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 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:

• 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)