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FEATURED! Possible Blue Ocean? Affordable "tiny" housing park

Discussion in 'Real Estate Investing' started by MJ DeMarco, Jul 26, 2018.

  1. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    If you read Blue Ocean, (recommended read in the bookstore) I was thinking that this might be a "possible" Blue Ocean...

    Cross a mobile home park with an gated HOA community and the TINY HOUSE trend...

    So this would be a bit more upscale, featuring tiny homes (< 1000 square ft) and with an HOA to help assist managing "rift raft" and other things associated with mobile home parks.

    There's a growing trend among young people who recognize that a big house and a big mortgage simply isn't worth it anymore. As a result, we've seen big growth in the Tiny House trend as more and more people seek travel and experiences, other than being house broke.

    Could a "tiny house" park be a possible Blue Ocean? Obviously the dirt is in the details and the branding so it doesn't cross into the realm of a trailer park.

    Thoughts?
     
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  2. CROJosh
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  3. loop101
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    loop101 Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Are these tiny homes the people's domiciles? Do their driver's license have the tiny home's address on it? You will have less people problems with a 55+ older community.
     
  4. minivanman
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    You can take the tiny house out of the trailer park but you can't take the trailer park out of the tiny house :)
     
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    My girlfriend had a very similar idea last year. A real estate agent told us about a small mobile home park for sale in our town and we went to look at it.
    It was in the oldest part of town on the last remaining run down street; the nearby streets were all being rehabbed or rebuilt and were coming up a lot in value. The park was 8 spaces, 3 of which had ramshackle trailers with people living in them- the other trailers were collapsing or just heaps of rubble.
    "All this!" for only $450k.
    She said we should clear it off and build tiny houses we could rent out long term or Airbnb. Her concept was to have a little community with a manager and activities like concerts by a firepit and art and film showings, etc.
    I liked the concept but after a little figuring concluded that with all the costs, time and possible complications involved it didn't make sense to do it with such a small number of units. In the right locale with 100 or 200 units I think it could definitely work though. I realized from watching a few episodes of the "Tiny House" TV show how much buyers were willing to pay per sq/ft and it's WAY higher than a normal sized house.
     
  6. WJK
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    I've looked at this. There are terrible problems with this market segment. I wrote a blog on it. READ MORE
    They don't have a HUD sticker, so they can't be occupied year around or put into most mobile home parks. And they can't be put into an RV park either year around.
    Most cities' & counties' Building & Safety regs won't allow them to put onto lots. They are too small. If allowed, they would have to go onto a permanent foundation.
    Almost all these units are NOT built by approved RV builders, so they can't be insured under almost all national companies. That makes them unable to be financed by an FDIC bank or traditional credit unions.
    So, you most probably have a unit that was constructed by an unapproved builder, that has no place to go on a permanent basis and cannot be insured nor financed.
    And they aren't that moveable either. They are a lot heavier and less aerodynamic than traditional RVs
    Not my kind of investment!
     
  7. minivanman
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    minivanman Gold Contributor Speedway Pass

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    As far as just regular 'parks' for tiny houses, we have a few around here. Our nephew and his wife were going to buy one to live in but luckily they came to their senses. All that is allowed are tiny houses and they are permanent.
     
  8. WJK
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    Some areas are starting to allow that kind of developments. Permanent? Aren't they supposed to be movable? BUT, they still have the lack of HUD stickers, insurance, and financing problems. And without current good data to counter, I'm afraid they are going to depreciate like RVs. RVs only have 20-year economic life. They go from 100% value on the sales lot to 0 over those years.
     
  9. CROJosh
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    Very interesting, I didn’t consider the RV/depreciation angle. However I do think as municipalities see the cashflow, codes will change - and if you can insure it and borrow money for it like a house, do you think it becomes a different animal?
     
  10. WJK
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    Maybe, but probably not. They fall outside of all the established systems -- RVs, mobile homes, houses, etc. They don't fit anywhere.
    I own a mobile home park and 40 of the mobile homes are my rental units. Did you read all the negative comments about mobile homes and MH parks? I have built a good, safe, private community here -- but, I still have people around me who make terrible comments about "trailer trash." Tiny homes are fighting the same stigma and a well known RV resale history -- over the long haul. I don't see how tiny houses are going to rise above that bias.
     
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  11. Denim Chicken
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    I thought about this before. I feel like the problem that tiny houses solve is affordable rent and because of that, it will inevitably attract certain types of tenants. And there's only so much management you can do without discrimination. The thing about managing a community or group is that when you have 1 bad neighbor, rather than the bad neighbor leaving, it causes the good people to go.

    If rent was truly affordable say $1000/mo for a house here in CA or even $1500... what's to stop criminals, dealers and drug users from applying and taking up housing versus the ideal, young college graduate who wants a nice small place that's affordable? Because I see that already in mobile homes communities around here even the upscale ones.

    The only way I feel that it would work, is if it was a commune or some sort of restricted community based on certain criteria to keep out bad tenants and criminals that can afford to pay that price point as well.

    Also, as someone who looked into tiny housing before there are a lot of bureaucratic and government laws that seem hell bent on not wanting any tiny houses around. I'm not sure what the reasoning is but you would think that in places where rents are extremely high (i.e. socal), everyone would be open to more smaller but private spaces such as mobile/rv/tiny home set ups and yet it seems impossible to get that even started at all due to city regulations.

    Ideally speaking, I would love it if this was possible as it would open up a lot more housing that's affordable, sustainable and efficient for a lot of people in crowded areas where housing is at a premium.
     
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  12. minivanman
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    A tiny house doesn't seem very affordable to me. If I was broke looking for a place, I could buy a cheap travel trailer for $2500 or a cheap tiny house for $25,000. I'm thinkin I'd go for the travel trailer.

    They are only mobile if you want them to be, they don't have to be. The parks that I've seen are in the middle of no where and this is Texas..... if you've been in the country in Texas you know they do what they want. Laws are for city folk. Code enforcement officer? LMAO They don't even know how to spell that, let alone have one.

    Ok, I can't come back to this conversation because it's making me want to buy in to a regular trailer park like in the other thread and I'm trying to resist the urge :jawdrop:
     
  13. CROJosh
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    I think that was MJ’s reasoning for the gated HOA - an upper middle class market tenant paying a premium for the lifestyle/statement. But bad tenants/criminals are relative, I live in a “nice” part of town and we have our own kind of crazies.
     
  14. MJ DeMarco
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    They're not paying for the house, they're paying for their freedom. The biggest NUT of life will always be your shelter. With this knocked out, life is much different.

    That's really the angle here, but also making it so folks don't feel like they're living in a trailer park (and all the associated stigmas.)

    Actually all these "obstacles" make the opportunity much that more attractive to me.

    The difficulty is the opportunity. It would be hard for any municipality to deny the opportunity for people to have affordable housing, especially in high-rent/mortgage places like CALI.
     
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  15. CareCPA
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    Some questions, since I'm a little ignorant of this area of RE development:

    Why not? If you own the RV park, don't you get to say when people can live there?

    How do campgrounds with tiny cabins get around this? Is this a local zoning issue? If so, that would vary by city.

    If they aren't technically houses, then couldn't you self-finance and not run afoul of the lending laws?

    I'm picturing a campground. but instead of tent and cabins, you have tiny houses.
     
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    I live in an area in Alaska which doesn't have Building and Safety, but we do have State housing laws.
    The laws on mobile home parks have caused me to no longer rent my spaces to mobile home owners. I only have 2 space renters left. I have bought mobile homes as people have moved. Under the new rules, I can't get rid of people who own their homes. I have to prove that they committed a crime (which takes a conviction) and that particular crime adversely affects their neighbors. Or that they don't pay their space rent. No matter how stupid they act, no matter how many rules they break, I'm stuck with them.
    So, now I have 40 rentals. I can evict renters with a 30-day notice when they act stupid. Since I provide housing, I am subject to the federal Fair Housing Laws. And that's a whole another set of rules and laws.
    Most Building and Safety laws nationwide don't allow a mobile home park owner to allow Tiny Houses into mobile home parks. They must have a HUD sticker, which means they were built by an approved factory. They are built to at least minimum standards. Tiny Houses regularly don't meet those standards since they are individually planned and built.
    For campgrounds and RV parks, per most Building and Safety laws, RVs can only stay in one spot for less than a year. I have seen people in some those parks move from space to space to comply with the rules. At times I have seen them actually swap rigs to comply.
    Cabins are permanent structures and they come under different rules & laws than Tiny Houses, which are on wheels.
    The federal Fair Housing laws apply to everything -- at times those laws spill over into unconventional housing. Many local governments also have rules on Tiny Houses, RVs, live-aboard boats, and residential camps.
    The rules vary, and they are totally technical.
     
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  17. WJK
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    Senior housing is an exception to the Fair Housing laws. But, there are still problems unless special Building and Safety rules are passed for that jurisdiction.
     
  18. WJK
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    EXCEPT --
    1. Because of the lack of insurance, it's more of risk. There are several cases of Tiny Homes being stolen. Somebody just hooked on and drove off with them. It's a dead loss for the owner.
    2. Without available financing, these are cash transactions
    3. The depreciation issue is the elephant in the room. IF they depreciate like RVs, they only have a 20 life -- 100% to 0 in 20 years. That means that the savings is short term without building up housing equity over the owner's lifetime. Tiny Homes appear to be on the same level as owning a car.
    4. One's quality of life depends on one's neighbors and the community management. What if the dope dealers in the neighborhood buy up the Tiny Homes on your block?
    It sounds sexy, but I have some major questions about the whole idea.
     
    Last edited: Jul 27, 2018
  19. Late Bloomer
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    Several people pointed out the challenges if this is just a housing play. I think the potential would be to offer a lifestyle by subscription, not just housing.

    What if the community center including some kind of co-working, business incubation setup, as well as big community kitchen and ping-pong, like a hot Internet company's HQ? What if this was pitched at mostly Millennial entrepreneurs, who could work with other people, be close to their kids, walk home for lunch in five minutes, and have kind of a dorm feel but a little more independence?

    What if, like London's posh clubs, the membership provided the opportunity to reserve living quarters?

    What if, like NYC co-ops, the existing membership could elect a board that can screen applicants?

    What if, as Bucky Fuller suggested decades ago, a business offers housing as a subscription and when you want to move, your subscription lets you instantly move into just as nice a house in your new location?

    Maybe instead of year-round, it's for temporary stays from a minimum 1 week to maximum 3 months? An affordable retreat colony that offers something while someone has a project? I could enjoy being at a place like that for a couple of months in order to write the first draft of a book, once I have the notes and outline.

    "Live affordably in a tiny house, without riff-raff" is a somewhat nice offer. "For less than a regular house payment, move into a life-changing community" would be a lot more appealing. My specific ideas might not be the answer. But I think the answer is in some kind of community.

    I'd also look up Tony Hsieh's experience moving out of the luxury condo to the little trailer, so he could be closer to his tribe.
     
  20. CareCPA
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    Ah, I see exactly where the misunderstanding is. You are discussing tiny homes in the sense of a small house built on a trailer, able to be pulled and moved with a truck.

    I was thinking of something more like this: Welcome To "Bestie Row": Lifelong Friends Build Row Of Tiny Houses In The Middle Of Nowhere.
    In my mind, build the houses and rent them out. since they would most likely be on one parcel of land for zoning purposes (getting around the square foot minimums that most places have for a primary dwelling).

    This is probably different than what @MJ DeMarco was initially discussing, but most people my age who are going to want to live in a tiny home aren't going to have a truck to pull it (which would cost just as much as the home), and aren't going to want to worry about finding a truck to pull it every time they move. My impression is the vast majority of people who live in a tiny home don't move it all that often. Otherwise, they would just get a camper or RV.

    Have a community area where folks could congregate, like a park, on the property as well. People in tiny homes like to spend their time outside and with other people.
     
  21. BucketHolly
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    I have to agree with you on this. This is great thinking.
     
  22. MJ DeMarco
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    Yes, this is what I'm talking about. Not trailers, not movable homes, site built, deeded, tiny homes set within a community structure, playgrounds, tennis, community garden, etc.

    Think of it as the "We Work" of housing.
     
  23. Get Right
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    It's a thing. The Katrina cottage movement was the largest development/plan. It took big government money and wasn't really successful. The main problem is the people said they wanted to live in them but when it came to move date they preferred the typical suburban home. They just didn't sell. Link

    I love the idea and I wish it would work. Unfortunately in my career I have come to realize that people like to talk change but don't like change. Governments, banks, insurance and individuals alike.
     
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  24. Andy Black
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    I can see a gated community for tech startup founders. With communal beanbags, free fruit, fuseball tables, free copies of “The Lean Startup”, and weekly pizza and kum-bah-ya meetings.

    Exceedingly expensive. Only for those with initial seed money.

    I actually think it would work.
     
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    Not shocked. The government isn't very good with our money.
     
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