Mobile-Home Economics
The economics of mobile homes are particularly alluring to folks who’ve made their living in the markets. Many counties in the U.S. have banned or discouraged construction of new trailer parks because the inhabitants are poor, pay little in taxes and drain resources. Yet demand is higher than ever, new investors in the parks say, because so many people never got back on their feet after the recession.
David Protiva, a former mortgage-backed-bond salesman at Kidder, Peabody & Co. and Donaldson, Lufkin & Jenrette Inc., now owns four trailer parks in Georgia. He’s noticed that until 2008, most people coming into his parks were moving up; they owned nothing before buying a trailer. Since 2009, half of his residents have come to him from conventional homes, moving down, he says.
Roughly 6 percent of Americans lived in mobile homes in 2012, according to the U.S. Census Bureau. Until recently, billionaire Sam Zell and a few other investors who run real estate investment trusts had the market to themselves.
“We like the oligopoly nature of our business,” Zell said on a 2012 analyst conference call for his Chicago-based Equity Lifestyle Properties Inc., which owns 71,500 trailer sites.
Senior Parks
Warren Buffett targeted the industry more than a decade ago when he purchased Clayton Homes Inc., the largest manufacturer of mobile homes. Now, private-equity firms are starting to prowl the parks. Carlyle Group LP bought two in Florida in October for a combined $31 million. Both are high-end senior parks, where tenants must be 55 or over, and one is just steps from the Atlantic.
The new tycoons in the business are professionals like Weissman and Shlachter, who are willing to buy smaller, sometimes squalid parks, where tenants have damaged credit and maybe criminal records. The sellers are often mom-and-pop owners who set up the parks in the 1960s and 1970s and have little incentive to improve them because tenants can’t afford to leave. One Colorado owner bragged to Shlachter about never plowing the snow, which saved him money.
“It’s hairy, and it’s colorful, and it’s sometimes scary,” Shlachter says.
Weissman and Shlachter take pride in improving the lives of residents in some of the more rundown parks they’ve bought. And they say owning trailer parks has taught them what it’s like to be poor in America. Many tenants can’t get bank accounts because they have wretched credit. Instead, they use prepaid debit cards that charge a fee of as much as $4 to load just $20 onto them.