MHP Funds, LLC
The principals of MHP Funds, LLC ("MHPF") and their affiliated companies are estimated to collectively have the 18th largest mobile home park portfolio in the country with over 7,500 lots in 15 states. The principals have an extensive 15-year track record of success in the mobile home park industry, and have over 55 years of combined real estate investing experience. They have long established relationships with key market participants such as banks, insurance companies, real estate agents and brokers, and are able to source attractive investments through their own popular MHPF listing websites. Their extensive experience in both the ownership and operation of mobile home parks makes them uniquely situated to quickly assess investments, determine their risks, evaluate possible turn-around plans and analyze future growth potential. They have established, proven systems for handling all aspects of mobile home park investing, and their extensive backgrounds and relationships help them identify properties that minimize investment risk and maximize cash on cash returns for investors.
MHPF has developed a set of stringent acquisition criteria that addresses both strong cash flow from day one and adding value to each mobile home park through various means such as increasing rental rates and occupancy, reducing expenses, and improving the quality of the community. The overall objective for each property is to provide an excellent return on investment for both the principals and investors involved, while at the same time providing every resident with a safe and affordable place to live.
The principals of MHPF are recognized as industry leaders, highly regarded educators, and consultants, having authored books and written articles on mobile home parks, conducted mobile home park "boot camps" and educational seminars, and served as mentors and advisors to other mobile home park investors. They have also developed some of the most respected websites dedicated to the MHPF and RV park industries.
Performance of Prior Funds
Members of MHPF have a strong track record in mobile home park investing that spans over a decade. Since 2010, they have raised over $32 million for six similarly structure funds. However, as with any investment, past performance is no guarantee of future results.
- MHPS Alumni, LLC ("Alumni 1"): This fund was fully subscribed in May 2010. A total of $2 million of investor capital was raised and used to purchase 437 spaces in five parks located in Colorado, Nebraska, Kansas, and Wisconsin. To date, three parks have been sold (La Junta, CO; Crete, NE; and Black River Falls, WI) and two additional parks were purchased (a portion of Elsmere, KY, and a park in Platteville, WI).
- MHPS Alumni 2, LLC ("Alumni 2"): This fund was fully subscribed in October 2010. A total of $2 million of investor capital was raised and used to purchase all or portions of 595 spaces in five parks located in Illinois, North Dakota, and Oklahoma. In addition, the fund has purchased a portion of a park in Elsmere, KY.
- MHPS Alumni 3, LLC ("Alumni 3"): This fund was fully subscribed in June 2011. A total of $3 million of investor capital was raised and used to purchase all or portions of 985 spaces in 12 parks in Iowa, Minnesota, Wisconsin, Texas, North Dakota, Massachusetts, and Colorado. To date, two parks have been sold (New Braunfels, TX and Eau Clair, WI) and a portion of a park in Elsmere, KY has been purchased.
- Affordable Housing Community Fund 1, LLC ("AHCF 1"): This fund was fully subscribed in February 2012. A total of $5 million of investor capital was raised and used to purchase all or portions of over 1,700 spaces in 18 parks in Nebraska, Illinois, Kansas, Colorado, Minnesota, Iowa, Texas, and Kentucky.
- Affordable Housing Community Fund 2, LLC ("AHCF 2"): This fund was fully subscribed in October 2012. A total of $10 million of investor capital was raised and used to purchase all or portions of almost 2,100 spaces in 16 parks in Iowa, South Carolina, Oklahoma, Illinois, Kansas, Wisconsin, and Nebraska.
- Affordable Housing Community Fund 3, LLC ("AHCF 3"): This fund is estimated to be fully subscribed by the end of July 2013. A total of $10 million of investor capital is being raised to purchase all of portions of over 2,000 spaces in 18 parks in states such as Washington, North Dakota, Texas, Indiana, Missouri, Illinois, and Nebraska.
|PARAMETER||ALUMNI 1||ALUMNI 2||ALUMNI 3||AHCF 1||AHCF 2||AHCF 3|
|Date Fully Subscribed||May 2010||Oct. 2010||Jun 2011||Feb. 2012||Oct. 2012||July 2013|
|Investor Capital Raised ($)||$2,000,000||$2,014,500||$3,000,000||$5,000,000||$10,000,000||$10,000,000|
|Investor Capital Returned ($)||$450,000||$0||$0||$0||$0||$0|
|Unreturned Investor Capital ($)||$1,550,000||$2,014,400||$3,000,000||$5,000,000||$10,000,000||$10,000,000|
|Number of Parks Owned (Fully or Partially)||4||5||8||13||14||18|
|Number of Mobile Home Park Lots (Ownership % Adjusted)||274||492||565||835||1424|
|Estimated Current Occupancy (%)||86%||83%||70%||77%||82%||N/A**|
*As with any investment, past performance is no guarantee of future results
Dave has specialized in the acquisition of mobile home and RV parks for over 15 years, and has managed companies that have owned and operated over 100 parks in 20 states. Dave co-manages multiple MHP investment funds and currently participates in the ownership of over 7,500 MHP lots. Dave is a licensed Colorado real estate broker and has been involved in additional MHP transactions in that capacity. He acts as a consultant to other MHP investors and operators, has authored four books on the subject, and has developed several of the most popular websites dedicated to the mobile home and RV park industries. His websites collectively receive over 10 million hits per year. Since June 2008, Dave and Frank Rolfe have conducted widely attended quarterly MHP boot camps. Dave has a B.S. in Accounting from Mesa State College, and has completed additional graduate courses in accounting and taxation at Colorado State University.
Frank has been active in all facets of the MHP business for over a decade. His companies have been ranked as high as the 63rd largest MHP owner in the U.S. Frank has managed companies that have owned and operated over 100 MHPs. Frank co-manages multiple MHP investment funds and currently participates in the ownership of over 7,500 MHP lots. Frank has performed due diligence on hundreds of MHPs for other MHP owners, and is a well-known author and speaker at MHP investing seminars and real estate investment clubs. Since June 2008, Frank and Dave Reynolds have conducted widely attended quarterly MHP boot camps. Prior to his MHP business, Frank was the largest private owner of billboards in Dallas/Ft. Worth.
Eric co-manages multiple MHP investment funds with Dave Reynolds and Frank Rolfe, focusing on investor relations, raising capital, and property acquisitions & dispositions, including MHP underwriting and due diligence. Eric participates in the ownership of over 5,000 MHP lots. Eric holds a Ph.D. in Electrical Engineering from the University of California at San Diego, and has been investing in real estate since 2005. In 2006 Eric joined the Board of Directors of the non-profit North San Diego Real Estate Investors Association, Inc. (NSDREI), one of San Diego's leading real estate education and networking organizations. He has served as President of the NSDREI since 2008. Eric also serves as an educator, mentor and consultant to other real estate investors and professionals.
At A Glance
|Investment Type:||Semi-Blind Diversified Fund|
|Investment Strategy:||Buy and Hold|
|Property Type:||Mobile Home Park|
|Target Fund Size:||$20 million|
|Hold Period:||5-10 years|
|Estimated Number of Properties:||15-30 properties|
|Location:||Various - parks will be purchased all over the U.S.|
|Distributions to Realty Mogul 6, LLC:||10% Preferred Return with excess cash flows and appreciation shared 50/50|
|Distribution Timing:||First distribution projected to occur in 6-9 months|
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 value is maximized and market conditions are favorable.
Realty Mogul investors are being provided the opportunity to invest in Realty Mogul 6, LLC. Realty Mogul 6, LLC is making an investment in Affordable Housing Community Fund 4, LLC ("AHCF4", "Fund"), MHPF's 7th mobile home park fund. This is Realty Mogul 6's second raise of funding for this Fund; the first raise closed on October 1, 2013. AHCF4 will be a semi-blind pool. MHPF has acquired nine (9) properties for this Fund in the last 3 months and will acquire additional properties throughout the life cycle of the fund.
The managers of 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 can expect to receive quarterly updates and quarterly distributions, with the first distribution expected in 6-9 months.
Investment highlights include*:
- Strong Sponsor with Significant Market Presence: The managers of MPHF have an extensive 15-year track record in the mobile home park industry and have over 55 years of experience in the real estate industry. They are estimated to collectively have the 18th largest mobile home park portfolio in the country with over 7,500 lots in 15 states.
- High Demand for Affordable Housing: According to census data, over 20 million Americans (8% of all households) live in mobile homes. 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. MPHF is primarily responsible for maintaining the land, not the mobile homes on the land. This strategy limits the required upfront capital investment and reduces ongoing maintenance costs. This strategy enables the tenants to enjoy the pride of owning their own homes, and since the residents are responsible for maintaining their own homes and lots, there are no major renovation costs needed to upgrade facilities to attract customers over time. This does not, however, preclude MPHF from acquiring mobile homes themselves.
- Stable and Predictable Income Stream: 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 unlikely to move, generating a stable and predictable income stream.
- Ability to Maximize Revenue: 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, significantly 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, referrals from boot camp attendees, and bank foreclosures.
- 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 (Tax Benefit): When comparing depreciation of mobile home parks to other investment properties, apartment buildings typically have a large 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 will 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 AHCF4. 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 community will have 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 seven full-time district coordinators that are in charge of working with the district managers as well as the onsite park managers. They oversee the paperwork, deposits, leases, titles, and licenses for each park. There is also a team of three people in the accounts payable department responsible for making sure payments are reconciled, approved, and made on time.
- District Mangers: There are currently seven full-time district managers that oversee approximately 10-15 parks each. They are in charge of communications with the corporate office and the 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 the rehab crews.
- Rehab Crews: There are five full-time rehab specialists on the payroll and at least three independent full-time contractors that travel between parks and may stay for a period ranging from two weeks to three months to aid the property's renovation post-acquisition. They also repair and maintain existing mobile homes so that they can be sold to future residents.
Risks and Risk Mitigation*
- 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 buying and selling mobile homes, with over 100 mobile home parks / 7,500 lots owned and operated by its affiliates. The company also undergoes an extensive underwriting process prior to each acquisition. With its extensive 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 that 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:
MHPF also provides bootcamps for mobile home park investing across the country. Here is a link to one of their presentations:
MHPF currently owns nine (9) mobile home parks in this fund and is in the process of acquiring four (4) additional parks in the next two months.
|Park Name||Location||Status||Closing Date||AHCF 4 Ownership||Purchase Price||Total Spaces||Occupancy||Avg. Lot Rent|
|Riverridge MHC||Grand Praire, TX||Acquired||9/24/13||100%||$2,500,000||111||67.6%||$440|
|Spalls MH Village||Monroeville, IN||Acquired||10/17/13||100%||$505,000||81||49.4%||$240|
|Hillscrest MHP||Clarks Grove, MN||Acquired||10/30/13||100%||$1,400,000||97||93.8%||$180|
|Valley View Terrace||Belle Plaine, MN||Acquired||11/21/13||100%||$1,500,000||68||83.8%||$425|
|Chancellors MHP||Fountain, CO||Acquired||12/15/13||50%||$1,825,000||121||54.5%||$365|
|Mobile Lodge MHC||Lecompton, KS||Acquired||12/20/13||100%||$880,000||55||69.1%||$305|
|Mobile Manor||Wichita, KS||Acquired||12/20/13||100%||$2,500,000||277||63.2%||$242|
|Oak Terrace & Cedar Knob||Killeen, TX||Acquired||12/23/13||40.5%||$866,000||98||75.5%||$220|
|Woodland Estates MHP||Decatur, IL||Pending||2/15/14*||50%||$1,100,000||265||37.0%||$280|
|Hi Vue MHP||Sartell, MN||In Due Diligence||2/28/14*||100%||$3,050,000||167||95.8%||$330|
|Rustic Manor||Anderson, IN||In Due Diligence||3/10/14*||100%||$395,000||41||92.7%||$175|
|Rex Aire MHP||Arnold, MO||In Due Diligence||3/10/14*||50%||$2,275,000||100||97.0%||$240|
*Estimated Closing Dates
- Riveridge MHC, Grand Prairie, TX: Riveridge MHC is located in Grand Prairie, Texas, a market where the occupancy for mobile home parks is 95%. The anticipated exit strategy could be to sell to RHP Properties, one of the nation's largest owners of mobile home parks, which also owns a nearby property. The acquisition is a re-capitalization for the current owner, who is a major developer. The primary objective in this investment is to enforce collections, fill lots, reduce high expenses, and work to recapture 100% of the water and sewer costs. This acquisition will likely be financed with a conduit loan.
- Spalls MH Village, Monroeville, IN: This is a foreclosure mobile home park that was purchased from the foreclosure sale purchaser. The park is well located in an area near other MHPF owned parks and there are currently 45 occupied spaces from the 85 total lots at the park. The park may potentially be a good short term hold until it is sold or refinanced.
- Hillcrest MHP, Clark Grove, MN: This park is well located in a strong market nearby other mobile home parks that MHPF owns and operates. The primary objective of this investment is to increase net operating income by both increasing revenue through raising current rents and decreasing costs by passing through particular expenses that are currently the responsibility of the landlord to the tenants, specifically water, sewer and trash costs.
- Valley View Terrace, Belle Plaine, MN: Valley View Terrace is the only mobile home park in Belle Plaine, MN. Belle Plaine is 25 miles southwest of Minneapolis, 35 minutes from the Mall of America, and has a population of approximately 7,000. The mobile home park has 68 mobile home lots and 43 storage units. There are currently 57 lots occupied and 11 storage units leased. All of the streets except for one small private street are owned and maintained by the city. The primary objective in this investment is to enforce collections and fill lots. This acquisition will likely be financed with a local bank loan.
- Chancellors MHP, Fountain, CO: AHCF 4 was the winning bidder for this park at an auction and acquired it for a very attractive price. This park is located in an excellent location in Colorado with substantial upside value.
- Westhill, Emporia, KS: This park is located in an area that is expected to have a significant number of new jobs come to town in the near future. The primary objective of this investment is to increase current rents and increase occupancy by renting the remaining unoccupied homes, thereby increasing cash flow and property value.
- Mobile Lodge MHC Lecompton, KS: This park is located in a high demand area near Kansas University. It has been very well kept and shows well. The primary objective is to maximize net operating income by filling remaining occupancy.
- Mobile Manor, Wichita, KS: This is an attractive looking park on a mobile home park row in Wichita. Wichita is a growing city in Kansas with a declining unemployment rate. It is well located and has good infrastructure.
- Oak Terrace & Cedar Knob Killeen, TX: These two parks are located in a strong mobile home market where it is difficult to find parks at under $10,000 per lot. The plan for these parks includes completing some deferred maintenance by way of cleaning the park and completing some road work after which the management team expects to substantially increase the occupancy percentage by filling current vacant lots.
- Woodland Estates MHP, Dectaur, IL: Decatur, IL has a population of 115,00 and a well-diversified employment base due to the nearby presence of Caterpillar, Archer Daniels Midland, several hospitals and Millikan University. This park is located directly across the street from the Archer Daniels Midland "campus." Archer Daniels Midland is one of the largest companies in the United States with roughly $89 billion in annual sales. In the opinion of MHPF, the current owners of the park have mismanaged the park to the point of virtually abandoned it, which has resulted in a very low occupancy percentage. The business plan for this property will be focused on significantly increasing the occupancy level from the existing 37%.
- Hi Vue MHP Sartel, MN: This park is currently in due diligence.
- Rustic Manor, Anderson, IN: This park is located in a strong market near other parks that are owned and operated by MHPF. Rents for this park are currently under market by $35-$50/month.
- Rex Aire MHP, Arnold, MO: MHPF believes that this park is superior to another park that it currently owns and operates in the same market due to this park's newer homes and larger lots. However, this park currently generates $240/lot while MHPF's other park currently generates $340/lot. MHPF will look to increase rents to market levels for this park after acquisition, thereby significantly increasing operating income.
Based on the characteristics of properties purchased thus far for MHPF, properties purchased for prior funds (2010-2012), and the types of properties MHPF is currently seeing in the market, the investment criteria below outlines the typical profile for a mobile home park property that could be acquired for this fund.
|Price per lot ($)||$12,300||
|Utilities: Water and Sewer||City services||
|Utilities: Gas and Electric||Not master-metered||
|Metro population||10,000 to 2 million+||
|Location||Midwest and Great Plains region||
|Age/condition of homes||Mix of newer and older, in average to good condition||
|Tenant vs. park-owned homes||Mostly tenant-owned||
|Amenities||Few to none||
|Permit status||Only legally permitted||
|Going-in cap rate||Greater than 10%||
|Going-in cash-on-cash (CoC)||Greater than 15%||
MHPF currently owns mobile home parks in 15 states. In this fund, MHPF will acquire mobile home parks all across the U.S., with acquisitions generally located in the Midwest and the Great Plains region.
For this fund MHPF currently owns properties for in Texas, Indiana, Minnesota, Colorado, and Kansas and has identified several additional properties for near-term acquisition in Illinois, Minnesota, Indiana, and Missouri.
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