD Code manufacturers do build more CSH homes, they would/should promote them, instead of the ‘big boxes’. That additional promotional exposure would certainly help the rest of the industry! Also, the manufacturers need to define the dividing line between their ‘big boxes’ and modulars. My ‘take’ is that manufactured housing will eventually (maybe now) divide into two segments: the CSH and lower end ‘big box’; and those homebuyers, wanting a factory – built home in the $50,000 plus price range will ‘go modular’.” (lightly edited. GFA)

“Another ‘interaction (inter segment) example’, is that even MHRetailers who make the business model changes you suggest, can’t really sell anything without chattel financing – creating somewhat of a chicken and egg scenario.” So true.

“Yet another (inter segment) reality, is that chattel lenders need to look beyond debt ratio underwriting, and recognize (Actually, ‘remember’) the historic advantage of financing new homes in landlease communities, enlisting on – site management’s assistance with collections, often lowering the frequency and cost severity of ‘repos’. Furthermore, when repossessions do occur, they don’t have to be moved; rather, remodeled in place, and on – site personnel enlisted to assist with reselling. And the community owner might even buy the repo unit. Goal here? Recreate a complementary, symbiotic working relationship between lender and LLCommunity owner/operators.” (lightly edited. GFA)

“Come on George, tell us who the corporate decision – makers are; who needs to get on board this ‘Four Ways to Restore Affordability to Manufactured Housing’ plan to Save Our Industry! The two HUD Code home manufacturers and ‘four plus one’ chattel lender executives are easy to ID. Have any of the seven responded to this blog yet? I’d like to know just that! And as you imply, MHRetailers are probably a lost cause, without a major influx of chattel finance. But the LLCommunity folk. Now there’s a mystery. Who’re you talking about here? Looking at the six biggest portfolio owners listed in the 23rd annual ALLEN REPORT, none of them are openly or directly involved in the machinations of manufactured housing, let alone landlease community affairs. How do we get them to care their properties too, will be ‘going down the tubes’, if they aren’t already, as they price rents out of some, if not all, their markets? I mean, you can only ‘give away’ new homes (i.e. ‘Selling at minimum or no retail margin or profit.’ GFA), in the face of high rents, for just so long. So, who do we look to, to ‘take the lead’ in Restoring Affordability to our property type? And hey, do you know most of these guys don’t even have all their properties paying dues as members of their respective state associations? Come on, tell us more!” (edited. GFA) At this writing, home manufacturers and chattel lenders have been absent from this discussion.

Pretty impressive response, wouldn’t you say? But know what? All this momentum will quickly slow and stop, if we don’t keep the pressure on our elected and salaried industry and asset class leaders. Remember, many of them will be convening in Arlington, VA., @ 26 – 28 February 2012, for MHI’s annual Legislative Conference. Will YOU be present to make your feelings known regarding issues (e.g. S.A.F.E. Act, Dodd – Frank bill, ‘MHIA@2000’, and more…) affecting manufactured housing and landlease communities today? For information regarding this upcoming national meeting, phone (703) 558-0666 and talk to Lisa Brechtel.

In the meantime, know this coming Sunday’s regular weekly blog posting is tentatively titled: ‘LEST WE FORGET…’ and subtitled, ‘Will MHInitiative®’s ‘How to Save Our Industry?!’ Challenge to the Manufactured Housing Institute, also be aired at the Legislative Conference in Arlington, VA., on 26 – 28 February 2012?’ There might well be more riding on this meeting than the event organizers realize….

***

George Allen, CPM®Emeritus, MHM® Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

Finally, a Simple, Practical & Timely Plan to Restore Affordability to Manufactured Housing and Landlease Community Living!

***
Important Notice. For background information on this potentially industry – saving topic, reread the past two weeks of blog postings, archived at this website (community-investor.com), before heeding this week’s message:

‘Let’s Replace the GOLD RULE with the GOLDEN RULE in 2012’
&
‘Restore Affordability to Manufactured Housing, Lending, & within Landlease Communities, to Sell More New Homes during year 2012’

***

Paraphrasing some contemporary American heroes, who courageously and with finality, on 9/11/2001, proclaimed: ‘Let’s Roll!’; are WE, as a dying industry and struggling realty asset class, as corporately courageous to avert own finality, by committing to ‘Let’s Recover!’? IF SO, the following, across industry segments Restore Affordability solutions, for manufactured housing and landlease (nee manufactured home) communities, comprise our best path to restoring housing market share! While simple and practical in concept, there’s no question but that it’ll be difficult to break bad habits, even tradition in some cases, as these industry segment steps require:

1. According to the Manufactured Housing Institute (‘MHI’), 80 percent of all new HUD Code manufactured homes are built and shipped by two factory – built housing firms, both of whom are major, dues – paying manufacturing division members of the institute.*1 By year end 2012, and by dint of their obvious national market domination, they could and should agree, to cease building Developer Series Homes (i.e. the ‘big box = big bucks’ multisection, full – featured models) unless already sold, or designed and ordered in advance of production, as well as ensure said homes are affordably – priced. At the same time, build more Community Series Homes (i.e. smaller multisection and singlesection homes with durability – enhancing features) to be aggressively marketed to landlease (nee manufactured home) communities throughout the U.S., helping fill the estimated 250,000+/- vacant rental homesites contained therein. Who to lead this industry – saving effort? Well, there’s….

2. Independent ‘street’ MHRetailers, even ‘company stores’, are no longer the dominant ‘players’ of years past, as their collective number, according to MHI, is down, nationally, from 11,500 to only 4,000 sales centers.*2 MHRetailers could and should take this 60 year new home shipment slump as ‘an opportunity and motivation’ to revamp their business model away from hawking units like automobile dealers, and commence marketing and selling new homes like Realtors®! Until MHRetailers do this – and now is indeed ‘the time to do so’ – how can we, as an industry, complain that HUD hasn’t fully implemented the Manufactured Housing Improvement Act of 2000 (a.k.a. ‘MHIA@2000’), legislation designed and passed more than a decade ago, to wean us from our vehicular heritage and into the overall housing industry? Who to lead this industry – saving effort? Well, there’s….

3. Independent, third party chattel (personal property) lenders have the conundrum of effecting, at the same time, the easiest and most difficult restore affordability tasks of all. In principle, revamp the nature of loan originations and underwriting, ensuring new and resale homebuyers aren’t mortgaging more home than they can truly afford, at the time of the sales transaction. In practice, this means returning to the original composition of the traditional 30 percent Housing Expense Factor (Where 30% HEF = 30% of homebuyer’s annual gross income or AGI is earmarked for ‘household expenses’*3), this being inclusive of mortgage principal and interest payment amounts, along with escrowed taxes and insurance, and household/utility expenses not including telecom services. While easy enough to describe, it’ll be difficult for lenders to restore an estimated 25 percent of the contemporary 30% HEF factor, for household/utility expenses; effectively ending the reality of homeowners paying these necessary bills ‘above and beyond’ the 30% heretofore used just for PITI. In effect, this past (still present) practice created a shadow HEF factor much higher than the 30 percent ‘affordability’ guideline. Who to lead this industry – saving effort? Well, there’s….

4. Landlease community owners large and small; whether property portfolios or single property owners like me. There’re three restore affordability tasks here. One has to do with ensuring the rental homesite rent is indeed ‘in sync’ with other forms of multifamily rental housing in the same market.*4 Another has to do with reallocating the traditional 30 percent Housing Expense Factor, in the manner described in the previous paragraph. And a third has to do with how the prospective homebuyer’s combined monthly mortgage (i.e. to be comprised of PITI & household/utility expenses) and homesite rental amount, compares with site – built housing in the same local housing market.*5 Once these benchmarks and changes – as necessary, are in effect; we’ll, as an asset class, be well on our way to restoring affordability to landlease communities nationwide. Who to led this industry – saving effort? Well, there’s….

So, there you almost have it. A simple, practical, timely plan to Restore Affordability to manufactured housing and landlease community living in six steps, spread among four segments of the HUD Code manufactured housing industry. What’s missing at this point? Three things: an open and serious discussion of the plan and its’ requisite steps; commitment among all applicable segments of the industry, to make said changes;
and finally, the elected, selected, and salaried leadership necessary, to pull it off. Are YOU one of those leaders ‘waiting in the wings’, for the clarion call to ‘Let’s Recover!’?

This week I didn’t name names at the end of the four numbered paragraphs, but will tell you this: Among HUD Code home manufacturers, there’re three, maybe four individuals who could and should restore affordability to their segment. Among MHRetailers, there are no champions, that I know of, to lead this effort. It’ll have to be a business culture change, even a paradigm shift, brought about by recognition that the manufactured housing industry is in ‘survival mode’ right now, and if this plan doesn’t work, it’s likely nothing else will either – short of a massive dumping of chattel capital into our type housing. Among lenders? Anyone who deals with chattel finance knows who these ‘four plus one’ leaders are. And on the landlease community side? In my opinion, it’s gotta start at the very top, with the largest of our property portfolio owners/operators, setting the restore affordability pace for the rest of us, hoping for a trickle down effect among the 50,000 landlease communities nationwide.

Are YOU on board? As always, anxious and open to hearing your opinions and ‘take’ on this simple, practical and timely plan to restore affordability to manufactured housing and the landlease community real estate asset class. Reach me via gfa7156@aol.com, the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764, or (317) 346-7156 & GFA c/o Box # 47024, Indianapolis, IN. 46247.

*****
End Notes.

1. Per Congressional Hearing transcript @ 2/1/2012 re: Manufactured Housing Improvement Act of 2000.

2. Ibid

3. HOUSING AFFORDOGRAPHY, ‘Study of Affordable Housing Formulae & Measures of Housing Affordability’, PMN Publishing, Indianapolis, 2008.

4. How to know whether LLCommunity rental homesite rate is truly ‘in sync’ with other forms of mulitifamily rental housing in the same local housing market? Perform two separate Market Surveys. First, survey conventional apartments in the same local housing market, researching just 3BR2B units. Calculate their average monthly rent, e.g. $9000.00/month, then divide by 3 (divide by 2.5 if subject LLCommunity is located inside an interstate beltway around an SMSA city) to estimate what average rental homesite rate might/should be; in this case, around $300.00/month. Second Market Survey is of similar (i.e. size, condition) landlease communities in the local housing market, including the subject LLCommunity. Then ask oneself: ‘How do these rental homesite rates individually, and in toto, compare with the subject property per se, as well as the result of the 3:1 Rule just cited? Two other Rules of Thumb include: The Schwep Rule = total monthly payment (loan & site rent together) must be 15 – 20% less than monthly rent rate for a conventional apartment in the same local housing market to sell manufactured homes onto rental homesites. Also, the Schraeder/Smith Rule = total monthly payment (loan & site rent together) must be at least $50.00 less than monthly rent rate for a conventional apartment in the same local housing market to sell manufactured homes onto rental homesites.

5. Here’re a few well known Rules of Thumb for ensuring one’s manufactured housing transactions, real and anticipated, fare well, when compared to site – built housing in the same local housing market:

• AGI or Area Median Income (‘AMI’) X 3 = affordable land and home deal $ max
• AGI or AMI X 4 = ‘risky’ land/home deal $ (Where to get AMI? Zipskinny.com)
• Income – to – Home Value Ratio or IHVR, a Realtor® Rule of Thumb; where ‘median home value’, for any given market, is divided by prevailing AMI (for that local housing market), to calculate the IHVR factor, e.g. $172,134 national median home value in 2010, divided by $51,229 national AMI during same year, = national IHVR of 3.36. Note how this IHVR of 3.36 falls comfortably in between the first two Rules of Thumb cited here in end note # 5, or factors 3 & 4. So, on a national level, multiply one’s AGI by 3.36 to estimate max affordable land and home deal $. *** George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

Restore Affordability to Manufactured Housing, Lending, and
within Landlease (nee manufactured home) Communities
to Sell More Homes in 2012

‘Thank You, Thank You, Thank You!’

That’s how one of the letters, responding to last week’s blog posting: ‘Let’s Replace the GOLD RULE with the GOLDEN RULE in 2012!’ began. Here’s the rest of the message:

“For the first time in my long career in manufactured housing, I’ve finally read where someone (you) has put it all together, describing ‘really why’ our industry is in the slump dump it’s in today. ‘Let’s replace the Gold Rule with the Golden Rule in 2012’ just about says it all, in a polite but straightforward fashion. Thank You, Thank You, Thank You! But much more needs to be said….

Allow me to embellish. You were overly kind to the decreasing number of firms who build HUD Code manufactured homes. It’s they, and no one else, who’ve long articulated the pernicious goal, as you rightly state, of ‘BIGGER BOXES = BIGGER BUCKS’ for them! Specifically, they’ve routinely designed and build bigger, more homelike structures, according to their whim, but rarely reflecting what prospective homebuyers, in local housing markets, need or want. Proof of this? As an industry, we keep score, by counting new homes shipped, not new homes sold. And that bassakwards perspective persists to this day! Attend any regional MHShow and inventory the exhibited homes. The vast majority continues to be Developer Series Homes (i.e. large multisection and full – featured), designed for land – and – home package installation (Who’s buying ‘em? No one.); yet still ‘far too few’ Community Series Homes (i.e. smaller multisection, and modest singlesection, homes with durability – enhancing features) suitable for siting in landlease (nee manufactured home) communities! And look at the unit pricing? Still far too expensive to even come close to qualifying as truly affordable homes. Bottom line? HUD Code home manufacturers are, for the most part, bloating us out of business with their too large, too high – priced homes! Solution? Restore affordability, by designing, building and shipping one or more lines of smaller basic manufactured homes that sell for reasonable prices!

Then there’re the independent third party chattel (personal property) lenders. We won’t talk about the rampant chattel loan origination and underwriting abuses that routinely occurred during the peak of our industry’s last renascence, circa 1996 – 2000. No; simply look at the factoid you pointed out in last week’s blog posting: How, somewhere along the line, lenders made it easy for naïve prospective homebuyers, to ‘buy more house’ than they could and can realistically afford. How so? By supplanting 25+/-% of the widely – recognized 30% Housing Expense Factor or HEF, heretofore earmarked for paying just ‘household/utility expenses, not including telecom costs’; but now, with a fatter PITI (inclusive only of principal, interest, taxes, insurance) house payment. Bottom line? Homebuyers now oft in homes they can’t really afford, as they make monthly ‘household/utility expenses, not including telecom costs’ every month, throughout the term of their home mortgage, in addition to a PITI payment comprises the entire 30% HEF! Solution? Restore affordability by putting ‘household/utility expenses, not including telecom costs’ back into the original 30% HEF! It’s truly as simple as that!

Why haven’t I mentioned independent, ‘street’ MHRetailers (to use your term)? They’ve, for the most part, already run themselves ‘out of business’, by gulping the ‘land – and – home package’ – tainted elixir of the late 1990s, believing they could beat site – builders at their own game. Didn’t happen! Isn’t Happening! Unlikely to happen! To be sure, ‘only the strong few (have) survived’. In many cases, these being independent ‘street’ MHRetailers who own/operate landlease communities. The others? Some compete with on – site home sales in landlease communities, others are relearning how to sell new and resale manufactured homes into these income – producing properties. Bottom line? Irreparable damage has been effected throughout this segment of the manufactured housing industry. Solution? Restore affordability by selling more Community Series Homes, or CSH models, into landlease communities nationwide. After all, you did tell us there’s something like 250,000+/- vacant rental homesites out there, right?

Landlease community folk? Just answer these two questions. 1) Are ‘household/utility expenses, not including telecom costs’ included in the monthly house payment a homebuyer pays, as part of the 30% HEF; OR, is that estimated 25+/-% of said 30% HEF supplanted, enabling homebuyer to purchase ‘more home’ than they can truly afford? – while still having to pay extra each month for those non – PITI expenses? And, 2) are rental homesite rents truly ‘in sync’ with other multifamily rental properties in the same local housing market? Do you even know how to tell?*1 Bottom line. If your answer to both questions is ‘No’, then there’s little to no ‘value proposition’ for prospective and present day homeowner/site lessee residents in your landlease community! Solution? Restore affordability, by returning to an all – inclusive 30% HEF when calculating home mortgage loan payments; and, ensure your rental homesite rent is indeed ‘in sync’ with the local housing market.

As I wrote earlier George, ‘Thank You, Thank You, Thank You’, for making this perennial, pernicious matter, pervasive throughout the contemporary manufactured housing industry, public! Hopefully, as more and more brave and responsible businessmen and women, with ‘real skin in the manufactured housing game’, as business owners, become aware of these anti – housing affordability measures and consequences, they’ll embrace what you described in last week’s blog post as “…a timely, reputation – enhancing, industry – saving CHALLENGE”; in quick time, correcting these matters, to finally right the sinking manufactured housing cruise ship!” Your ‘friend in the MHBusiness’, MH Ronin, a pseudonym adopted by request.

(Preceding was edited for clarity & effect. GFA)

End Note.

1. To learn ‘How to Know’ a landlease community’s monthly rental homesite rate is truly ‘in sync’ with other forms of multihousing rental properties in the same local housing market; and, How to Use the Schraeder/Smith Rule and Schwep’s Rule of Thumb, to ensure a prospective homeowner’s combined mortgage and site rent payment is truly ‘in sync’ with fee simple realty mortgage payments, on similar – sized homes in the same local housing market, phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 and request descriptions of the popular formulae. As one wag recently put it to some manufactured housing sales pros, attending a marketing seminar: “The time has indeed come, to ‘STOP flying by the seat of your pants!’” So, get these helpful formulae and start selling truly affordable housing ‘by the numbers’. GFA

***

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46246. (317) 346-7156

Let’s Replace the GOLD RULE with the GOLDEN RULE in 2012

…a timely, reputation – enhancing, industry – saving CHALLENGE to HUD Code manufactured housing BUILDERS, chattel (personal property) mortgage LENDERS, & landlease (nee manufactured home) community OWNERS/OPERATORS throughout North America!

The GOLD RULE. ‘He who has the gold makes the rules!’

The GOLDEN RULE. ‘Treat others as you want to be treated!’

What manufactured housing veteran doesn’t recall HUD Code home manufacturers routinely ‘fluffing’ new home invoices to maximize profitability and cover MHRetailer rebates, as well as buying – down capital borrowing rates to sell more homes? AND subsequent to the brief REIT wave of the mid – 1990s; how, many landlease (nee manufactured home) community owners aggressively raised rental homesite rates, to the point of sucking value right out of the very properties in which our homeowners/site lessees lived.*1 Yes, those were indeed go – go days, and still are in a few local housing markets; when & where the GOLD RULE prevailed, AND continues!

Well, as an industry and realty asset class, we’ve known for awhile we should (i.e. ‘have to’) change the way we do business with our traditional ‘newly weds and nearly deads’ housing market, or we’ll lose them forever, if we haven’t already done so. Site – built housing finance abuses (e.g. no money down ARM deals put pregnant teenagers into $80,000.00 tract houses throughout the Midwest and elsewhere, until circa 2007) have already enticed, ‘sold’, and damaged the former; and, the continuing inability of Seniors to sell their ‘free and clear’ homes, then retire to Sunbelt regions in newly bought manufactured homes, has stymied and discouraged the latter.

So, what’s an industry and its’ sister realty asset class to do? Well, that’s how we began, but detoured, last week’s blog post, with this slightly recast FOREWORD, describing the first of several ‘How to Save Our Industry?!’ measures to appear in coming weeks, to wit:

HOW do we move from entrenched GOLD RULE measures, described in previous paragraphs, to a bona fide Ethic of Reciprocity, a.k.a. the GOLDEN RULE? Well the process actually and quietly commenced 27 February 2008, at the first National State of the Asset Class (‘NSAC’) caucus, in Tampa, FL., when 100+/- landlease community owners/operators agreed on Five Action Areas to guide their future business dealings. One of those action areas encouraged landlease community owners/operators to effect…

“A Value Proposition (for homebuying/site lessee customers), ensuring fair interplay of housing product PRICING, loan financing TERMS and value, along with right site RENTAL RATE, and more….” (Lightly edited for emphasis. GFA)

Two years later, Randy Rowe, founder of Hometown America and Green Courte Partners, while a keynote speaker at the 19th annual International Networking Roundtable, in Phoenix, AZ., shared his ‘Five Part Market Share Recovery Plan for the Manufactured Housing Industry & the Landlease Community Real Estate Asset Class’. A key part of his plan further encouraged landlease community owner/operators to…

‘Ensure on – site sale PRICE and loan financing (TERMS) of new and resale homes, within landlease communities, is in sync with site – built housing offerings, and apartment RENTAL RATES, in the same local housing market.’ (Again, lightly edited for emphasis. GFA)

Have these two similar overtures been implemented among the estimated 50,000 landlease communities in the U.S. today? Unfortunately, for the most part, these interrelated $$$ matters remain, in this industry observer’s opinion, pretty much unchanged and unheeded, particularly among some larger property portfolios – though recent foreclosure actions, in some regions, appear to be forcing a degree of change.

The only positive advances worthy of mention here, have to do with two relatively new, but already popular resources, both researched and published in 2008, to facilitate the ideal and needed replacement of the GOLD RULE with the GOLDEN RULE!

• The booklet, HOUSING AFFORDOGRAPHY debuted in 2008. It’s purpose? To identify three empirical and one subjective measure(s) of ‘affordable housing & housing affordability’ – later supplemented with a fourth empirical measure.

• The same year, using one of the aforementioned measures (i.e. The 30% Housing Expense Factor or HEF), a new ‘Ah Ha!& Uh Oh! Worksheet’ was created to “…estimate maximum recommended ‘affordable’ & ‘risky’ purchase PRICES for new & resale, privately – owned homes of any type, sited on realty owned fee simple said home, or on a rental homesite within a landlease community.’

All that brings us to today, and the challenge contained in the title of this blog posting:

Let’s Replace the GOLD RULE with the GOLDEN RULE in 2012

Again, HOW? The most straight forward approach, to meet and implement this timely, reputation – enhancing, industry – saving challenge, is to couch the strategic procedure in terms of the well known 5 – Ps of MARAKETING, specifically:

Place. Ensure right location for a home sales center & that of the landlease community

Price. Calculate affordable ‘for sale’ amount, & right site rent per local housing market

Product. Know what size & type house will sell, & whether rental homesites are rentable

Promotion. Ascertain effective traditional & online housing & site marketing measures

People. Previous four marketing perspectives only as effective as sales and leasing staff!

So, how does one go about implementing the first three of these four Ps of Marketing?

PLACE. A subjective exercise at best. The key here, is to decide whether ‘home sales’ per se, are best achieved via an independent, standalone manufactured housing retail sales center located as near as possible, but separate from the host landlease community. Or, does said landlease community enjoy sufficiently good marketing and drive – by exposure, as well as easy highway access, to warrant simplifying staffing and inventory, by having MHRetail sales center on – site within property boundaries, with some ‘for sale’ homes installed, skirted, accessorized, and ‘ready for move – in’, or not. This particular P of Marketing does not lend itself directly to the proposed segue from the GOLD RULE to the GOLDEN RULE. That needed change begins with the next step…

PRICE & PRODUCT inclusive of housing ‘for sale’ and rental homesites ‘for rent’. Calculate affordable ‘for sale’ amount, & right site rent per local housing market via two steps:

Begin by ascertaining whether present or anticipated (i.e. in the event a new landlease community is being constructed, or an existing one is being acquired) landlease community operation is charging a rental homesite rate in sync with other forms of rental and fee simple housing in the same local housing market. How to do so? First, use the decades – old, but oft proven ‘3:1 Rule or Ratio’ for an initial ‘feel’ for the multifamily housing rental market. Perform the first of two Market Surveys; the first being of 3BR2B garden style, non – subsidized apartments or town houses. Calculate the average rent among these large units and divide by three. This pegs what the average landlease community site rent rate ‘might be’ in that local housing market. Then, effect a second Market Survey, this time of all comparable (by site count, amenities, etc.) landlease communities in the same local housing market – being sure to adjust for whether ‘water & sewer’ charges are included in or billed separately from said site rent. How does the average site rent compare to the result of the ‘3:1 Rule or Ratio’, and to the amount already being charged by the subject community? If this exercise is being effected pursuant to new construction, results suggest where initial site rent might be pegged.

Second step, relative to PRICE & PRODUCT, involves calculating the affordable ‘for sale’ amount of homes to be marketed in this particular local housing market. That’s where the aforementioned ‘Ah Ha! & Uh Oh! Worksheet’ comes into play. In this instance, all calculations begin with either the verified Annual Gross Income (‘AGI’) of a prospective homebuyer or household; and or, with the Area Median Income (‘AMI’) of the subject local housing market defined by postal zip code. For the purposes of this example, AMI is assumed to be $51,229.00 – which is the approximate national AMI for years 2010 & 2011. While the ‘Ah Ha! & Uh Oh! Worksheet’ is designed to produce four different maximum housing prices per local housing market; here, only one is being demonstrated, that of an ‘affordable’ home sited in a landlease community. Taking the $51,229 AMI; multiply it by 30 percent (.30) HEF, to estimate $15,368 available for a ‘loaded’ HEF – which is to say PITI (principal, interest, taxes & insurance escrows) AND annual household/utility expenses, not including telephone expenses, PLUS site rent. With that said, approximately 75 percent of that $15,368 will go to pay PITI and site rent. Divide $15,368 by 12 months, to show $961/00 month available to pay PITI & site rent. Then, subtracting the known or estimated site rent (see previous paragraph), of (for example) $333.00/month, $628.00 remains for PITI alone. Using a financial calculator, this $628.00 PITI payment, along with chattel mortgage terms of 9.5% for 20 years, suggests a maximum ‘affordable’ mortgage of $67,372.00. When a 10% ‘down payment’ is calculated back onto that figure, the maximum ‘affordable’ house price is $74,858, rounded to $75,000. maximum ‘for sale’ home price (i.e. ‘all in’, to include skirting, etc., to be included in mortgage) in a landlease community where site rent is $333.00/month.

So, where does this exercise in calculating ‘affordable’ PRICE & PRODUCT factors take us on this timely, image – enhancing, industry – saving journey from the GOLD RULE to the GOLDEN RULE? Simply put: Most independent, third party chattel lenders originating mortgages on manufactured homes going into, or already in, landlease communities, as well as landlease community owners/operators self – financing their own on – site deals, do NOT deduct ‘household/utility expenses, not including telephone expenses’ from the monthly amount calculated to be available for PITI and site rent. With that said, the ‘Ah Ha! & Uh Oh! Worksheet’, in yet another column, calculates, what it labels as ‘risky’ (vs. ‘affordable) maximum mortgage and home price amounts. Using the same starting point of $51,229, and ‘working thru the numbers’, but backing out the ‘household/utility expenses, not including telephone expenses’ 25 percent factor, and deducting $333.00/month site rent, leaves $948.00 for a ‘barebones’ PITI. Using a financial calculator, and the same chattel mortgage terms of 9.5% for 20 years, this suggests a maximum ‘risky’ mortgage of $101,702. When a 10% ‘down payment’ is calculated back onto that figure, the maximum ‘risky’ house price is $113,002, rounded to $113,000. in a landlease community where the site rent is $333.00/month. But remember, these new home purchasers/owners of ‘more home’ (i.e. $113,000 ‘risky’ vs. $75,000 ‘affordable’ transaction) will still be paying household/utility expenses each month, over and above the original 30 percent HEF cited at the beginning of this exercise!

This latter ‘risky’ approach to estimating maximum home price, in any given local housing market, is the manner in which many, if not most present day GOLD RULE deals occur throughout the manufactured housing industry and within landlease communities. If, as an industry and asset class, we truly want to segue into a more Ethical Reciprocity means of doing business, the GOLDEN RULE way, we’ll have to start selling ‘less house’ (i.e. What prospective homebuyers can purchase ‘affordably,’ and NOT in our heretofore ‘risky’ fashion), AND ensure our rental homesite rates truly in sync with other forms of multifamily rental housing and fee simple housing in the same local housing market.

Well, that gives you something sobering to think about during this next week. If you agree, even disagree, that we, as an industry and asset class should embark on this individual and collective business journey from allegiance to the GOLD RULE, to the Ethics Reciprocity GOLDEN RULE, talk to me about it – the sooner the better.

In the meantime, ponder this:

“To keep the Golden Rule we must put ourselves in other people’s places, but to do that consists in and depends upon picturing ourselves in their places. If we had the imagination to do that, there would be fewer families estranged by misunderstanding between the older and the younger generations, fewer bitter judgments would pass our lips, fewer racial, national and class prejudices would stain our lives.’ Harry Emerson Fosdic, D.D.

And in our case, maybe more new homes sold and more rental homesites leased!

Remember, the Manufactured Housing Institute (‘MHI’) will be having its’ annual Legislative Conference in Arlington, VA., 26 – 28 February 2012. This blog post is the sort of ‘timely, image – enhancing, industry – saving paradigm shift thought – and – actionable material’ our elected and salaried industry leaders should be discussing at these annual gatherings. If you’re an MHI member, like me, then let our leaders know what you think, about matters like this, and plan to attend. I plan to attend. Phone Lisa Brechtel @ (703) 558-0666 today to register!

*****

End Note:

1. REIT. Real Estate Investment Trust

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156