067: How to Invest in Mobile Home Parks with Frank Rolfe
On this episode of the InvestFourMore Real Estate Podcast I interview Frank Rolfe. Frank has been investing in mobile home parks for decades and with his partner Dave Reynolds has the 5th largest mobile home park portfolio in the United States. Frank started buying mobile home parks while attending Stanford, because he had to start a business for school. He did not realize buying mobile home parks would become his career and an awesome business. Over the years Frank has learned how to find mobile home parks that are well below market value, improve them, and then either keep them for cash flow or sell them.
How did Frank Rolfe get involved in mobile home parks?
Frank was going to Stanford when he was required to start a business for school. Frank started a billboard company, which he eventually sold. After he sold his billboard company, he decided he wanted to start another business and one of his billboard customers offered to sell Frank a mobile home park. Frank knew nothing about mobile home parks, but thought there was potential in this deal, because it took almost none of his own money. The mobile home park owner was willing to provide 30 year seller financing with only $10,000 down. Frank admits he was a little naive at the time, but he was able to turn the park around. The park was not making any money due to horrible management. There was little maintenance being done and rent was hardly collected.
Frank brought in new management, made the park look nice again, and started to make money. Frank went on to buy another park that was mismanaged and turned that one around as well. Frank owns mobile home parks all across the country and has sold many parks for millions more than he bought them for.
How is Frank able to get great deals on mobile home parks?
The majority of mobile homes parks were created in the 1960’s. The government gave some huge tax incentives for starting a mobile home park at the time. In later years those tax advantages disappeared and many cities started to frown upon mobile home parks. Cities do not like mobile home parks because negative connotations that sometimes come with them, but because they make less tax revenue from them. The value of a mobile home is very low and with each mobile home taking up a lot, the tax revenue is much less than stick built homes or multifamily properties. There are very few places you can develop a new park at now.
Many of the current owners of mobile home parks, developed the parks decades ago and own them free and clear. Many of those owners live in other states and may not have the best management in place. There is opportunity to buy the parks cheap, improve them, and sell them for a profit or keep them.
How has Frank been able to buy mobile home parks with very little of his own money?
Another benefit of mobile home parks having older owners, is that they may prefer seller financing. When a mobile home park is owned outright without a loan, the capital gains taxes can be outrageous when the owner sells. If the owner finances the property, they may save on paying taxes and get a higher return on their money than if they stuck in a CD or money market.
What makes a good mobile home park operator?
One thing Frank mentions on this podcast, is that mobile homes last much longer than people think. If you maintain a mobile home, many of them will last just as long as a house. Although the mobile homes can last a long time, many of the models from the 1960’s and 1970’s have become obsolete, because of their floor plans with small rooms. As a park owner you do not have to constantly replace the mobile homes and in many cases you do not own the mobile homes, just the land under them.
The number one goal of a mobile home park owner is to make sure as many lots as possible are occupied. It can cost $5,000 or more to move a mobile home, so once you get an owner to place their mobile home on your lot or purchase one of your mobile homes, it is rare they will move. Of course once someone is renting a lot from you, you have to make sure you collect the rent.
How can you learn more about mobile home park investing?
Frank has written multiple books on mobile home park investing and created courses as well for those interested in learning the business. You can reach Frank here.