At A Glance

Investment Details

MHP Funds, LLC ("MHPF") plans to acquire, add value, and reposition under-valued, under-managed, under-performing, and improperly capitalized -- but income-generating -- mobile home parks in the U.S. MHPF is looking to assemble a diversified portfolio of cash-flowing mobile home parks to generate income and equity growth.  The exit strategy for this fund is to groom parks to maximize cash flow and appreciation and sell the properties in 1-10 years when the park values have been maximized and market conditions are favorable. 

Realty Mogul investors are being provided the opportunity to invest in Realty Mogul 26, LLC. Realty Mogul 26, LLC is making an investment in Affordable Housing Community Fund 5, LLC ("AHCF5" or the "Fund"), MHPF's 8th mobile home park fund.  Realty Mogul previously closed a capital raise for MHPF's prior fund, Affordable Housing Community Fund 4, LLC, in the amount of $2,985,000. AHCF5 will be a semi-blind pool. Currently, there are three (3) transactions under contract that include six (6) mobile home parks in Indiana, Kentucky, and Wisconsin.  MHPF plans to acquire additional properties throughout the life cycle of the fund.

MHPF will handle all aspects of the investment including finding the parks to buy, completing the due diligence and handling the closing. They will also be responsible for enacting the turnaround plan, managing the properties, handling all accounting and developing appropriate exit strategies. Investors are projected to receive quarterly updates and quarterly distributions, with the first distribution expected in 6-9 months.

Investment Highlights

• Experienced Sponsor with Significant Market Presence: The principals of MHPF have an extensive 15-year track record in the mobile home park industry and have more than 55 years of experience in the real estate industry.  Collectively, they are estimated to be one of the top 15 largest mobile home park owners in the country, with over 100 parks and 10,000 lots in 16 states. 
• High Demand for Affordable Housing: According to census data, over 20 million Americans (8% of all households) live in mobile homes.  MHPF believes that the increasing demand for mobile home parks has largely been driven by a fundamental shift in the U.S. towards creation of lower paying jobs and by the increasing number of retirees downsizing their homes.
• Minimal Capital Investment and Lower Maintenance Costs: MHPF's primary business plan consists of acquiring mobile home parks and renting the lots to tenants who own their homes. Under this plan, MHPF is primarily responsible for maintaining the land, not the mobile homes on the land.  This strategy serves to limit the required upfront capital investment and reduces ongoing maintenance costs.  This strategy also helps enable the tenants to enjoy the pride of owning their own homes, and since the residents are responsible for maintaining their own homes and lots, MHPF does not project needing any major renovation costs to upgrade facilities to attract customers over time.  This does not, however, preclude MHPF from acquiring mobile homes themselves. 
• Stable Tenant Base with Limited Rollover: In the typical mobile home park, the resident base usually consists of residents living on social security checks or with lower paying jobs that tend to be more secure and replaceable. While most of these residents are not generally financially savvy, they can usually produce the amount necessary for lot rent to keep their home. Due to the high cost of moving a mobile home, which MHPF estimates to be approximately $5,000, tenants are less likely to move.
• Ability to Maximize Revenue: MHPF believes that when residents own their homes in a mobile home park, the ability to increase rents or pass-through utility expenses and retain them as residents is much higher.  For example, an effective rental increase of $20 would cost a resident an additional $240 per year.  Compared to the cost of moving the home, this increase is much less.  
• Limited Competition: The supply of mobile home parks is limited in the U.S. due to high entry costs, adverse regulations, extensive government restrictions, and limited access to water and sewer connections. In many areas of the U.S., it is difficult to obtain the proper zoning and meet all the requirements to build a new community. Once the permits are in place and licenses have been obtained, the curbs, roads, driveways, utilities, and other infrastructure improvements need to be built out, increasing a potential developer's costs.  A potential mobile home park developer also needs to cover the carrying costs until enough homes have been brought into the community to cover expenses.  Furthermore, mobile home parks are often perceived negatively and can meet extreme resistance from nearby homeowners and business owners.
• Strong Pipeline: MHPF continues to maintain a strong investment pipeline and is able to source transactions through several channels -- a large database of long-time owners that have not efficiently operated or improperly capitalized their properties, bank foreclosures, and referrals from boot camp attendees (the boot camp is an educational seminar on mobile home park investing held by the principals of the sponsor).  
• Dislocation in the Capital Markets: More buyers for mobile home parks have recently entered the market, and although the credit markets have loosened up on higher-priced properties, financing is still often difficult to obtain for properties in need of repositioning.  This has created an opportunity for all-cash purchases coupled with a refinance after the repositioning work is near completion or has been completed. Furthermore, lenders prefer and often demand only seasoned, credible borrowers, which often precludes new entrants from investing in the mobile home park space. 
• Accelerated Depreciation (Potential Tax Benefit): When comparing depreciation of mobile home parks to other investment properties, apartment buildings typically have a large portion of their value attributable to the building itself that can be depreciated over a 27.5-year period. However, for mobile home parks, the depreciable costs are typically the roads, water lines, sewer lines, electric poles, and other infrastructure improvements.  Since these are considered land improvements for tax purposes, they can typically be depreciated over a much shorter period of 15 years.  This accelerated depreciation over the first 15 years of ownership can be a major tax benefit for some investors.

MHPF plans to work with RV Horizons, Inc. ("RVH"), an experienced mobile home park property management firm owned by one of the principals of MHPF, Dave Reynolds, to enact turn-around plans and perform the day-to-day operations for properties acquired by AHCF5.  RV Horizons employs more than 47 people at offices in Cedaredge, Colorado (company headquarters), Montrose, Colorado and Niles, Michigan, and has more than 119 managers and supervisors in the field.  The team at RVH includes a corporate office staff, district managers and rehab crews that work with the onsite managers as described below. 

• Onsite Managers: Each mobile home park has an onsite manager and maintenance personnel. The onsite manager is responsible for record keeping, collecting and depositing rent, property maintenance, showing available lots and homes to prospective residents, enforcing rules and regulations of the community, handling resident problems and questions, and all duties involved with managing the property.
• Corporate Office: The corporate office consists of nine (9) full-time district coordinators who are in charge of working with district managers and onsite park managers.  They oversee the paperwork, deposits, leases, titles, and licenses for each park.  There is also a team of three (3) people in the accounts payable department who make sure the payments are reconciled, approved, and made on time.
• District Mangers: There are currently nine (9) full-time district managers who oversee approximately 10-15 parks each. They are in charge of communications between the corporate office and onsite managers. In addition, they typically make bi-monthly visits (more if necessary) to each property to check on the property and its management. The district managers are also in charge of overseeing rehab crews.
• Rehab Crews: There are typically 10 full-time rehabbers on payroll plus at least five (5) independent full-time contractors who travel from park to park and stay approximately two (2) weeks to three (3) months to aid in turnaround after MHPF purchases it.  They also rehab mobile homes which can be sold to future residents.

Risks and Risk Mitigation*

• Forward-Looking Statements: Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated,” “projected”, “forecasted”, “estimated”, “prospective”, “believes,” “expects,” ”plans” “future” “intends,”, “should,” “can”, “could”, “might”, “potential,” “continue,” “may,” “will,” and similar expressions to identify these forward-looking statements.
• Illiquid Investment - Transfer Restrictions & No Public Market: The transferability of membership interests in Realty Mogul 26, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.
• Management Risk: Investors will be relying solely on the manager of Affordable Housing Community Fund 5, LLC for the execution of its business plan. That manager in turn may rely on other key personnel with relevant experience and knowledge, including contractors and consultants.  Members of Affordable Housing Community Fund 5, LLC (including Realty Mogul 26, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the manager of Affordable Housing Community Fund 5, LLC has significant operating experience, Affordable Housing Community Fund 5, LLC  is a newly formed company and has no operating history or record of performance. 
• Uncertain Distributions: The manager of Affordable Housing Community Fund 5, LLC  cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 26, LLC) from either net cash from operations or proceeds from the sale of the asset. That manager, in its discretion, may retain any portion of such funds for property operations or capital improvements. 
• General Economic and Market Risks: While the Sponsor has conducted significant research to justify the intended rental rates and sales price relative to comparable properties in the market, its best efforts to forecast economic conditions cannot state for certain whether or not investor sentiment and the capital markets will be favorable to the property at the intended disposition date. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand for real estate investments, all of which are beyond the control of the manager of Affordable Housing Community Fund 5, LLC.
• Adverse Market and Economic Conditions: Local conditions in the market of each mobile home park may significantly affect occupancy, rental rates, and the operating performance of each property.  These risks include plant closings, industry slowdowns, and other factors that could potentially affect the local economy. Rent control or rent stabilization laws, or other laws regulating mobile home parks, could also prevent MHPF from raising lot rents or selling mobile homes.  Adverse economic conditions such as increases in property taxes, utilities, compensation for on-site associates and routine maintenance could cause an increase in MHPF's operating expenses, which could potentially negatively affect the fund's financial performance.  MHPF has more than 15 years of experience buying and selling mobile homes, with over 100 mobile home parks and 10,000 lots owned and operated by its affiliates.  The company also undergoes an extensive underwriting process prior to each acquisition.  With their experience and rigorous diligence process, MHPF is able to partially mitigate this risk.
• Competitive Housing Alternatives: Properties owned by the fund will compete with other housing alternatives to attract residents, including other mobile home parks, condominiums, and single-family homes which are available for rent or sale.  Competitive residential housing in a particular area could affect MHPF's ability to sell its mobile homes, rent its mobile home lots for occupancy, and/or to increase or maintain lot rental rates.  Improvements to each investment property planned by MHPF will be designed to make them more attractive to new and existing occupants, in hopes of creating a competitive advantage as compared to other housing alternatives in the marketplace.

*The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Investor Document Package for a discussion of additional risks.  We recommend that you consult with a Financial Adviser, Attorney, Accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.  All investment involves risk of loss, and therefore cannot be guaranteed.  As with any investment, past performance is no guarantee of future results.

Interested in learning more about mobile home parks and semi-blind funds?

Review our blog posts on the subject:

• Introduction to Mobile Home Park Investing
• Semi-Blind Real Estate Funds

MHPF also provides bootcamps for mobile home park investing across the country. Here is a link to one of their presentations:
(Click HERE)