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Welcome to the Mobile Home Park Mastery Podcast where you will learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks! Your host is Frank Rolfe, the 5th largest mobile home park owner in the United State with his partner Dave Reynolds. Together, they also own and operate Mobile Home University, the leading educational website for both new and experienced mobile home park investors!
If you are an avid reader of those weekly news reviews that I do where I take all the articles on the industry and offer rebuttals to the crazy nonsense that most of these woke socialist writers write, you will notice one of the most common topics at all these different media outlets is how evil raising rents are and that landlords, particularly mobile home park owners, are among the most evil of the evil. That we raise our rents supposedly higher and faster than any other niche. But I can tell you as a mobile home park owner and operator for the past 30 years, this narrative is nonsense. This is Frank Rolfe with the Mobile Home Park Mastery podcast. We're gonna talk all about why higher rents are needed, why they are essential, and why raising rents is anything but evil, but in fact is what you have to do to maintain the housing stock in America known as mobile home parks.
So let's start off with a few basic premises of why rents can no longer stay at these ridiculously low levels. Number one, if you can't make money with a mobile home park, you're gonna tear it down to put up something else on that land. That is basically the benchmark minimum of capitalism, of free trade. If you have an option that makes more money than what you're currently doing, why would you not jump onto that option? Of course the answer is you definitely would. People have been developing and redeveloping land since the beginning of time. Manhattan Island was once owned by Astor. And where's that at today? Is it still just agricultural property and one-story stone bungalows? No, it's high-rise office buildings. Every piece of land in America has a higher and better use, and a mobile home park is rarely that. So if you say that mobile home park lot rents can't go up and that we must keep them low, what you really are saying is, "I want all the mobile home parks to be torn down." And if you read my weekly news review, you'll see probably the number two most common topic are mobile home parks that are just that, being torn down for redevelopment because the lot rents were way too low.
Another given is that customers don't mind higher rents if they go hand in hand with improvements to the property, professional management, all the things that we all desire. I often give people who try and tell me that it's just about the price, that all Americans care about is the price, the example of coming to the exit on the highway with three motels and hotels there. One is the Tiki Motor Lodge. It's only 19 bucks a night. Fluorescent sign, half of it's burned out. It's the old everything on one ground level with exterior doors and scary people milling about. And then you have a Holiday Inn Express just down the street, and it's $99 a night, but it's safe, it's clean. There's no access to any of the rooms from the outside. Its parking lot is secured, well-lighted. And then you've got, just beyond that, you've got the Ritz-Carlton hotel, and it's $400 a night, but it's sumptuous with all kinds of amenities. Now, I've had people say they would stay at the Ritz-Carlton, but most people say that they would want to stay at the Holiday Inn Express. But I've never had anyone in 30 years tell me, "Yeah, I'd stay at the Tiki Motor Court." Why is that? If life is nothing but the dollar number, the $19 Tiki Motor Court is a fifth of the price of the Holiday Inn Express. It's because of the value. We don't want to stay at the Tiki Motor Court because you might get murdered or you might get bedbugs or who knows what.
So Americans don't mind, nor have they ever minded, paying up for something better. And with most mobile home parks today, with all the improvements that are being made to the infrastructure, to the roads, professional management, general cleanup, enforcement of rules, these things are worth much more to the consumer than they used to be in the olden days under mom-and-pop. So as we bring the value higher on mobile home parks, of course those lot rents need to go up significantly. Also, I will add that in today's world of real estate, where values have gone up a lot, and particularly in mobile home parks where the values have gone up substantially simply because our industry has finally become appreciated by the investment community, when you slap those big mortgages on buying a mobile home park today, it is going to require much higher rents to support the mortgage.
Look no further than what happens with properties bought by residents. Those resident-owned community deals, tenant-owned communities, what happens with those? Well, I saw one recently, which again I had in my news review column, that the group, the nonprofit that was helping putting this deal together, they were going to have to raise the rents upon closing by nearly $200 a month. Now wait a minute, you might say, I thought those tenant deals, the whole point is keeping the rent low. Well, you can't keep the rent low when you stick 10 or 20 million dollars of mortgage debt onto a paid-for property. That's just what you're going to have when you have the transition from the mom-and-pop seller to the new person paying the fair market rate, you're going to by necessity have to have higher lot rents. The only way you'll ever get around that is if you can convince mom-and-pop or their estate to give the property away, which is a pretty unlikely scenario.
Also, you'll notice in many of these articles that are out there, they always want to give you that one example of the one person in the mobile home park who's marginal, trying to make it on some kind of different subsidy combination, and now they're not going to be able to pay for medicine or whatever the case may be because the lot rent went up $50. The problem with that is if you ran businesses based on these one-off tiny examples, then the world would completely fall apart. You couldn't even sell products in America, probably any product at all, because you can find the one person who's allergic to it. We'd have to ban peanuts in their entirety. There are some people that are allergic to meat. We'd have to ban all meat. I'm sure we could find that one person who is allergic and it would be life-threatening to be exposed to almost anything. No, you have to run businesses in America based on the majority. That's one of the key elements to capitalism is people producing products that sell and sell in a big way to the majority of people. And we have to ignore all these articles where they base it on, in a 100-space mobile home park, that one tenant who really shouldn't even be living in there. But what then happens to that one tenant?
Well, marginal tenants in America are supposed to be taken care of under the Section 8 program by the U.S. government. But yet why aren't people in the program? They can't take anyone because the program is basically broke. It's never been mobile home parks' responsibility to watch over all of the tenants. We are not a nonprofit. We are not a government. We are a business. I'd be the first to tell you that these tenants who are marginal definitely need to be on a social program. They need to be on something like Section 8, which can pay for their housing based on a percentage of what is often a very, very small amount of income. But yet they can't get in the programs. That is not the fault of mobile home park owners. That is the fault of the federal government. Also, you often hear from a lot of these socialist groups as rents go up, the tenants are unable to move, that they're stuck where they are. They always use my old Waffle House quote, where I said that people were chained to the booths. Now, they always ignore the context of the quote, which was explaining to a reporter from Bloomberg why restaurants fail all the time and mobile home parks don't. And the point was not about tenants being chained to a booth. It was the fact that we know every day in the mobile home park business exactly how many customers we will have. But a restaurant has no idea. Every time you unlock the doors, you don't know if anyone's coming in that day for lunch or dinner or they're not. But customers in mobile home parks have never been chained to the booths, have never had any restrictions on free movement. All they have to do if they're unhappy is simply sell their home where it sits and move to someplace where they are happier. That's how houses work. That's how condominiums work.
The fact that mobile homes underneath that chassis are some axles perhaps you can mount wheels on does not mean that they were ever meant to be moved. The word mobile home is pre-1976. Starting in 1976, these things are known as manufactured homes. No discussion of mobile, no attempt to explain, "Oh, yeah, sure, just hook it up to your car and drive off." That's definitely not true. In fact, to move a mobile home today, you have to have a CDL, you have to have permits, all kinds of things. They were not designed to be moved. They were designed to be bought and sold, just like all other forms of housing. And if someone owns a mobile home in a mobile home park, then what they do is they sell their mobile home where it sits and they buy something else.
Also, if mobile homes in fact are transportable, which ones built from about the 1990s to new are, there's a thing going on with mobile home park owners and has been going on as long as I've been in the business called organic moves. If you're unhappy in your mobile home park, the owner of the other mobile home park that you like better will pay to move you there for free. It's utter nonsense to try and claim that as rents go up, the tenants have no right, no voice, no way they can enact their own freedom. No, they've always had that freedom, always had that. Now, it's inevitable that our rents go up in our industry because they're so ridiculously low. We all know this. Our rents are the Dollar Tree of housing. And it's always so disingenuous when the media attempts to talk all about percentages. That's what you talk about when things are crazy cheap, because if you talk about the dollar value, people will laugh at you. When Dollar Tree went from a $1 product price to $1.25, they went up 25 percent. That's what the media told you. Shocking. Without telling you that that 25 percent increase was in fact a quarter. When the McChicken at McDonald's went from a dollar item to a $3 item, that was a 300 percent increase. But the media didn't tell you it only represented $2.
When mobile home park lot rents go up, the reason the media always talks only in terms of percentage is they're embarrassed to tell you the dollar figure because they know their audience would not be impressed. It sounds a whole lot more impressive to say that the lot rent went up in the mobile home park by 20 percent rather than say the rent went up by $50. The average American would look at that and say, "$50? That's what I paid in just refueling my car the other day." That was the price difference since gas prices have risen. You're not gonna get a lot of impact on your audience if you start talking about the real, real dollar figures, and that's why they always tend to work in a world of percentages, even though they know that that's a lie, that that's strictly gaslighting.
Lot rents in America will continue to go up. They have been going up as long as I've been in the business, but there's every reason to have it happen. It's completely legitimate, it's completely proper, it's right in line with the laws of economics. And it's those park owners who have the bravery to bring old mobile home parks back to life and increase those rents that keep much of the affordable housing stock in America still in business. This is Frank Rolfe with the Mobile Home Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.