Jun 21, 2024
In this episode of The MHP Broker’s Tips and Tricks podcast, Maxwell Baker, president of The Mobile Home Park Broker, interviewed Kirby Horton. As president and CEO of The Firm, Inc., Kirby is involved in acquiring, developing, and operating manufactured home communities.
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Here Are the Show Highlights:
- Kirby Horton serves as the park acquisition lead and project
manager at his company,
The Firm, in Franklin Tennessee. Kirby has worked deals with Max’s
company. (Max,
0:22)
- In reviewing his career path. Krby explained how he almost
accidentally got into his
current line of work. He earned a degree in Economics, then spent
the next 20 to 25
years in financial services. Over time, he started to see that
field becoming a
commodity and the possibility for making a good living shrinking.
He began to feel
bored and less able to use his creativity. (Kirby, 1:35)
- As a voracious reader, Kirby eventually stumbled on a book by
Lonnie Scruggs, the
legendary mobile home investor and author. (Kirby, 2:49)
- Following the Lonnie Scruggs pattern, Kirby made a part-time job
of buying cheap
mobile homes and selling them on a rent-to-own (RTO) basis. His
first sale, of a
mobile home he paid $800 for, was to a park manager who has, since
1009, been
Kirby’s employee for the longest tenure. (Kirby, 3:2)
- Over time, Kirby bought and sold on RTO contracts a total of
maybe 50 or 60 mobile
homes. He’d spend the first week of every month knocking on doors
and getting rent
from his RTO contract holders.
- When the SAFE Act regulation of Dodd Frank came out in 2008,
Kirby realized that
would pretty much kill his mode of business. zThe purpose of the
SAFE Act was to
regulate those who sell housing, and the rules and requirements
were so
complicated and involved that he figured he’d have to redirect the
way he moved
forward. (Kirby, 4:49)
- That’s when Kirby began buying mobile home parks. He lost his
shirt on that first deal,
but learned plenty. For starters, he learned that owning
communities isn’t “mailbox
money” a matter of just waiting for the checks to arrive by letter
carrier. It’s harder
than that, and there’s much more to do to successfully run a park.
(Kirby, 5:21)
- In describing a park deal he worked with Max’s company, Kirby
mentioned that a
community that was shaky when he first bought it is now stabilized,
with 100 percent
occupancy and 90 percent collections and only responsible
residents. (Kirby, 7:17)
- When he bought it, the community was all park-owned homes (POH).
One of the first
things Kirby did was determine who he wanted living there and who
he wanted out in
order to clean up the community and improve the culture. He also
turned all of the
POHs into opportunities for the preferred residents to buy them.
(Kirby, 7:37)
- Kirby basically had only three park rules, and those who couldn’t
follow them were
evicted. The rules were, be a good neighbor…keep your yard
clean…and pay your
rent on time. (Kirby, 7:56)
- Kirby enjoyed working with his good tenants, and either getting
money upfront or working out payment plans so they could own
their homes and he was only dealing with lot rent. Some of the
homes were in such poor condition that he literally gave them
to
his tenants. His dream is that eventually the community (and others
he owns) will
become so stabilized that people will be proud to live there and
fond of their
childhood memories in a manufactured home community. (Kirby,
8:39)
- Max observed that his start in the industry was much like
Kirby’s, including being heavily
influenced by Lonnie Scruggs books. (Max, 10:10)
- Asked whether he’s ever tried syndication as a way of raising
acquisition capital, Kirby
said that it makes him nervous if he has to report to major
investors. His preference
is to go one deal at a time, with him and his family usually the
sole investors on
reasonably small deals. In the case of larger deals, he might bring
together one or
two friends who can invest, but he stays away from large pools of
investors. (Kirby,
11:45)
- Asked if he buys new or used homes for his parks, Kirby said that
he’d love to be able to
find affordable higher-quality used homes, but they’re almost
impossible to find. Even
if he could, they would each cost about $20,000 to $30,000 to buy
and move in.
(Kirby, 13:31)
- Kirby mentioned some of the new home manufacturers he uses, and
highlighted
Hamilton Homes out of Hamilton, Alabama for how they came through
when the
supply chain was held up after Covid. He also had words of praise
for Champion
Homes, and Clayton for the high quality of their homes. Kirby said
that the quality of
new mobile homes today is generally as good as he’s ever seen.
(Kirby, 14:21)
- He says that talk of mobile homes depreciating like cars is
false, and that a good quality
mobile home, properly installed and cared for, will maintain its
value for a long time.
(Kirby, 15:12)
- Stabilized lot rents should be set at $400 a month, bare minimum.
(Kirby, 17:20)
Kirby resents experts who talk about “value add” as solely a matter
of raising rents and
metering the water. Where’s the value in that for tenants? While
that kind of revenue
raising sometimes must be done, he thinks park owners need to also
create value for
tenants by improving the communities, not just making them costlier
to live in.. (Kirby,
18:01)
- Asked by Max if he’d consider selling to a developer who wanted
to turn the property into more expensive apartment units, Kirby
said he’d probably sell if it was profitable As
a business person, it’s his responsibility to keep his company
healthy. (Kirby, 21:35)
- Kirby said that, upon further consideration, that he might first
go to the local government after receiving such an offer. He’d
explain that he’s now offering affordable housing to families
that would probably be displaced, and what can the local
authorities do in terms of zoning and other issues to help him be
able to responsibly reject the offer
and expand instead. (Kirby, 22:50)
- In 2022, Kirby’s company bought and installed 500 new homes in
parks around the
country. The rate has slowed somewhat since then, but they’re still
very active. (Kirby, 31:34)
The lower number of homes purchased and installed is inversely
related to rising interest
rates. (Kirby, 31:47)
Do you need expert support and guidance in buying or selling
manufactured home
communities? Call up Maxwell Baker at The Mobile Home Park Broker,
(678) 932-0200. You can also drop him a line at
info@themhpbroker.com.
Power Quotes in This Episode:
(On Kiry Horton’s desire to improve the communities he owns.) “We
want to create memories for those young kids that we want them
to have a safe, fun place to grow up.” (Kirby, 10:02)
(On his reluctance to bring in outside investors.) “It's one thing
to follow your gut when it's your money. Yeah, it's somebody
else's money, you better be following something more than
just your gut.” (Kirby, 11:45)
“I’ll lose my own money, but I sure would hate to lose someone
else’s.” (Kirby, 13:05)
“The quality of new homes is just so great today, there’s just no
comparing a (manufactured) hom today to even ten years ago.
The quality is that much better.” (Kirby, 14:21)
“If that new home, if it's a quality home, and it's placed properly
and installed properly, in the right location, will maintain its
value over many, many years.” (Kirby, 15:12)
“Once you clean the place up…as you're doing that, (residents) know
what the rent increase is coming. It's just…a whole lot easier to
swallow and to deliver if you've (first) improved their community.”
(Kirby, 1801)
(On raising rents without improving communities.) “I see a lot of
investors do that. Typically, it’s the ones that are on razor-sharp
margins when they buy that kind of stuff.” (Max, 19:35)
“If the media is going to interview me, I want it to be because of
the progress that we've made because of improving the neighborhood,
improving the community, not because I'm a carpetbagger, or
somebody who's trying to gouge the poor.” (Kirby, 20:39)