Understanding the Star Rating System

In this brief episode of The MHP Broker’s Tips and Tricks podcast, Max Baker explains the meaning behind the star system used to describe the layout and condition of mobile home parks.

Max is the co-founder of The MHP Broker. This and all of the Tips and Tricks podcast episodes are brought to you by our proprietary Community Price Maximizer. Use this four-step system to get the highest price possible for your mobile home park or RV community when you sell it through us. Guaranteed. Ask us for details.

Here Are Show Highlights:

• Mobile home parks are given one to five stars to rate them qualitatively. (00:48)
• A park with a one-star rating is in the poorest condition. There are likely to have older homes in bad shape and dirt roads (mis)managed by the park owner. On occasion, you’ll see dirt roads that look to be in pretty good shape, but they’re often owned and managed by the local community. Often, these one-star parks are out in the country or around very small towns. (01:19)
• Two-star communities are a step up. You might have gravel roads and newer homes, maybe from the 1980s and 90s era. The curb appeal is a little better than a park that gets a one-star rating. What I think of as a “high two” rating is one in which the water and sewer situation is slightly better than a “low two” park. You might also see less clutter in the yards, so the aesthetics are slightly better. Two-star communities aren’t usually found outside of larger cities, though they’re worth more if they are. They’re usually around mid-size cities. (2:30)
• Three-star communities are what we typically see and sell. The homes are newer and in better shape, the roads are paved and the water/sewer situation might be well and septic or city water and sewer lagoons. That’s better than the water/sewer infrastructure in one- or two-star parks. (3:21)
• Four-star communities are similar to the threes, but they have such amenities as playgrounds or a pool. These amenities might be a little tired-looking, but they add more appeal to a community. (3:59)
• I’ve only had an opportunity to sell maybe six five-star parks in my career. They don’t come on the market very often. They have very nice amenities, and the setting looks more like the grounds of a class A apartment complex. Many of these five-star communities are now owned by REITs, and aren’t likely to go on the market anytime soon. (4:28)

Call Max if you’d like our frank estimate of how many stars your own mobile home park community rates. Just drop us a line at info@themhpbroker.com or give Maxwell Baker a call at 678-932-0200.

Power Quotes on This Episode:

 “You don’t really see (one-star parks) too much anymore because there’s a lot of

investment coming in to the industry.” (1:19)

“Those two-stars can make a lot of money, depending on where they are.” (2:30)

“This is our bread and butter.” (three-star communities) (3:21)

“They have amenities.” (four-star communities) (3:59)

“These five-stars have the amenities, just like the fours, but they’re super-duper nice…excellent curb appeal.” (4:28)

00:02

Hello and welcome to the mobile home park brokers tips and tricks. This is the podcast where we talk about mobile home park investing, because that’s what we’ve been involved in for the last decade. Let’s dive into today’s episode. Here’s your host, Maxwell Baker.

00:22 Maxwell Baker 

Hey y’all, welcome to another episode of The Mobile Home Park Brokers tips and tricks podcast. As always, this episode is brought to you by the Community Price Maximizer. It is our proprietary system that will guarantee you a higher price when you exclusively list with us, four-step program works every time you know you love it, a lot of people call us about it. So give us a call.

00:48

So let’s jump into today’s episode, which is all about mobile home park star ratings, the star rating in mobile home communities has really evolved over the years. But I’ve always had a gut feeling on what I personally feel the star ratings are all about. So mobile home parks have five different ratings one star two star, three, four and five. The one star compared to the five star are going to be completely different.

01:19

What I classify a one-star being is a mobile home community that has dirt roads, beat-up older mobile homes in there or trailers if you want to call them that and really, they just are rough. You don’t really see him too much anymore, because there’s a lot of investment coming into the industry. But they still exist in some areas of the country and I have sold some and they’re tough sale. Now let’s back up, a one-star could have dedicated roads, which are dirt roads that the city maintains. The very first park I ever sold was in Dublin, Georgia and it was a foreclosure by a gentleman that lost it or just bad management. We’ll leave it at that. I went in there and it had dirt roads and I was like, “Man those dirt roads are pretty nice for dirt roads” later downstream, I find out as I was doing my due diligence before I put it on market that the city maintained it. So there are city-maintained dirt roads, and you just got to give them a call and they’ll bring you a little rake out there. But typically they’re in the country in these like really small towns. Dublin’s pretty small. It’s a tertiary market, but they maintain it.

02:30

So let’s jump into two stars, two stars, they’re going to be a little better. You got gravel roads, semi-newer homes like 80s-90s, decent curb appeal, not too much. There could be a high two-star or a low two-star and really it just depends on how much junk’s in the yards, what the infrastructure might be, whether it’s well in septic, one to one septic or three to one septic. I’ve even seen five to one, believe it or not, that’s also going to determine those two stars and I’ve sold a lot of those. Those two stars can make a lot of money depending on where they are. Sometimes they’re in the cities very rarely are they but mostly they’re in the secondary markets from what I have seen. And those two stars, like I said, depending on utilities range from a high two-star to a low two-star.

03:21

Moving on to three-star communities. This is our bread and butter. These are paved roads, homes are in decent condition utilities might be well and septic, city water and sewer lagoons. Try to avoid lagoons, but they do exist. So we do sell and they’re expensive to maintain. But much like the two stars, they are going to be rated based off of how the utilities are, the age of the homes. So it could be a high three-star or a low three-star. It all depends on what we really classify when we’re evaluating these communities.

03:59

And then four-star communities basically are the same thing. However they have amenities. The amenities are a little tired looking, they have the paved roads. Rarely do they have gravel roads, but these four-star parks also range from high four to low four by the amenities and like I said they might have a playground, they might have a pool, you know, there’s just some things in there that might make it a little bit better. But the key factor is, is that they have amenities.

04:28

Five stars, I’ve probably sold six five-star communities in my life, they just don’t trade that often. They have very nice pools, very nice amenities like a little dog walking. It’s like what you would see in a nice apartment building that’s freshly been built. Typically the REITs are the ones that own these and once a REIT owns it, it’s very rare that they’ll let it go. It just goes into a black hole and basically say goodbye because it’s not going to hit the mark market if ever again, unless somebody comes in and just pays like a two cap for it, which does exist, they do sometimes do pay for those communities like that depending on rent levels and where they feel like growth is gonna go. But those five stars have the amenities just like the four but they are super duper nice, brand new or almost brand new excellent curb appeal. Utilities are nine times out of ten city water and sewer usually sub-metered or direct billed. So it all depends on the amenities between the four and five stars. I’ve always said that the four stars are going to be tired, older amenities and the five stars are going to be updated nice what you would see in a class A apartment building.

05:47

So that pretty much wraps up the star ratings that I have personally experienced. And if y’all ever have any questions on what star rating your community is, feel free to give us a call 678-932-0200 or shoot us an email at info@themhpbroker.com. And once we do the free analysis on your community, we will tell you what we feel the star rating is on it and what the typical buyer profile will be once we start presenting offers to you so happy you were able to spend a little time listening to us. Feel free to reach out and y’all have a great rest of your day. Be well