By

“Uncle Zally” / Stu Silver

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Last week I wrote about Ruby. This week I am going to write about another crazy lady, Irene … the Hurricane, that is.

When it comes to hurricanes, people “flip out” over the idea of living in a mobile home, and I thought I would set the record straight with some rational explanations. I do not mean to stop people from flipping out. It is everyone’s right to flip out when they want to, but hopefully some can choose other more irrational topics to flip out over, like terrorism or war, after reading this.

First, my family has lived in Florida for 25 years, and we experienced hundreds of named storms that threatened us, perhaps a hundred of which became hurricanes. A storm is named when it reaches tropical storm strength with winds of 39 mph, and it becomes a hurricane when its wind speed reaches 74 mph, the beginning threshold of a category 1.

My son says all the mobile homes in Florida are field tested to a category 1 Hurricane. How is this possible? Because they were driven down the highway at speeds of 75 mph or greater when they were delivered.

Let me give you the categories of hurricanes briefly:

Category 1- Winds 74-95 mph, storm surge 4-5 ft above normal.

Category 2- Winds 96-110 mph, storm surge 6-8 ft above normal.

Category 3-Winds 111-130 mph, storm surge 9-12 ft above normal

Category 4-Winds 131-155 mph, storm surge 13-18 ft above normal

Category 5-Winds greater 155 mph, storm surge > 18 ft above normal

I personally experienced a category 4 storm, Hurricane Charlie, in 2004. Charlie was a powerful, quick little runt. I never saw a Hurricane go so fast from a category 2, to a 3, to a 4 in so short a time, probably within a few hours, and change direction with hard 90 degree turns during the same short time span, where it went from going due north away from us, to heading due west and clobbering us, to heading due north again, and sparing us (but clobbering Port Charlotte.)

I also witnessed a category 3 the following year, Hurricane Wilma, which was a slow, huge monster, and did much more damage, though lower in category.

That’s when I learned it isn’t just wind speed that matters, but how fast the hurricane is traveling along the earth from city to city, and how wide its reach is – unless the eye of the storm is bearing down right on top of you. Then you are going to experience the worst of whatever can happen.

What about mobile homes and hurricanes? Basically, any mobile home built after 1993 is built to a wind zone 2 standard, which means it is able to take a category 2 hurricane with winds up to 110 mph, provided it is tied down correctly. Before 1993, a mobile home was only built to wind zone 1 standard, to withstand a category 1 hurricane, with winds up to 95 mph.

In 1993, an additional standard, wind zone 3, was added for mobile homes that were placed in coastal areas prone to hurricanes. This means the home will withstand a category 3 hurricane with winds up to 130 mph. Also in 1993, the state of Florida changed the standard for ALL new homes – they had to withstand a category 3 hurricane. So in the state of Florida, the Hurricane Playground of the World (and also the Lightning Capital, by the way, because we get God’s most powerful ideas) a wind zone 3 mobile home offers the same safety as any new home built after 1993.

Yeah, I know, you’re wondering what if you live in a regular home built before 1993, or a mobile home built before 1993, and a category 3 storm is heading your way? Answer – get out of Dodge!

But what if a category 2 storm is heading your way, and you’re living in mobile home or a regular home that may only be a wind zone 1? It’s a judgment call, or even a roll of the dice. However, in my opinion, after personally experiencing Cat 2’s, Cat 3’s, and Cat 4’s, it’s best to get the hell out of there, and head for safer ground, if you can. In fact, last year, part of the reason I bought a mobile home park in Ocala, Florida was so my family would have a safe place to hang out, since we live in Fort Myers, which is close to the Gulf of Mexico, with muchos Hurricanos. (Those reading my blog can come and be our guests in one of our cabins or RV spaces, should the need arise. Just show this blog at the door.)

Now those of you that live in the Midwest and Texas, don’t get to feelin’ all cozy and warm when you look at our hurricanes. You get tornados, and they are a real thrill.

I think I would rather live in a hurricane prone area than a tornado prone area, because the tracking and early warning systems for a tornado are gut wrenching and in some cases, a matter of minutes. At least we get lots of warning, along with lots of sunshine, here in Florida.

And if you live in an area where tornados and hurricanes won’t get you, then earthquakes and tsunamis will.

And if you still are feeling safe and secure, ask the folks in Japan and Russia about nuclear power plant accidents, that were supposed to be impossible.

A really good question to ask is: Is there any place safe from Mother Nature’s wrath, or God just wanting to flex His muscles and show off some of His skills? Probably not.

I think the best quote about handling these life questions was given by Ernest Hemingway, when he said:

“Living well is the best revenge.”

Cheers, mate!

** Dedicated to T.F., D.F., and Y.F. with love

By

Stu Silver / “Uncle Zally”

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Where are the really big bucks in investing in mobile home parks?

If you have been riding on the Mobile Home Wealth train with me these past four weeks, you may have been wondering that.

I didn’t discuss how to make a million dollars on one park. Instead, I created a series about how to manage a Mobile Home Park that is a long distance from your home, giving you the safest and most conservative advice, like a good Uncle should.

However, there are many among you who don’t want safe and conservative. You want to “go for the gusto and get rich.” In that case, you want your rich uncle to share his secrets for making the really big bucks in mobile homes. Well, here is the secret:

The Turn-Around Park

I underlined it for you, put it in caps, and made it bold to help you. Okay, see you next week …

Oh, maybe you want to know exactly what a turn-around park is, and when you find one, how you turn it around and make a million dollars? Okay, pull up a chair and let your Uncle Zally explain it to you. Then you can better decide if this is right for you.

What is a Turn-Around Park?

A turn-around mobile home park is one where you can make a dramatic increase in the net yearly profit, or NOI. Even though many sellers might try to convince you their park is undervalued and underpriced, and can throw off much more profit as soon you own it, the truth is not every park can have its profit dramatically increased. Some parks are running just fine, and their profit can’t be improved much. There is nothing wrong with that, as long as you don’t overpay.

The turn-around park is characterized by:

1-   Many empty lots that are not producing any income

2-   Many vacant or abandoned mobile homes not producing any income

3-   Other forms of mismanagement and/or deferred maintenance

Some turn-around parks are turning a profit now, and some aren’t and may be losing money. In those deals where there is a cash flow drain, time becomes important, and you’ll want to increase profits as soon as possible so it doesn’t impact your savings.

Not all turn around parks are ugly and beat up like the picture on the left, but there is usually deferred maintenance and neglect in turn-around parks.

The best deals are parks that are earning a 10% profit now, and still have lots of upside with vacant lots, vacant mobile homes, or other ways of providing value-added profits. In those deals, you have a choice of how fast you want to improve your cash flow, depending on your time and capital.

How do you turn around a park and make a million dollars?

First, to make a million dollars profit, you must increase the net profit of the park, or the NOI, by $100,000 per year, or $8,000 per month. I’m going to give you a simple, realistic example of how you might do that. If your goal is to make more or less than a million dollars, it’s not a problem. This is merely the template you will follow. If you want to buy two parks and make $500,000 on each, or four parks that make $250,000 each, this procedure still works. I picked a million dollars because that is a number that motivates people, and sometimes my nephews and nieces need some exciting motivation to get you off your chairs … don’t you?

Let’s assume you find a park that has 50 lots, priced at $500,000. The owner states that the NOI, or yearly profit is $50,000, so it is producing a 10% return, which is good. The owner is willing to finance 80% of the price, and carry back a $400,000 mortgage at 6% for 30 years that will cost $2,400/month. You will put down $100,000.

Now, 22 of the lots in the park have residents living on them who own their own mobile homes, and they are paying $300/month in lot rent, which is normal for the area. The 28 remaining lots either are vacant, or have an abandoned mobile home on them, but in any case, they are not adding any income, so they have no present value.

You ask why there are so many vacant, unproductive lots, and you are told the owner has been sick for the past few years, and let the park run down. Now he wants to sell and move on. There could be any number of other plausible reasons for mismanagement like divorce, death, family challenges, etc.,  or just plain neglect.

Let’s perform a quick test to see if the NOI, and thus the price, is reasonable. There are 22 lots producing $300/month, or 22 x 300 = $6,600/month. Multiplying by 12 months in the year, $6,600 x 12 = $79,200 gross income.  Since the owner claims there is $50,000 profit, that means there are $79,200 – $50,000 = $29,200 in expenses. $29,200 in expenses on a gross income of $79,200 is 37%, which is reasonable. The common expense ratio is 35 – 40% in a land lease park, which this is.

Okay, the park is priced right, and due diligence must be done later to check the facts.

Now, let’s turn to the 28 empty lots that are either vacant, or have an abandoned mobile home. What will happen to the profit on the park when those lots are filled, or the abandoned mobile homes are fixed and sold?

You will have 28 x $300/month = $8,400/month, or $100,000/year in extra income coming in. What will the expenses be on those formerly empty lots? If  all the utilities are paid by the residents, then there is no real increase in expenses on the empty lots you fill. The money goes right to the bottom line. When you add $100,000 to the pre-existing $50,000 profit, you get a total NOI of $150,000, and a park worth $1,500,000 because it produces a 10% return. You only paid $500,000. You made a profit of $1,000,000.

You started with $100,000, and you made 10 times your money back. How long will it take? If you can fill one lot per month, which is a conservative assumption, it will take a little more than 2 years. How many of you are going to make $1,000,000 in the next two years?

There is much more to learn on how to do this, especially how to fill those empty lots or get those abandoned mobile homes sold. It is not something I can teach you in a blog, but I did give you one simple, realistic example so my nephews and nieces would understand.

How to Get Help Buying a Turn-Around Park

Funny you should ask. Again. As I explained last week, I will be conducting the SAM Camp, the Special Advanced Mentoring, the week before Thanksgiving, on Wednesday, Thursday, Friday, and Sunday, November 16, 17, 18, and 20.

In it we will BUYING mobile home parks, as well as commercial property like warehouses, office buildings, apartments, stores, motels, etc.

The purpose is to come out of the camp with many contracts on good deals for mobile home parks and/or commercial property.

In order to get into the camp, a prerequisite is having read both of my books and listened to both Wealth Systems. This is a 4 day Mastermind session to get property bought, and you don’t want to spend your time and money covering basics. You want to go home with the trophy – getting a good deal. Perhaps even a million dollar turn-around park. Think of how that will impact you and your family?

If you are concerned about financing, I will also arrange for participants in the SAM camp to meet my personal bankers, who are actively pursuing mobile home park loans with investors.

There was an excellent response to my last blog, and now there are only 2 openings left, because I allowed couples to come in for the same price as one investor, or $9,995 for both. I will hold that same price for two more couples, and then we are full.

Remember, the goal is to create a position of high trust with well-trained investors, and we can only do that with a small group of colleagues, NOT a room full of strangers.

When Zally is your Uncle, I’m your Uncle for life.

If you are interested, email me and we will discuss whether this is right for you and me.

Until then … Cheers!

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