Friday, July 21st, 2017

 Manufacturing Commissions

by Stu Silver/Zalman Velvel

 

“You can make a lot of money with a lot of little deals.”

Imagine sitting in a classroom with thirty other people, and your instructor is dancing down the aisle doing the Pachanga, and singing that sentence over and over.

“You can make a lot of money with a lot of little deals.”

I’ll never forget it, and now I’m not letting you forget it. Why? Because I am going to suggest a simple way of increasing your commission income that you may not have thought of – listing and selling a hidden segment of the affordable housing market, which has an even smaller price. Because of price, this segment is easy to market and “you can make a lot of money with a lot of little deals.” Becoming attuned to this market will also fill in gaps in your current residential marketing making you more efficient.

This is exactly opposite of a failed trend I witnessed years ago. I watched my residential Realtor Brothers and Sisters (yes, we are a family) seeking to expand their markets, and their commissions, by listing and selling commercial property. The reasoning went like this: If I can make a certain commission selling a $100,000 house, I can make 10 times that selling a million dollar commercial property.

Perhaps this makes sense to you, and it does mathematically, but it  didn’t work out that way for many of the residential Realtors that tried to expand into the commercial real estate market.  They learned, through a painful expenditure of valuable time, that commercial property buyers, sellers, marketing, and financing were a world apart from residential real estate. The amount of transactions were much more limited, and competition for those listings was fierce. For that reason, the commissions usually went to specialists who committed all of their time to commercial transactions, and were willing to risk waiting six months or more year for a payday, for perhaps many years in a row.

Now I’m asking you to go in the opposite direction – don’t go bigger, go smaller in price and wider in market reach. The hidden segment I am speaking about is manufactured homes. Why manufactured homes, you ask?  Because there is now, and has always has been, a tremendous demand for affordable housing in virtually every area of these United States, and manufactured homes are the most affordable. And there are a lot of them!  There are 9 million manufactured homes in this country, one residence out of every ten, yet it’s like they are hidden and not even on the radar screen of most Realtors. This means there are less Realtors listing and selling them, so there is less competition for listings, and more opportunity for you.

About two thirds of manufactured homes, or 6 million, are sold exactly the same as real estate because they are sold together with the land, on a lot similar to a single family house. They can be listed and sold by any licensed Realtor. The remaining one-third of manufactured homes, about three million, are located in manufactured home communities. In some of those communities, the residents own the lot under their mobile home so they can also be sold by any Realtor. In other communities, the resident only owns the home, and leases the land underneath. In Florida, and perhaps other states, you need a separate license to list and sell manufactured homes on leased lots, since they are considered personal property. No problema. The license is easy and inexpensive to obtain.

In order to take advantage of this hidden opportunity, some Realtors will need to free up a few pre-conceived attitudes about manufactured homes, the first of which is their quality. The beautiful home on the left was built in a factory and towed to the home site and fit together. Because of advances in factory building, many newer manufactured homes are equal or superior in quality to a site built home.

Another mistaken belief is about their longevity. Manufactured homes, because they are built in a factory like a car, also have a title just like a car.  For this reason, some people believe that manufactured homes wear out, just like a car.  However, if a homeowner takes care of a manufactured home the same way they care for a site-built house, it can last every bit as long.  We personally own, and have listed and sold, manufactured homes that were  forty years old or more, and they are still providing safe, healthy, and sturdy shelter for families.

Now let’s discuss some easy steps for you to take so you understand and feel comfortable with this segment of the market.

The first step is easy. Become an explorer. Go out and find subdivisions or manufactured home communities that you feel comfortable with, like the one on the left.  You can find them in the yellow pages, in the Classifieds under Manufactured Homes For Sale, or on the Internet on websites that contain manufactured homes for sale, like Manufactured Housing Global Network (Mfdhousing.com), or Realtor.com.  There are over 50,000 mobile home communities in the U.S., so that’s an average of 1,000 in every state, and there is more than enough to go around. Take a ride through these communities and look at them with a fresh eye.  You may be surprised at how lovely, clean and homey some of the manufactured homes are.

You can assume there will be homes for sale (in fact you will probably see some as you drive through) because in most communities, ten percent of the homes are for sale at any one time.  That means in a small community of, say, 200 homes, there should be at least 20 residents that will need the services of a Realtor. In a larger community, even more.

Obtaining listings, marketing homes, and handling buyers is exactly the same for manufactured homes as single family site-built homes, and there is great training available to you on how to do this from your Board of Realtors, so I won’t repeat it in this article.  It would also help to read books and articles that pertain to manufactured homes to obtain product knowledge, but the stroll up the learning curve is not steep, or long.

The good news is you can continue marketing listings on site built homes, only you will be even more efficient. You will now be entering two huge markets for affordable housing: the first time homebuyer and the last time homebuyer, retirees. In our area of Southwest Florida, a median priced home is now $100,000 and a median priced manufactured home on its own lot is $50,000, about half.

Because prices are lower on manufactured homes, you can keep first time homebuyer prospects who don’t qualify for site built homes by guiding them over to lower priced manufactured homes. Later on, you can up-sell when it’s time for your clients to move to a bigger and more expensive site-built home.

The reverse is true for last time home buyer, the retiree. When it’s time for them to downsize, you can market their more expensive site built home and simultaneously earn a commission on their new purchase of a manufactured home.  There are many wonderful manufactured home communities built exclusively for retirees, with clubhouses, tennis courts, golf courses, and activities that it make it a peaceful, yet fun, lifestyle.

Throughout this article we have been using the term manufactured home, because it does not create an emotional reaction in some people like two other similar terms – mobile homes and trailers.  When we use the words mobile home or trailer, what springs to mind in some people is an image of Tobacco Road, and this is another mistaken belief.  Many mobile home or trailer parks, i.e. manufactured home communities, look like the picture on the left, and contain respectable peace-loving retirees as well as hard-working first time home buyers, many of whom demonstrate pride of ownership.

We have created a humorous slogan to this end that’s easy to remember:

It’s not trailer trash, it’s trailer cash!

Author and trainer Zalman Velvel, CCIM, is a Licensed Real Estate Broker and Mobile Home Dealer. He has 28 years of experience in Real Estate investment, 28 years as a Realtor, and 17 of those years in manufactured home investment.  He has conducted 3-day live trainings and Internet Distance Learning on Mobile Homes and Real Estate Investments to over 5,000 enthusiastic clients all over the country.  His books, Mobile Home Wealth and Mobile Home Wealth Part 2: Mobile Home Parks, are available on his website, www.ZalmanVelvel.com, and at Barnes & Noble, Amazon.com, and other fine bookstores.