Aha roll up and prospectus

A F F O R D A B L EHousing Acquisitions

f f o rdab leou s i ngcqu i s i t i on s , L LC

AHASpecial iz ing in Asset Backed Inves tmentsSpecializing in Asset Backed Investments



AHASpecial iz ing in Asset Backed Inves tments




Specializing in Asset Backed Investments

Loan Request

Amount requested: $500,000

Borrower: Affordable Housing Acquisitions LLC

Purpose:To facilitate a “rollup” of six currently controlled properties into a new fund to ultimately be-come a publicly traded Mobile Home Park REIT

Use of Funds:To pay off mortgages and exercise options on properties operated under lease/option agreements. Specifically: Payoff mortgage on The Glen at Hickory MHP $80,000 Payoff Mortgage on Suburban MHP $150,000 Exercise option on 1/3 Travelers Rest MHP $75,000 Exercise option on The Glen at Forest City $55,000 Acquisitions $140,000

TOTAL $500,000Collateral: First Position on Suburban, value $450,000 First position on Hickory, value $125,000 First Position on Forest City, value $330,000 First position on 1 of 3 parks Traveler’s Rest, value $125,000 Second position on remaining ++ First or second position on acquisition ++

TOTAL $1,030,000+ LTV: 40% +/-

Recourse: As many of our investors are qualified pension plans, we cannot do recourse beyond the entity, thus the low LTV

Table of Contents

I. A.H.A Affordable Housing Acquisitions

Why Invest with Affordable Housing Acquisitions .......................................................1

Affordable Housing Acquisitions Officers .....................................................................2

II. Mobile Home Park Rollup / Proposed Publicly Traded Corporation Synopsis of Mobile Home Park Rollup and Proposed Publicly Traded Corporation .....4 Pro Forma Financial Data ................................................................................................7

III. Affordable Housing Acquisitions Currently Controlled Properties Location Map ...................................................................................................................8

Blytheville Partners LLC .................................................................................................9

The Glen at Forest City ..................................................................................................15

Traveler’s Rest ..................................................................................................................22

The Glen at Grover .........................................................................................................27

Cherry Mountain .............................................................................................................34

Glen at Hickory ...............................................................................................................39

IV. Mobile Home Park Investing

The Basics of Mobile Home Park Investing ...................................................................46

Why Invest in Mobile Home Parks ................................................................................49

Why Inflation will be Great for Manufactured Home Community Owners .................51

V. America’s Housing Imbalance Special Focus - America’s Housing Imbalance ...............................................................53 America’s Housing Imbalance: Out of Balance ...............................................................54




I.A.H.A.Affordable HousingAcquisitions




WHY Affordable Housing Acquisitions, LLC?




“Win” “Win” Scenario

• A Capital starved economy has produced an increasing number of properties with advantageous prices, terms, and covenants. “Mom and Pop” mobile home park owners have few, if any, exit strate-gies

• Owners of the parks cash needs are satisfied by capital from AHA, and the remaining cost is lever-aged by the property itself.

• This creates an exit strategy for the park owner and opportunities for AHA to diversily and expand in the current “buyers market.”

Strategic Partnerships & Infrastructure

• Years of independent affordable housing fund and park management has forged strategic partnerships with trailer park brokers, servicers, and movers.

• Management teams are centralized and duties, templates, and day to day operations are in place to handle future acquisitions.

Asset Backed Investment/ Immediate Return

• Typically real estate investments require large capital contributions, AHA allows investors to own an asset backed direct property interest

• Our principal investment strategy optimizes value through multiples on cash flow and liquidation of assets while providing increased flexibility for shareholders.

• Every investor enjoys the security of having their capital contribution backed by a tangible asset. • Most investments take years to come to fruition, AHA investment opportunities start yielding re-

turns to investors immediately.

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Our Due Diligence

• AHA has decades of experience in buying properties. The due diligence we do on them prior to purchase is all important. Buying existing, income producing properties is a much easier evalua-tion task than most new construction projects, business acquisitions, or marketing plans. Unlike those ventures, we have existing data - often years of it - to determine revenues and costs. We have extensive due diligence checklists to assure that we are on the mark on our financial projections.

• The more difficult part of our due diligence process involves the intangibles: what’s happening in the area, the strength of the rental market, and the political risk. It is in these areas that our experi-ence becomes all important

• Regarding area analysis, we now have a surfeit of data available via the internet. We use that, of course, but we go beyond that and interview city planners, development authorities, and local busi-ness people.

• Regarding the rental market, our task becomes easier. Because we are in the affordable housing sector, we know there is always excess demand. Nevertheless we digest the data, speak with local property managers and make our determination.

• The political risk is perhaps the most difficult to assess. Mobile home parks are subject to a myriad of regulation that can sometimes make life difficult. Municipalities are constantly enacting new ordinances and rules. This is one of the reasons we prefer the American Southeast, where mobile home parks flourish and are a very accepted housing alternative. We judge the risk by speaking with the authorities who regulate us. We not only find what the current situation is, but we determine their attitudes toward mobile home parks and assess their future plans. The political risk is, in our case, the most difficult to assess, but it is also one of the major factors that make for our success. In the case of nearly all of our parks, it would be extremely difficult, if not impossible, for anyone to build a new one nearby. We are”grandfathered in” to an existing monopoly in most of our locations.

• All of these factors are taken into account before we close on a purchase, during the inspection pe-riod. In this phenomenal “buyer’s market,” a property must shine on all factors to make it through our due diligence process.

Valuation and Exit Strategy

• Maturity of AHA and the inception of our principal investment strategy, the “reverse merger” will begin when the fund meets ten parks under controlled management (currently six parks in AHA control outlined below).

• Our principal investment strategy optimizes value through multiples on cash flow and liquidation of assets while providing increased flexibility for shareholders.

• Mobile Home REITs trade for 20x cash flow on public markets. Incrementally increasing the size of our fund compounds cash flows, value, and maximizes shareholders IRR through economies of scale.

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Affordable Housing Acquisitions OfficersA Highly Motivated Team with Expertise in Affordable Housing, Real Estate

Management and Operations, Investing, and Appraisals

Dan Kiely, ChairmanReal Property and Law • Affordable Housing Specialist

• Extensive background in affordable housing and real property, public company formation and manage-

ment with over 35 years’ experience • Stanford Law Graduate• Primary expertise in transaction negotiation and facilitation involving affordable housing• Co-founder of A.H.A Affordable Housing Acquisitions

Jason May, PresidentReal Property and Equity Investment • Capital Investment Relations

• Extensive background in management of hedge funds involving real property and equities• Financial planning background• Primary expertise in investments in equities, REIT’s, and collateralized lending• Co-founder of A.H.A Affordable Housing Acquisitions

Eric Tomko, Vice PresidentMarketing • Investor Relations

• Wide-ranging background in marketing • Experienced Marketing VP for BSN

Todd Neary, Vice PresidentReal Property • Commercial Valuation

• Financing and real estate background• Extensive background in providing consulting service for commercial, industrial and residential assets• Overseen individual and portfolio assignments throughout the United States, specializing in multi-family assets• Co-founder of A.H.A Affordable Housing Acquisitions

Adam Shepherd, Vice PresidentReal Property and Marketing • Business Developement

• Comprehensive background in affordable housing and real property • Real Estate tactician and business development professional• Primary expertise in real estate implementation and investment strategies, and marketing • Co-founder of A.H.A Affordable Housing Acquisitions

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• Primary expertise in marketing and investor relations • Co-founder of A.H.A Affordable Housing Acquisitions

II.Mobile Home Park Rollup Proposed PubliclyTraded Corporation




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Synopsis of Mobile Home Park RollupProposed Publicly Traded Corporation Affordable Housing Acquisitions goal is the establishment of a fund created by a “rollups” of mobile home parks into a public vehicle. The objective is to create a mobile home park real estate investment trust (“REIT”) taking advantage of the greater multiples and other benefits of the public vehicle as well as economies of scale.

The Opportunity: The current economic environment makes this unusual opportunity possible and our infrastructure makes it work. The factors at work are: (1) the capital starved economy resulting in an ex-treme “buyer’s market,” (2) the lack of exit strategies for “mom and pop” mobile home park owners, (3) our existing management infrastructure, and (4) our knowledge and experience in the field.

Objective:

The goal is to create a publicly traded U.S. company, well funded, with liquid shares, owning several mo-bile home parks and postured to acquire many more parks. The plan takes advantage of two facts: (1) a great number of “mom and pop” mobile home parks are currently available on great terms and excellent prices due to the economic downturn and the capital starved economy and (2) in a public REIT, the value of the equity is much greater. The purpose is to allow for greater value (due to better multiples on cash flow), capital creation, liquidity and flexibility for the shareholders (the current MHP owners). The process shall be to complete a “reverse merger” with an existing but dormant public company. We currently have six parks under management and control.

Mobile Home REITs are trading in the markets at multiples of 20 time cash flow and are quite popular in today’s frightened investor market because they are hard assets with great yields. Value is created by achieving the greater multiples. “Rolling up” several mobile home parks with 12%+ capitalization rates (i.e. a multiple of 8 times cash flow) should result in a stock equity value much greater than the value of the equity as individual parks.

Phase one: Convert AHA into a private “REIT” (90 days)

• Finalize business plan (including determination of which properties are included)• Determine values of initial properties to be purchased or infused • Determine start-up costs and develop a budget• Build ProForma financials for the resulting company• Complete the private REIT phase

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Phase Two: Complete the reverse merger and become publicly trading (12 to 24 months)

• Identify target public vehicle (one has been preliminarily selected)• Negotiate terms of the reverse merger• Audit preparation• Engage necessary professionals • Determine Board members, officers, and necessary personnel (minimal)• Complete the reverse merger• Work with market makers, do “road shows” and create the market for shares• In the 18 month to 36 month time frame thereafter, complete a PIPE (private investment – public

equity) placement for $2,000,000, to “grow” the new REIT.

Result:

1. The former partners will, at the completion of phase two, own shares in the public company giving them (a) a better exit strategy at higher prices; (b) a higher multiple on income; and (c) more flex-ibility in ownership, exit strategy, estate planning and retirement;

2. The investor will have a secured position and in phase two will reap the rewards of the higher multiple through conversion of preferred stock

3. The resulting company has more credibility and more flexibility in raising capital;4. The cash needs for the near term are met;5. The infrastructure is in place for growth; and6. The company is poised to expand and create more value

Investment Assets:

1. Currently owned and targeted properties (see attached)2. We are currently in discussions with other mobile home park owners who are interested in rolling their

parks into the REIT3. Other

Infrastructure:

As these parks are already up, running, and producing cash flow, the infrastructure is in place to accom-modate many more parks without additional corporate structure.The return on additional mobile homes currently being placed in the parks is 35%+/-. It costs about $12,000 to $15,000 total to buy a mobile home (used), move it to the site, skirt it, hook it up to utilities, and renovate it. That home will generate $450 per month in revenue with few expenses. The annual re-turn per added home will be in the $5000 range.

Time Table:

We would like to complete phase one in the next 90 days and phase two in the 12 to 24 lowest month time frame, and the PIPE offering 6 to 12 months after phase two. We are at the mercy of a number of profes-sionals and agencies so it is difficult to accurately project time lines.

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Scalability

If, after a short “proof of concept” period we can perhaps get $2,000,000 from a PIPE fund or elsewhere, and we should be able to buy, using low leverage (seller take-back), $4,000,000 in properties. If we can use stock as part of the purchases, capital can be stretched even further with no additional leverage. Sellers of such parks are desperate for exit strategies and are forced to be creative. The equity within the entity of each additional property, purchased at 8 multiples, becomes worth much more at the higher multiple (20+/-). Thus, as we infuse more properties, we continue to move the value of the stock up with only modest lever-age (risk) and the next round of financing should be of a much greater magnitude.

Investor Requirements / Security

This proposal presupposes a new corporation to which all of our existing investors (about 5) transfer their interests. We are in the process of getting valuations on the properties. I believe the total value of the equity will be $900,000 +/-. Whatever that valuation shows, each investor will be issued one share of com-mon stock at $10 per share for each $10 of value.

Result:

The objective is to end up with a structure that makes the whole greater than the sum of its parts. This should be achievable due to the conditions existing in the current economy, and the premium placed on publicly traded stock.




AHA Rollup Properties Proforma Financial Data

Rollup 3 2012 ROI/value Value (1) Mtg/option(2) equity cash flow (3) % return

Travelers Rest 400,000 250,000 150,000 35,000

Grover 215,000 149,000 66,000 11,500

Forest City 330,000 55,000 275,000 46,000

Cherry Mntn 175,000 125,000 50,000 12,000

Hickory 125,000 80,000 45,000 19,500

Blytheville 450,000 150,000 300,000 45,000

Total 1,695,000 785,000 886,000 134,000 15.1%

(1) Either POV or anticipated POV valuation (2) Payoff amount of Mortgage or exercise price of option (3) Anticipated cash flow after investment, completion of current renovation, and option/mortgage payoffs

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III.Affordable HousingAcquisitionsCurrently Controlled Properties




Location Map

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FOR FURTHER INFORMATION, PLEASE CONTACT

Dan Kiely

(561) 779 0175

120 S. OLIVE AVE, SUITE 400 WEST PALM BEACH, FL 33401 USA




Suburban Mobile Home Park Blytheville, AR

45 SiteMobile HomeCommunity

Great ExpansionPotential

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Suburban Mobile Home Park Blytheville, AR 45 Lot Mobile Home Community

Park Particulars:

• 45 sites, less than half full - huge upside 5.46 acres

• Great cash flow

• Partially Tax Deferred

• Professional management with presence in the area

• City utilities paid by tenants

• Recession resistant

• Value creation through curing deficiencies, upgrading property, cosmetic renovation

• Multiple exit strategies




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1102 South Ruddle Road, Blytheville, AR

Suburban Mobile Home Park in Blytheville, Arkansas has 45 devel-oped pad sites on approximately 5.46 acres. Of the 45 sites, 7 are oc-cupied by tenant owned mobile homes and 14 of the sites are occu-pied by park owned mobile homes rented for $350 to $450 per month. Twenty of the pads are vacant; four pads have repairable mobile homes.Each space is supplied with city water as well as natural gas and city sewer. Garbage service is provided by the city.

The property is located in a working class neighborhood and is conve-nient to the local downtown as well as the highway. A tree lined paved road and gutter system currently serves the residential homes.

This project has been owned by us for a few years. This property fits our acquisition model as it was purchased at an excellent cost from an owner who over time had neglected the park. Rent collection was not enforced and few rules and regulations were in place. We have made significant improvements to the park and renovated some exist-ing homes. We have taken no distributions from the project, electing instead to use cash flow for rehabbing existing homes in the park. Due to its ease of operation, we have done little to take the park to the next level.

The project is located in Blytheville, AR which is located in the NE portion of the state and is the seat for county offices. The property is located in Mississippi county, the #1 county in the US for both cotton and steel production according to the Chamber of Commerce.

Shade trees, city water, septic, natural gas, security lights, pavedroad.

Property Address:

Description:

History:

Location:

Amenities:

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Market:

Business Plan:

Exit Strategy:

There is a strong demand for rental units in Blytheville. The city and the county have created initiatives attracting new industry supporting a broad and stable economic base. In addition to Arkansas North East College, widespread agribusiness and two plants owned by steel man-ufacturer Nucor, a new aircraft maintenance operation has recently opened at the long ago vacated Air Force base located near Blytheville. The company is investing $20 million and will employ 440 new em-ployees. This is in addition to the existing 450 employees already em-ployed at the facility.

The highest and best use for this property is as affordable housing rental units for young couples, families and retirees. As such, the plan is to develop the community by enhancing the landscaping, renovating the park owned units, supplying mobile homes for vacant sites, and curing remaining deficiencies.

Multiple exit strategies exist regarding this property:1. Exchange. We may find a tax-deferred exchange at some appropri-

ate time to realize appreciated value of the homes.3. Financing. We may finance the homes at an appropriate time to re-

capture some or all of the equity and continue to receive cash flow.4. Other. Other exit strategies, such as re-syndication, or inclusion in

a later “roll-up” strategy also exist.

Property: Suburban Mobile Home Park4/2/12




Itemized Expense Projections

Rents (monthly)

Pad sites $175

Mobile Homes $350-$450

Anticipated POV $450,000.00

Mortgage $150,000

Equity $ 300,000.00

ITEM

Rents at 100% (of current occupancy) 66,000.00

Vacancy Rate 10%

Less Vacancies: $6,100

Effective Gross Income: $59,400

Onsite Management Cost $6,100

Insurance $865

Property Taxes $1,650

Accounting & Legal $1,500

Landscaping $900

Repairs and Maintenance $1,000

Mobile Home tax $750

Utilities water/septic maint. $1,200

Trash $2,400

Miscellaneous $1,000

TOTAL OPERATING EXPENSES $17,265

Net Operating Income $42,135 $53,245

Mortgage Payments $11,500

Cash on Cash POV Return $30,632 10.2%

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Suburban Mobile Home Park 45 Lot Mobile Home Community

Blytheville, AR

Property Location

Park Map

Property Location

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The Glen at Forest City Lancaster Drive Forest City, NC

24 PadMobile Home Park

and 9 ExistingMobile Homes

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Lancaster Drive Forest City, NC

Park Particulars

• 24 Mobile Home Sites

• 10+ acres

• 2 Private Wells – one operational and one dormant

• Nearest sizable housing to the new ”clean” coal plant and Facebook Data Center.

• Grandfathered in: There will be no new mobile home parks in Forest City

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140 Lancaster Drive, Forest City, NC

24 sites, most infrastructure in place Currently 3 rentedlots, 4 renovated MHs and 2 MHs under renovation.

2 Wells and Electric. 2 Mobile Homes Per SepticTank. Private Trash service. Tenants pay all utilitiesexcept water and trash.

1. Exercise option2. Continue to develop parks

Park is under a Lease/Option park $55,000 at optionexercise Rent is $320 per mo.

Currently managed by our staff in the area with allmgt infrastructure in place

These parks were neglected for many years by an owner who died four years ago and had Alzheimer’s prior to that. Phase one, now complete, landscaped the park, removed trailer hulks, provided new entryway, graded for new drainage, bought and renovated 9 mobile homes, insti-tuted rules and regulations, provided tight management .

Property Address:

Number of Lots:

Utilities:

Business Plan

Ownership:

Management in Place

Condition:





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Property Description:

Area Information:

Area Information:

Forest City Commons is a 24 space mobile home park. The total park sits on 10+ acres and is located in Forest City, North Carolina. The as-set manager has several properties in the area, is experienced there and has the necessary staff in place.

Forest City is located in Rutherford County. Forest City iscentrally located between Ashville and Charlotte, NorthCarolina.

We own and have owned multiple other successfulapartment and mobile home projects in the area. Therecontinues to be a strong demand for affordable housing inthe area. Current holdings continuously run close to 95%occupancy.

The local housing office reports that they receive threeapplications for each affordable housing unit. In theCarolinas, mobile homes are considered the mainstay ofthe affordable housing industry. Tenants are hard workingblue-collar individuals and retirees.

The local housing assistance office pays $400+/- permonth on their assistance program for a two bedroomshome and $450+ for a three bedroom. Rentals for mobilehome pad sites range from $125 to $200.

Rutherford County Chamber of Commercehttp://www.rutherfordcoc.org/Town of Forest Cityhttp://www.townofforestcity.com/Rutherford Economic Development Commissionhttp://www.rutherfordncedc.com/Local Newspaper – The Digital Courierhttp://www.thedigitalcourier.com/





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Property: The Glen at Forest City10 5 11





Rents (monthly)

Pad sites $450

Doublewide $550

Singlewide $425-$450

POV Value $330,000.00

Option Exercise $55,000

Equity $ 275,000.00

ITEM

Rents at 100% (of current occupancy) 63,000.00

Vacancy Rate 10%

Less Vacancies: $6,300

Effective Gross Income: $56,700

Onsite Management Cost $3,000

Insurance $865


Accounting & Legal $500

Landscaping $900

Repairs and Maintenance $1000

Mobile Home tax $750

Utilities water/septic maint. $1200

Trash (tenant responsible for own) $0

Miscellaneous $1000

TOTAL OPERATING EXPENSES $10,865

Net Operating Income $45,835

Cash on Cash Return 13.6%

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Traveler’s Rest Mobile Home Parks Traveler’s Rest, South Carolina

ThreeMobile Home

Parks

20 Total Padsand Homes




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Property Highlights

• 20 Mobile Home sites in three parks

• 20 1999 Fleetwood Mobile homes

• Upscale suburb of Greenville, SC, one of the country’s most vibrant markets

• City water, sewer

• Grandfathered in: There will be no new mobile home parks in Traveler’s Rest

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612 Main Street, 116 Tubbs Mountain road, 110 ½ Tubbs Mountain Road, Traveler’s Rest, South Carolina

20, All infrastructure in place16 Homes renovated and rented, 4 remaining and under renovation

City water and sewer Private Trash service.

1. Park is under a Lease/Option park for $2,000 per month with an option to purchase for $250,000

2. Complete all renovation and fill park3. Exercise option4. Keep for passive income or sell for capital gains

$7,000$7,000

Currently managed by our staff in the area with all mgt infrastructure in place

These parks were neglected and had only 12 rented when we took possession. We have filled units as soon as renovated and have com-pleted 5. Revenues have increased from $3000 +/- to $6000 +

Property Addresses:

Number of Lots:

Utilities:

Business Plan:

Price Per Space:Price Per Mobile Home:

Management in Place

Condition

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White Pines Park sits on Main Street and fronts on the famous Swamp Rabbit Trail, a biking and hiking trail currently being renovated with government funds. It is 6 pad sites and 6 mobile homes and is very near the city center.

Tubbs Mountain 1 and 2 are a total of 14 pad sites and 14 mobile homes in a nice location near the city center.

Traveler’s Rest is an upscale suburb adjoining Greenville, South Caro-lina centrally located on I-85 between Atlanta Georgia and Charlotte, North Carolina. Greenville is home to BMW North America, Michelin Tire, and other manufacturers. The Spartanburg / Greenville corridor isone of the most exciting in the country.

We own and have owned multiple other successful apartment and mo-bile home projects in the area. There continues to be a strong demand for affordable housing in the area. Current holdings continuously run close to 95% occupancy.

The local housing office reports that they receive three applications for each affordable housing unit. In the Carolinas, mobile homes are considered the mainstay of the affordable housing industry. Tenants are hard working blue-collar individuals and retirees.

Property Description:

Area Information:

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Property: Traveler’s Rest





Rent (monthly)

$375

Anticipated POV $400,000

Option Exercise $250,000

Equity $150,000

ITEM

Rents as is 67,500.00 $90,000

Vacancy Rate 10% 10%

Less Vacancies: $6,750 $9,000

Effective Gross Income: $60,750 $81,000

Mortgage Passthrough (lease) $24,000 --------

Management Fee $6,075 $8,100

Insurance $4,303 $4,500

Business License $305 $305

Corporate Filings $125 $125

Property Taxes $1,912 $1,912

Accounting & Legal $500 $1,500

Landscaping $1,980 $2,500

Repairs and Maintenance $1,350 $2,500

150 Mobile Home tax $3,126 $3,126

Utilities water/sewer $3,900 $5,000

Trash $1,500 $1,500

Miscellaneous $2,000 $2,000

TOTAL OPERATING EXPENSES $27,076 $33,068


Cash on Cash Return 36.95% 15.46%

After Option Exercise

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The Glen at Grover Grover, North Carolina

The Glen at Grover Mobile Home Community

Grover, North Carolina

Friends and Family Investment The Glen at Grover Mobile Home Park

Grover, North Carolina

FOR FURTHER INFORMATION,

PLEASE CONTACT

Dan kiely (561) 779 0175

325 Clematis Street, Suite 333

WEST PALM BEACH, FL 33401

10 Potential Pad sites, 7

Existing Pads and

Mobile Homes and a Brick house

10 Potential7 Existing Pads andMobile Homes and a

Brick House

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The Glen at Grover - Mobile Home Community Grover, North Carolina

Property Highlights

• Located in the strong market between our existing base in Rutherford County, NC and our expanding presence in the economically exciting Greenville/Spartanburg Corridor of SC.

• 4.67 acres (low density: over ½ acre per dwelling)

• Mature, occupied park in nice town, pretty setting, long term tenants – not a turn-around or value enhancement project – simply bought right.


• Recession resistant affordable housing and postured to take advantage of inflation

• Grandfathered in and expandable, but no current plan to do so given the excellent current return

• Great cash flow

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113 McGinnis Drive, Grover, Cleveland County, North Carolina

The Glen at Grover is a small mobile home park in Grover, NC lo-cated on the North Carolina / South Carolina border. The park in-cludes a brick home and 7 existing pads each with a good quality mo-bile home owned by the park. It sits on approximately 4.67 acres. The tenants are long term. Rents are $350 per month and $400 per month for the house. The rents are probably 15% below market. The county informs us that there could be three additional pads sites, but given the current high projected income, expansion would not significantly improve the cash on cash return. Each tenant pays his or her own utili-ties including water. The tenants are responsible for their own trash and mowing. The owner has little expense beyond insurance, taxes, and R&M. A curved paved road currently serves the residential homes.

This project was never listed, was ”off-grid,” and came to us through one of our managers. It is owned by his father-in-law who is in failing health. This property is different from our normal “value-creation” model, but fits our acquisition criteria due to its unusually high return and the excellent purchase terms negotiated with the seller. The park is well run and extremely well maintained. There is expansion potential as noted above, but it is not in our immediate plans. Some value can be created by raising rents.

The property is located in a working class neighborhood and is conve-nient to the local downtown. Grover is actually a feeder communityfor several larger towns nearby and is in some respects a “high rentdistrict” with nicer homes and four very, very nice mobile home parks –all full.

Mature border vegetation, shade trees, city water and sewer, niceexpansive lawns, security lights, paved road.

Property Address:

Description:

History:

Location:

Amenities:

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Nearby Rutherford County is our base in the Carolinas and has for several years proved to be an excellent rental market. Affordable hous-ing is in short supply in Grover as it is nearly everywhere. Cleveland County (where this park is) adjoins Rutherford County. Shelby, NC, (10 miles away) is the County Seat and in addition to its own eco-nomic base, is a bedroom community for Charlotte. On the Rutherford County line, perhaps 15 miles from the property, sits the NC data cen-ter and the new Facebook data center. To the South, the Greenville/Spartanburg Corridor hosts a great variety of manufacturing including BMW and Michelin. Spartanburg is also the international headquar-ters for Denny’s Restaurants.

The highest and best use for this property is already in place. It isaffordable housing rental units for young couples, families and retirees. In contrast to our usual project, we need to do very little.

Multiple exit strategies exist regarding this property and we have fiveyears to contemplate them:1. Sale of the Property. I believe that in four to five years we can sell the property for a multiple of our equity. If we get strong inflation, as many predict, it may be a high multiple. If we get runaway infla-

tion, it is probably our best hedge.2. Exchange. We may find a tax-deferred exchange at some appropri-

ate time to realize appreciated value of the property.3. Financing. If lenders re-enter the marketplace, that will in itself

increase the value. We may refinance the property at an appropriate time to recapture some or all of the equity and continue to receive cash flow.

4. On the downside, even if we walk away from the project (highly unlikely) we will get our investment back and will have made an annual return in excess of 10% per year, if it continues to perform as is.

5. Other exit strategies, such as re-syndication, also exist.

Market:

Business Plan:

Exit Strategy:

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Property: The Glen at Grover6 16 11


Value $215,000.00

Mortgage $149,000

Equity $66,000

ITEM Current 15% Increase 2013

Rents at 100% 34,800.00 40,000.00




Onsite Management Fee $3,132 $3,600

Insurance $900 $900

Property Taxes $800 $800

Accounting & Legal $500 $500

Landscaping $500 $500

Repairs and Maintenance $2,400 $2,400

Mobile Home tax $525 $525

Utilities water/sewer $0 $0

Overhead Contribution $1,200 $1,200

Travel/Miscellaneous $2,000 $2,000



Debt Service $12,720 $12,270

Cash on Cash Return $6,643 $11,305

Cash on Value Return 10.1% 17%

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The Glen at Grover Mobile Home Community

Grover, North

Carolina

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The Glen at Grover - Mobile Home Community Grover, North CarolinaThe Glen at Grover Mobile Home Community

Grover, North

Carolina

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Cherry Mountain Townhomes Forest City, North Carolina

FiveTownhouseApartments

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Property Highlights

• Located in our existing base in Rutherford County, NC, in Forest City, home to the new Facebook data center.

• Clever purchase arrangement resulting from the current market conditions. It is a lease /option leaving the present financing in place with a RECORDED purchase option for five years at the loan balance at the time of exercise.

• “Purchased” from a cash poor seller who couldn’t refurbish 3 of the 5 units and was running a monthly cash deficit.

• All units renovated, in service and rented as of 3/2012. Project completed.


• Recession resistant affordable housing and postured to take advantage of inflation.

• Purchased at less than $40 per square foot; reproduction cost $120+ per foot plus land cost.

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239 Cherry Mountain Street, Forest City, North Carolina

Cherry Mountain Apartments consist of five sizable townhouse units located in Forest City, NC, where we have management and staff in place for several other properties. Each unit is 1200 square feet consist-ing of two bedrooms and one and one half baths. All units are rent-ed at $450 per month. Tenants pay utilities including water. There is more than ample paved parking on the site. The construction is brick on a concrete slab. The roof is in good condition. Tax assessment is $213,800.

The project was “purchased” using a lease – option wherein the lessee (us) net leases the property paying all related expenses. We have a five year option to purchase at the mortgage balance at the time of exercise. The Seller gets 15% of the profit. For our protection, the option is re-corded. This structure allows the present financing to remain in place in this market where such financing is virtually impossible to find. We will make “pass – through” payments for the mortgage, insurance and property tax on a monthly basis.

The current mortgage balance is $134,820 equating to about $26,960 per unit. At the end of 5 years the balance will be $106,000 +/-, equat-ing to about $21,200 per unit. In post – crash 2010, we sold four apart-ment properties within 12 miles of this one for per unit sales prices between $31,000 and $32,500. They were of less size and quality than the subject. We are getting an excellent return on investment, some tax shelter, the benefit of the amortization of the mortgage during theholding period, cheap leverage, and a 5 year “free look” at the appreci-ated value. To double our investment we will have to sell the property for $163,000 or $32,600 per unit ($106,000 mortgage balance + 2 times $27,000 investment less seller’s 15%).

Property Address:

Description:

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This project was not listed, was ”off-grid,” and came to us throughone of our realtor contacts who manages the property. This property is creatively structured, but still fits our normal “valuecreation” model in that by curing the minor deficiencies we have restored the economic value to the property. The property is of solid masonry construction and is built to last. Some value can be created by raising rents, but we won’t do that precipitously.

The property is located on a very pleasant street, in a niceneighborhood and is convenient to the local downtown.

Mature vegetation, shade trees, city water and sewer, expansive lawn, security lights, paved street.

Rutherford County is our base in the Carolinas and has for several years proved to be an excellent rental market. Affordable housing is in short supply as it is nearly everywhere. Nearby sits the NC data center and the new Facebook data center under construction.

The highest and best use for this property is already in place. It is af-fordable housing rental units for young couples, families and retirees. We have refurbished and rented the units. We will also list the property early, but I believe a sale is unlikely in the first two years.

Multiple exit strategies exist regarding this property and we havefive years to contemplate them:1. Sale of the Property. I believe that in four to five years we can sell

the property for a multiple of our equity. If we get strong inflation, as many predict, it may be a high multiple. If we get runaway infla-tion, it is probably our best hedge.

2. Exchange. We may find a tax-deferred exchange at some appropri-ate time to realize appreciated value of the property.

3. Financing. If lenders re-enter the marketplace, that will in itself increase the value of this property. We may refinance the property at an appropriate time to recapture some or all of the equity and continue to receive cash flow.

4. Other exit strategies, such as re-syndication, also exist.

History:

Location:

Amenities:

Market:

Business Plan:

Exit Strategy:

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Property: Cherry Mountain Townhomes6 16 11


Anticipated Valuation $175,000.00

Option Cost $125,000

Equity $50,000

ITEM Current 15% Increase 2013

Rents at 100% 27,000.00 31,000.00




Onsite Management Fee $2,430

Lease Payments 5,028

Insurance $1,327


Accounting & Legal $500

Landscaping $500

Repairs and Maintenance $2,400

Utilities water/sewer $0

Overhead Contribution $1,200

Travel/Miscellaneous $750



Cash on Equity Return 21% 27.8%

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The Glen at HickoryHickory/Morganton, North Carolina

Presents an A.H.A. Opportunity:

The Glen at Hickory Hickory/ Morganton, North Carolina

For Further Information Please Contact:

DAN KIELY

(561) 779-0175

301 Clematis Street, Suite 3000

West Palm Beach, Florida 33401

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The Glen at Hickory Hickory/Morganton, North Carolina

Property Highlights

• The Glen at Hickory is a mature, occupied park in pleasant town, with an attractive setting, and boasts long term tenants – some nearly 30 years in the park.

• AHA sees this as a value enhancement project, but the park is operating at a good return as it is.

• AHA has a professional management presence established in the area.

• Great cash flow, value creation and potential appreciation.

• Seller financing enhances the cash flow.

• The park is “grandfathered in,” to less stringent zoning and building regulations than now exist, making it difficult for anyone to build new parks to compete.

• The park is expandable.

• The Glen at Hickory is a recession resistant affordable housing park and is poised to take advantage of inflation should it materialize.

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3925 Martin Fishpond Road, Hickory, North Carolina. The park islocated in Burke County

The Glen at Hickory is a quaint mobile home park near Hickory andMorganton, North Carolina. The park has 17 existing pads. Nine of thepads are rented and two mobile homes are in the process of being movedin, set up, and renovated for rental. The park sits on approxi-mately 3.37 acres. The tenants are long term. Rents for mobilehomes are projected at $425 per month – commensurate with our ex-perienced rental rates in the area. Pad rents are $120 per month andare being raised to $150 per month. In January 2013 they will be raisedto market rates of $180 per month. Each tenant pays his or her ownutilities except for water. The owner has little expensebeyond insurance, taxes, and R&M. A curved road currently serves theresidential homes.

This project was ”off-grid” and was purchased out of one of the ownerspersonal bankruptcy (caused by other businesses). AHA’s strategicpartnerships allowed our managers to seize this opportunity. Thisproperty fits our acquisition criteria due to its high return and theexcellent purchase terms negotiated with the seller. Understanding thepotential investment opportunity in this park AHA managementtook over management four months ago, and through AHA’s provensystems has since turned around a once run-down park into aproducing park. What makes the property so appealing is theexpansion potential as noted above, and the value that can be createdby raising rents and adding mobile homes. AHA recognizes thesensitive rent situation and will not raise them precipitously. InitiallyAHA will make a few minor improvements –plantings, institutingstringent park rules, cosmetic improvements, removing “eyesores” andadding three mobile homes to be owned by the park.

Property Address:

Description:

History:

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The property is located in a working class neighborhood and is con-venient to both Morganton and Hickory downtowns. Located in the strong affordable housing market in the next county north of AHA’s existing presence in Rutherford County, North Carolina, the Glen at Hickory is located far enough off I-40 to be rustic and charming; yet close enough to highway 40 to allow for ease of access to bigger cities such as Asheville and Charlotte, located just 60 minutes away. The park is within minutes’ drive to either Hickory or Morganton job mar-kets, shopping, and city amenities.

Hickory is located in the North Carolina foothills and is the 162nd largest urban area in the U.S. The city is growing steadily and the last census data placed the Hickory Metropolitan area as the 4th largest in North Carolina with 342,000 people. Several new businesses are coming to the area, including a Google processing center and a Tar-get Corp. distribution center. Hickory is home to many manufactur-ers of lumber, furniture, fiber optic cable and pressure sensitive tape. Forty percent of the fiber optic cable in the WORLD is made in the Hickory area. Each year only ten cities in the US are designated “All-America City.” Hickory has won the designation three times. Hickory also boasts a minor league baseball stadium, Hickory Crawdads, and Lenoir-Rhyne College.

Location:

Area:

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Mature border vegetation, shade trees, city water, nice expansivelawns, security lights, curved road.

Nearby Rutherford County is our base in the Carolinas, and has forseveral years proved to be an excellent rental market. Affordablehousing is in short supply. Because of the close proximity to Interstate40 Hickory has become a focal point for large corporations to set upshop; such as Google and Target, ultimately creating hundreds andthousands of jobs for local residents.

The highest and best use for this property is already in place. It isaffordable housing rental units for young couples, families and retireesValue enhancement is possible through expansion of the parkand the addition of more mobile homes.

Multiple exit strategies exist regarding this property and we have fiveyears to contemplate them:1. Sale of the Property. AHA believes that in four to five years we can

sell the property for a multiple of our equity. If we get strong infla-tion, as many predict, it may be a high multiple. If we get runaway inflation, it is probably our best hedge.

2. Exchange. We may find a tax-deferred exchange at some appropri-ate time to realize appreciated value of the property.

3. Financing. If lenders re-enter the marketplace, that will in itself increase the value. We may refinance the property at an appropriate time to recapture some or all of the equity and continue to receive cash flow.

4. Rolling the property up into a larger fund. Other exit strategies, such as re-syndication, also exist.

Amenities:

Market:

Business Plan:

Exit Strategy:

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Property: The Glen at Hickory





Rent (monthly)

Pad Rent $150

Pad Rent 2013 ($180)

2012: 10 Pads & 1 MH

2013: 10 Pads & 3 MH’s

Value $125,000

Mortgage Payoff $80,000

Equity $45,000

ITEM 2,012.00 2013

Rents at 100% 27,000.00 33,300.00

Vacancy Rate 7% 7%



Management Fee $2,511 $3,097

Insurance $890 $890

Property Taxes $517 $517

Accounting & Legal $250 $250

Landscaping $400 $600

Repairs and Maintenance $250 $500

150 Mobile Home tax $75 $225

Utilities water/sewer $1,560 $1,650

Trash $2,220 $2,220

Overhead Contribution $600 $600

Travel $600 $600

Miscellaneous $200 $300



Cash Return $15,037 $19,520

Cash on Cash 12% 15.6%

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Map

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IV.Mobile Home ParkInvesting




THE BASICS OF MOBILE HOME PARK INVESTINGMobile home park investing is one of the most misunderstood - and most lucrative - forms of real estate investing. With cap rates of 10% + and even better cash-on-cash returns +, it stands as the highest yield-ing real estate asset class. And with over 150,000 mobile home parks in the U.S. - and most of those still in the hands of the original “Moms & Pops” - there is opportunity in virtually every state in the U.S. So what is mobile home park investing all about?

It started off with the Vanderbilt’s

And the Rockefellers, and all the other wealthy families in the U.S. Back in the early days of the automo-bile, when you travelled across the country, you had to stop your car and sleep in tents, as the motel had not yet been invented. As the wealthy preferred better accommodations, they built luxurious “trailers” that could be towed behind their cars. And since cities and towns everywhere wanted these well-heeled customers to stay - and shop - in their town, they built “trailer parks” to park house these guests when they passed through.

World War II extended the prosperity

The logistics of building housing for thousands of troops necessitated large purchases of mobile homes by the U.S. government. At one point in the 1940’s, the demographics of mobile home residents was higher than that of stick-built homes, as so many high-achievement veterans were on the GI Bill as they attended college.

The shift to affordable housing

As the decades passed, the customer base for mobile homes - and mobile home parks - changed. The resi-dents of mobile home parks transitioned into lower-earning individuals and families. With this shift, the dynamics of the mobile home park industry shifted. Today, 8% of the American population lives in mobile homes. The modern mobile home is a testament to American ingenuity, as it delivers the lowest-cost form of detached housing in the country, producing homes for $30 per square foot or less (down to as low as $1 per square foot for used housing) as compared to around $100 per square foot for stick-built homes.

Affordable Housing is a giant industry

There are around 60,000,000 Americans who live in families that have $20,000 per year or less in earn-ings. This slice of America represents 20% of the entire population. If you assume that one-third of income should be used towards housing (and that’s what the U.S. government says), then these families have only $500 per month to spend. And that only leaves two forms of housing that meet this budget: 1) mobile home parks and 2) affordable sector apartments.




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A product far superior to apartments

The average two-bedroom apartment in the U.S. cost $1,035 per month in 2010. So the only type of apart-ment you can afford when you have a budget of $500 per month is a lower quality unit. When you live in an apartment - especially low-cost apartments - you have neighbors on all sides. You are often in the hub of criminal activity. It’s a lousy place to live and even worse in which to raise kids. A much more satisfactory choice is a mobile home park. In a mobile home park, you share no walls with your neighbors. You also have a yard for the kids to play and maybe a dog to be fenced in. You have your privacy and your dignity. It is the very problem with apartments that makes the level of demand continuously high for mobile home parks. And there is no likelihood that low-cost apartments will change in the near future.

An investment like no other

Probably the most unique aspect of mobile home park ownership is the fact that it costs around $3,000 to move a mobile home from one property to another. The reason the cost is so high is that “mobile homes” are anything but mobile. It takes significant work to disassemble, transport, set, tie-down, and skirt a mo-bile home. And this cost must be paid in cash up front. The result? About 95% of the mobile homes in the U.S. never leave the spot that they are originally delivered. From a landlord’s perspective, this is heaven. When your tenant cannot afford to move, they must tolerate and pay all rent raises without argument. In addition, since tenants can never leave, mobile home parks have phenomenally stable revenues.

Plentiful seller-carry

In a world of difficult commercial real estate lending, mobile home park investing really soars above the rest. The reason? Most mobile home park owners are willing to provide seller-financing with a reasonable amount down. That allows you to avoid the frustrations, fees and lack of control that traditional bank lending entails. In addition to sellers carrying the paper on the transaction, that paper is normally non-recourse. In certain cases, such as incomplete prior financials or turn-around situations, high loan to value seller financing can be obtained.

Unbelievable numbers

Many people have the misconception that many mobile home park deals must be flawed or mis-repre-sented since they show cap rates in the double digits. This is not true. Mobile home parks - as an industry standard - are bought and sold at much higher cap rates than other forms of real estate. The single biggest reason for this is simple supply and demand: there are more parks for sale than there are qualified buyers. Another factor is that most people have the wrong impression of the “trailer park” business, as a result of media hype and comedians such as Jeff Foxworthy, and do not consider it a worthy strategy. These same people would be shocked to find that Sam Zell is the largest owner of mobile home parks in the U.S. (fa-mous for apartment and other real estate ventures) and that Warren Buffet is the largest owner of mobile home manufacturing and financing through his ownership of Clayton.

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Operating parks is all about systems

Due to the few items that mobile home park owners are responsible for, successful management is entirely based on steady use of good systems. The key systems that owners must perfect are collections, bookkeep-ing, repair & maintenance, and tenant relations.

Collections are a top priority for park owners. Without cash in the door, there is nothing to pay bills with and make a profit from. And, obviously, lower earning residents have a much harder time paying their bills when due. The key to collections in mobile home parks is to press for payment relentlessly, with the im-mediate threat of eviction, at the earliest possible date. Normally, the rent is due on the first and late after the fifth. On the sixth, the legal demand notices go out and the evictions process begins. This constant urgency is required to not let tenants get behind.

Bookkeeping is very important in mobile home parks. The average park has 50 to 100 tenants, and the complexities are far beyond pen and paper. There are many accounting operating systems available for mobile home parks such as Rent Manager and Park Sidekick, but many operators are just as happy with simple Quick Books and Excel.

Repair and Maintenance in mobile home parks is very basic, and often centers around sewer clogs. Since many tenants cook with large amounts of grease, there is a continual issue with clogged pipes. This is fairly easily remedied by Roto-Rooter. Other common issues are pothole repair and water line breaks, which are simple issues of dispatching repairmen and making sure that the work is completed satisfactorily.

Tenant Relations in mobile home parks are very simple. All you ask is that the tenant pay their rent and follow some basic rules, such as no non-running vehicles and mowing their yards. Everything else that hap-pens in the park is a matter for the police. Loose dogs? Call 911. Domestic violence? Call 911. Loud music late at night? Call 911. One of the key factors in a successful park is that it be treated like a residential subdivision. The tenants must not be babied, but act on the same principles as a traditional neighborhood - if someone is breaking the law, the police are called, not the park management.

Above all, get going now while there’s still time

We are currently in a great environment to buy mobile home parks. Moms & Pops are getting old and want to sell. The economy is in a shambles. Not many people are bidding on parks. But this buyers’ market won’t last forever. You need to take action now, while the opportunities are still here.

There are many books, courses and boot camps on the subject of mobile home park investing. You can find most of them through Mobilehomeparkstore.com. Read and learn. You can get up to speed very quickly using these resources.

Conclusion

Mobile home park investing is the most attractive asset class in all of commercial real estate at this mo-ment. It serves an ever-growing affordable housing market, and offers spectacular returns and frequent seller financing.

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Why Invest In Mobile Home Parks?There are over 60,000,000 Americans with household incomes under $20,000 per year. To this giant market, a mobile home is the only form of detached housing that they will ever be able to afford. And, as a result, the demand for mobile homes has never been higher. But how can you take advantage of this opportunity?

The Basics of Affordable Housing

Before you can begin to invest in mobile homes, you must first understand your customer. For those fami-lies with household incomes under $20,000 per year using the governments own ratio of housing cost to income of 33% their housing budget is around $500 per month. At the same time, the average cost of an apartment in the U.S. in 2010 was around $1,030 per month. The point is that this market segment is extremely thankful to find something that they can afford, and is not very discriminating on the quality of the product. They are looking for basic shelter literally a roof over their head, a solid floor, running water and sewer, and heat in the winter. These customers are not expecting fine carpets, hardwood floors, upscale cabinetry. As a result, a successful investor in mobile homes will not focus on providing more than the basics. That is not to say that the home should not be clean and attractive. But the American obsession with upscale bathrooms and kitchens has no place in affordable housing.

And before you think that this customer is different than you and I, look around you. If you earn $10 per hour or less, you are in this segment. And that is a giant pool of jobs in America today. Almost everyone who works at the grocery store, McDonald’s everywhere you go earns in this range. And as Americas economy continues to decline, this number grows.

Why Mobile Homes Are The Answer to Affordable Housing

Mobile homes are the lowest cost form of detached housing to build. It costs less than $30 per square foot to build a mobile home, as opposed to around $100 for a stick-built home. And used homes often sell in the area of $10 to $15 per square foot. HUD has controlled the construction standards of mobile homes since the 1970’s, with the goal of keeping costs at a minimum. If there’s been a way to shave costs, it’s been done.

The other key is the quality of life that a mobile home can provide the resident as compared to other inex-pensive housing options. Unlike an apartment, the customer has nobody banging on their walls or ceiling. They have a yard. They can have a pet. Basically, mobile homes allow residents to have self-respect, and a neighborhood feel that supports a healthy lifestyle.

Why Mobile Homes Are Easy To Renovate

Mobile homes have some unusual attributes that other forms of housing do not share. One is that they have no permanent foundation. A mobile home’s foundation is nothing more than a steel chassis, to which the wooden floor is attached. There are so slabs and no piers nothing expensive to settle or crack. Level-ing a mobile home costs in the hundreds compared to a stick-built home’s thousands. All utilities run in a




49

common trough as opposed to the myriad of wires and pipes in a stick-built home. This makes it easy to locate and repair the water, sewer and electric pipes and lines.

One of the most unusual components of a mobile home is the fact that none of the walls are load-bearing. A mobile home is structurally similar to a shoe box the walls and roof are the only components needed to make it stand up. This gives you much more freedom in renovations, as virtually all internal walls are simply cosmetic.

An Unbelievable Amount of Demand

If the U.S. is in a recession, you would never know it if you run an ad for a mobile home for sale or rent. Even in a small market, you should receive 30 to 50 calls a week in response to your ad. At a mobile home park in Pueblo, Colorado recently, the number of calls exceeded 150 in one week. Why all the calls? Be-cause there is a huge, unsatisfied demand for affordable housing. But that’s not the whole story. The other cause of the giant demand is the poor quality of traditional apartment offerings. Have you seen an afford-able housing apartment complex recently? Anyone who thinks that mobile home parks are unattractive has not visited apartments. The true crime center of most cities today are the lower-income apartment developments, with drug dealers standing out in front and prostitutes, gangs and drug addicts living in-side. This is a horrible environment for any family or individual to live in, and many buyers and renters of mobile homes are fleeing from these terrible situations. In fact, most cities now view aging apartment complexes as their #1 problem not trailer parks.

Healthy Numbers

Mobile homes are an attractive investment due to very attractive numbers. Essentially, it is easy to sell a mobile home for much more than you paid for it. A mobile home that you buy and renovate for $8,000 can be sold for $15,000 and a home that costs $12,000 can be sold for $30,000. You can buy them relatively cheaply because most people do not want to invest in this asset type. At the same time, there is a huge supply/demand gap, so you can price them high without much competition. The important fundamental and the one that needs to be your guide in every decision you make is to stick with the business model of affordable housing. You have to construct the monthly payment , including mobile home park lot rent, to not exceed around $500 per month. This is what the customer can afford. If you place the consumer in a position of having a bigger monthly obligation than they can afford as was just demonstrated in the sub-prime mortgage meltdown you will end up in endless defaults. This serves no one, as you are constantly having to clean and re-sell the home and your customers are denied the affordable housing, and long term benefit, that they are searching for. Gaining Knowledge In This Niche

There are two web sites that contain a large amount of information on this investment sector. One is www.Mobilehomeparkstore.com and the other is www.MHBay.com which together make up the largest portfo-lio of web sites for the industry. There is also a new site that contains a vast assortment of articles and tips on investing in mobile homes at www.Mobilehomer.com.

Conclusion

Affordable housing is going to be one of the key investment sectors in real estate in the coming years. Get in now, on the ground floor. You can obtain spectacular returns and -- equally important -- provide nice housing to hard-working Americans who need it badly. This is a giant market, and one that you will be hearing a lot more about in the future.

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Why Inflation Will Be Great For Manufactured Home Community Owners With the price of oil nearing $100 a barrel, and other commodities heading up sharply, only a fool would not see the trend to a more inflationary environment in the U.S.. And despite the government’s attempts to stem the increases, clearly inflation will be the big news story right up to the elections in 2012. But what will the effects of inflation be on manufactured home communities as an investment? It appears only positive.

People have to live somewhere

Housing is not a luxury (although it would seem that way in some countries). People have to have shelter - they can’t just cut that out of their budget. As a result, manufactured home communities do not have to fight a battle to keep consumers buying their product despite their attempts to trim costs to deal with inflation. This is one moment in history when being at the top of the demand food-chain is a good thing. And, equally important, manufactured home living is among the least expensive options out there. At a time when people will be seeking a way to reduce their budget, life can’t get any cheaper than the manu-factured home community. While others may be losing tenants, we may actually see increasing demand.

Our customers are in the best position not to lose their jobs

In times of inflation - when companies are struggling to trim costs such as payroll - there are some jobs you can cut, and some you can’t. The ones you can cut are administration. Executives, supervisors - jobs that you can’t directly link to sales - are the ones that go first. Our customers are the folks you can’t let go of. Let’s look at a hotel as an example. You can’t fire the people who clean the rooms, cook the meals in the restaurant, or valet the cars. But you can fire the management staff, and the management company that supervises them. Our customers are the former, not the latter. The manufactured home communities will not feel the pain. The McMansions will.

Those jobs paying minimum wage to $15 per hour will be the survivors of the cost-cutting mania that is about to be unleashed.

We have the ability to still raise rents

As inflation increases, we will be able to raise rents to stay in step with increased costs. And we can do that because our rents are still very low. When you have a lot rent of $200 to $300 per month, you are delivering a low price that still has plenty of room for a boost - yet still remain uniquely affordable.

In many communities, the residents already own their homes outright. With no mortgage to pay, they are effectively living in a two or three bedroom home for a few hundred dollars a month. Let’s compare that to the average apartment in the U.S., which exceeded $1,000 per month in 2010. Which do you think has more room for price growth?




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Manufactured home communities do not use a lot of inflating resources

The single largest line item for the average manufactured home community is water ;amp& sewer. While these will probably always be going up over time, they are not energy related and are not expected to inflate wildly. In fact, there are few - if any - line items that are going to go anywhere fast. The most dangerous cost from an inflationary perspective is going to be the electricity, but that is paid directly by the tenant. So there is really little inflationary damage from the community owner’s perspective.

While many industries - from airlines to trucking - will be struggling to survive the increasing costs of inflation, community owners will pretty much be on the sidelines.

Inflation is good for real estate

When the stick-built housing bubble burst a few years ago, some economists said that the only salvation would be a good round of aggressive inflation to boost values. Well, it looks like they’re going to get their wish. But inflation is not just good for houses, it’s good for all forms of real estate. Why? Because inflation gives you a sales point to make all hard, tangible investments more valuable, while investments tied to cur-rency falter. Just look at what happened to the stock market the day I wrote this article - it fell 180 points due to concerns on inflation.

As real estate values increase, so will the value of your manufactured home community. Just like those lucky Californians who bought real estate before the great inflationary run up of the past few decades, a basic manufactured home community - any community - will increase in value without any help on your part. As a result, you will see the benefits when you go to sell or refinance.

Conclusion

Yes, inflation is coming back. The signs are everywhere. Remember gold at $300 an ounce? Try $1,400. Remember $20 per barrel oil? Try $100. Remember what that shopping cart at Walmart cost you last week? Well, it’s going to be a whole lot higher soon. And the effects of inflation are going to be huge, as we have avoided it for so many years that we don’t factor that into our decision making any more.

But one of the few happy participants in the inflation game are going to be the community owners. They will see continually higher cash flow and values. And that’s a happy security blanket when the rest of the economy is crashing

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V.America’s HousingImbalance




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Strategy Corporation International (SCI)Special Focus - April 2009America’s Housing ImbalanceThe nations shrinking affordable housing supply

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SPECIAL FOCUS

AMERICA’S HOUSING IMBALANCE: Out of Balance

AFFORDABLE HOUSING FINANCE • September 2008

The risk of the nation’s shrinking affordable housing supplyBY DONNA KIMURA

Barbara Harvey lives in her car, driving to a parking lot each evening to spend the night and then leaving shortly after the sun rises.

A 66-year-old mother of three grown children, she has been homeless since March, not long after she lost her job and then the three-bedroom condominium that she rented.

“I expected to live there for the rest of my days,” Harvey says, recalling afternoons spent tending her gar-den. “I thought that was where I would be happy to live for the rest of my life.”

A notary, Harvey was a contract employee for several companies, but when the work dried up, she could no longer pay her rent. “I’ve never earned enough to save a lot of money,” she says.

She was forced to move into the back of her Honda CR-V with her two golden retrievers. Four months later, Harvey still hasn’t been able to find a place to live in Santa Barbara, Calif., a coastal community that has been her home for 26 years. How hard has the search been? “There isn’t any affordable housing,” she says. “That’s the answer right there.”

On some nights, she will stay with a friend, but most of the time she sleeps in the back of her car. Many cities ban camping in vehicles, but several churches, nonprofit organizations, and the local government in Santa Barbara have made parking lots available at night for people living in their vehicles.

The program, which began a few years ago with a dozen people staying in three lots, has grown to serve 55 people in 12 lots, with a waiting list, says Gary Linker, executive director of the nonprofit New Beginnings Counseling Center. Although counseling and education is the group’s focus, it helped place 40 people in housing last year. The parking program is one of the group’s outreach efforts.

The participants drive to one of the parking lots around 7 p.m. and leave at 7 a.m. Many have physical or psychological disabilities, and about half hold jobs, debunking a stereotype that the homeless choose not to work. “Many of them do work but just can’t afford a place,” Linker says.

With the economy tanking and foreclosures rising, expect more Barbara Harveys across the country. That prospect is alarming considering the already wide gap between the number of needy families and the supply of low-cost housing.




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The impact of the affordable housing shortage is vast because affordable housing is like an iceberg. Below the surface, its expansive reach touches upon health, education, and the other foundations of a community.

If the demand continues to dwarf supply, more people will live in overcrowded and poor housing condi-tions, warns Nicolas Retsinas, director of the Joint Center for Housing Studies (JCHS) at Harvard Univer-sity. “That will have a contagion effect on education and public health,” he says. “And we’ll see housing being built further and further out, with sprawl being a consequence.”

Growing Need

There are way more needy families than there are affordable homes. The deficit of affordable housing is in the millions.

In 2005, there were 9 million extremely low income renter households, those earning no more than 30 per-cent of the area median income (AMI), and only 6.2 million units affordable to them, an absolute short-age of 2.8 million, according to Danilo Pelletiere, research director at the National Low Income Housing Coalition in Washington, D.C.

But when the availability of a unit gets taken into account along with affordability, the shortfall is more like 6 million units, he says. This means there are only 38 affordable and available units for every 100 ex-tremely low income households—meaning three out of five in need are shut out.

The situation is not much better for those earning up to 50 percent of the AMI. For this group, the deficit is still a staggering 5 million affordable and available units.

In another sign of the growing gap between affordable housing and needy families, the number of house-holds with “worst case” housing needs has increased significantly, reaching 5.99 million in 2005. That’s a nearly 20 percent jump from 5.01 million in 2001, according to the latest Affordable Housing Needs 2005: Report to Congress prepared by the Department of Housing and Urban Development. Households with worst-case needs are defined as unassisted renters with very low incomes who are either paying more than half of their incomes for housing or living in severely substandard housing.

Increasing Need

The demand for affordable housing continues to grow across the nation, with no signs of easing.

• In 2006, 39 million households were at least moderately cost burdened (paying more than 30 percent of income on housing), and nearly 18 million were severely cost burdened (paying more than 50 percent). From 2001 to 2006, the number of severely burdened households alone swelled by almost 4 million.

• The number of households with “worst-case housing” needs in 2005 was 5.99 million, comprising 13.4 million individuals. This is an increase of 817,000, or 16 percent, from 5.18 million in 2003. Households with worst-case needs are defined as unassisted renters with very low incomes who are either paying more than half of their incomes for housing or living in severely substandard housing. The group with the largest increase in worst-case needs from 2003 to 2005 was families with children—475,000 households.

• The proportion of American households that had worst-case needs in 2005 was 5.5 percent, up from 4.9 percent in 2003.

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• All regions of the country shared in worst-case needs, and all regions experienced increases: 208,000 households in the Northeast; 143,000 in the Midwest; 338,000 in the South; and 129,000 in the West in 2005.Sources: Department of Housing and Urban Development and Joint Center for Housing Studies at Harvard Uni-versity

“The need for affordable housing for low-income people is only going to get greater,” says Sister Lillian Murphy, CEO of Mercy Housing, one of the nation’s largest affordable housing owners and developers, citing the growth in immigrants and the elderly. In its 26 years, Mercy Housing has either built, preserved, or helped finance 34,000 affordable units. The urgency of the times is motivating Murphy to think even bigger. She wants to get to 100,000 units in the next five years. It’s a lofty goal but still a drop in the bucket.

“We haven’t seen the high point of foreclosures yet,” notes Murphy. One in every 171 U.S. households received a foreclosure notice in the second quarter of 2008, according to RealtyTrac, Inc., which reported that filings were up 121 percent from the same period a year ago.

In projecting the future need, Mercy Housing estimates that the demand for affordable housing will soar to around 19 million by 2015, while the inventory will be about 7 million. It’s a rough estimate, and the organization hopes to work with the JCHS to see if its early projections are correct, and to get a handle on the scope of the challenge.

The numbers help frame the crisis, but low-income families and affordable housing developers don’t need studies to tell them there is a problem. They see it every day on the streets and in the seemingly endless waiting lists.

When Paseo Senter at Coyote Creek opened in San Jose, Calif., this year, more than 3,000 people applied for the affordable apartments at the 218-unit community developed by Charities Housing Development Corp. and The Core Cos.

Other examples are just as striking.

“Of the 20 properties we manage, the average wait for a one-bedroom apartment in the Berkeley- Oakland, Calif., area is seven years,” says Ryan Chao, executive director of Satellite Housing, a nonprofit affordable housing developer. The average annual income of its residents is $12,000, and most of the group’s residents are seniors.

Chao and other affordable housing developers have closed some of their waiting lists because they were getting so long.

Declining Production

While demand grows, the supply is shrinking.

The last major federal production program standing is the low-income housing tax credit (LIHTC), says Retsinas.

Created in 1986, the program has spurred the development of more than 2 million affordable housing units across the country. Developers compete for the credits, which they can then sell to banks or other

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investors to raise equity for their affordable housing projects. The investors use the credits to reduce their federal tax liability.

Unfortunately, the number of LIHTC units being produced has been falling. In 2006, credits were reserved for 131,704 units—71,171 units from the state ceiling allocations and 60,433 units in developments fi-nanced by tax-exempt bonds. This is a drop from the 132,449 units that were reserved credits in 2005 and the 140,000 units in 2004, according to figures compiled by the National Council of State Housing Agen-cies (NCSHA).

Higher construction costs are often blamed for the slipping numbers, but other issues are at play as well.

There is concern that the decline in LIHTC production will continue this year and possibly beyond be-cause of recent financial market turmoil, coupled with the economic downturn. “The disruption in the broader capital markets has had the effect of bringing to almost a standstill the raising of new capital for new LIHTC properties,” says David Smith, CEO of Boston-based Recap Advisors, LLC. “Some of that may be attributable to it being the summer, but more of it is attributable to the withdrawal of over 60 percent of last year’s buying volume.”

Several longtime investors, including Fannie Mae, Freddie Mac, and several major banks, have had little or no appetite for credits this year because of their own financial troubles or issues. Their absence from the market has led to higher yields for remaining investors and lower prices going to developers.

Because the LIHTC program is the country’s only significant production tool, it is also looked at as the an-swer to many of the nation’s housing problems. The program can serve residents earning up to 60 percent of the AMI, but many developments target poorer residents and those with special needs.

Deeper income targeting often requires more credits per unit, so fewer units can be developed. “It’s not bad, but it is an indication there is demand on the resource,” Smith says.

NCSHA is concerned about housing tax credit production levels and is watching the situation to see if states can use all their credits this year, says Barbara Thompson, executive director of the NCSHA.

NCSHA and others pushed for the recent passage of H.R. 3221, Housing and Economic Recovery Act, which includes several moves aimed at strengthening the LIHTC program.

“We think the legislation is the most important [proposal] that has happened to the credit since the 2000 cap increase,” Thompson says. “No question about it.”

Experts note that support for other housing programs has been evaporating. “From 1997 to 2007, housing assistance programs fell from 10 percent to 8 percent of the nation’s dwindling domestic discretionary out-lays,” according to the JCHS in its latest The State of the Nation’s Housing report.

What could be worse than not building enough new homes? Losing existing affordable housing. In a recent 10-year period, the supply of rental units affordable to households earning less than $16,000 shrank by 17 percent, estimated the JCHS.

That’s a growing danger as low-cost units lose their affordability to redevelopment and rent hikes or dete-riorate so extensively that they can no longer be used.

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Why Housing Matters

Developers and advocates have long believed that affordable housing is more than shelter. Connecting all the dots has been difficult, but the lines are getting clearer and more important as housing needs grow.

Decreasing Supply

Affordable housing production and the number of available affordable units are falling further behind the nation’s demand.

• The number of affordable housing units being produced with 9 percent and 4 percent low-income housing tax credits (LIHTCs) has fallen in recent years. In 2004, credits were allocated for 140,000 units—76,326 apartments from the state ceiling and 63,674 in bond-financed developments. That fell to 132,449 units in 2005 and then to 131,704 in 2006. That’s a 6 percent drop between 2004 and 2006.

• Over the 10-year period from 1993 to 2003, the number of units that were affordable to renters in the bottom third of the renter income distribution ($400 per month or less) fell by 13 percent, or 1.2 million units.

• About 14 percent of the low-cost rental apartments built before 1940 and 10 percent of the low-cost units built between 1940 and 1970 were permanently removed from the nation’s stock of affordable hous-ing between 1995 and 2005.

• Mortgage restrictions and rental assistance contracts covering more than 1 million units of subsidized housing will expire by 2013, and many small, unassisted low-rent buildings are at risk of being lost through demolition, abandonment, or gentrification.Sources: Joint Center for Housing Studies at Harvard University and National Council of State Housing Agencies

Affordable housing can provide significant economic benefits to a community, including creating construc-tion jobs, generating taxes, and increasing activity at local businesses. Oregon Housing and Community Services, the state housing finance agency, reports that each $1 it invests in affordable housing leverages additional investments and spurs a total economic benefit of as much as $10 to $15 across the state.

Research also suggests that good affordable housing can reduce health problems and increase residential stability. It points out that families living in affordable housing are likely to have more money to spend on nutritious food and health care.

Studies have also found that children in low-income families receiving housing subsidies are less likely to suffer from iron deficiencies and malnutrition.

The Center for Housing Policy and Enterprise Community Partners last year identified nine promising hypotheses regarding the positive contribution of affordable housing to health.

“Our sense in general is there is not enough understanding of the social benefits of housing,” says Jeffrey Lubell, executive director of the Center for Housing Policy. The recent analysis is a step toward piecing together the puzzle.

One of the surprises in doing the recent analysis was the large number of hypotheses that emerged, he says.

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A dramatic example of the real-life benefits can be seen in Seattle at 1811 Eastlake, a bold development for 75 formerly homeless men and women with chronic alcohol addiction, many of whom were among the city’s biggest users of public services. The development follows the Housing First approach, which calls for providing homeless people with housing quickly and then offering services.

In its first year, residents were using about $2.5 million less in crisis and emergency health-care services. Medical expenses were down 41 percent, and jail bookings declined 45 percent, according to findings from a preliminary study.

1811 Eastlake, which is operated by the Downtown Emergency Service Center (DESC), is also making a difference in the community. The number of alcohol-related incidents reported by the Downtown Seattle Association was down 48 percent.

“It means for the broader community that it is much cheaper on taxpayers to invest in and create perma-nent supportive housing for people who are living with behavioral health disabilities, to build permanent supportive housing than to leave them on the street,” says Bill Hobson, DESC executive director.

The results seen in Seattle are not a fluke. Similar findings were reported in Maine, where a recent cost analysis found that putting homeless people into housing cut the average cost of services they consume in half. Permanent supportive housing reduced emergency room costs alone by 62 percent, according to the study by the Corporation for Supportive Housing, MaineHousing, and the Maine Department of Health and Human Services.

The average annual cost-of-care savings produced in the first year of living in permanent supportive hous-ing was $944 per person, or $94,000 a year for all 99 people studied. Those numbers suggest that housing just 1,000 homeless people would produce close to $1 million in savings per year.

Housing and Education

There were 679,724 homeless students enrolled in local school districts in the 2006- 2007 school year. The number is less than the year before, with the difference being attributed to the high numbers from the hur-ricanes that hit in 2005-2006. Still, the latest number is significant.

Studies suggest that stable and affordable housing provides children with increased opportunities for edu-cational success. The Center for Housing Policy and Enterprise, which looked at the health benefits, also analyzed existing research related to affordable housing and education and came up with seven promising hypotheses.

The first is that good housing reduces the frequency of unwanted moves that lead to children changing schools and having their education disrupted. Studies point out that children who change schools fre-quently experience drops in their educational achievement. “Helping families afford the costs of owning or renting a stable, affordable home improves their stability and reduces the likelihood they will have to move as a result of eviction, rent increases, or other financial struggles,” notes the research analysis.

Affordable housing is also a way to alleviate overcrowding and health hazards such as lead paint in older homes, which can contribute to poor school performance or missing school.

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The Center further points out that affordable housing often provides a platform for residential-based after-school programs. Many LIHTC developments provide after school programs and tutoring.

The services available in some affordable communities can make a big difference. Computer classes were important for Anna Montano’s son while growing up at La Puente Park Apartments, an affordable hous-ing development owned and operated by Jamboree Housing Corp. in La Puente, Calif. Jamboree’s social services division also awarded him a scholarship.

“If I didn’t have this place and affordable rent, I don’t know where I would be,” says Montano, who drives a van that transports seniors and disabled individuals to appointments. Like Montano, many of the other residents at her development are single mothers. “It’s a place to raise your children and feel comfortable,” she says.

The Big Picture

Understanding the collateral benefits of affordable housing, including providing construction and other jobs, is critical for the industry, especially in raising support from policy makers.

“If we want to succeed on raising housing on the national agenda, we need to do more than assert that housing matters in achieving these outcomes,” Lubell said. “We have to prove it.”

Others agree that a big-picture view is needed. “Policy makers need to put on a wider lens when it comes to seeing what affordable housing means for families’ health, for child development, and creating healthy communities,” says Mary Cunningham, director of the Homeless Research Institute at the National Alli-ance to End Homelessness.

The primary driver of homelessness, she says, is the lack of affordable housing.

That’s something Barbara Harvey knows all too well. In Santa Barbara, she stays hopeful that she will find a job and a home.

“I am extremely grateful that people have helped,” she says. “This shows me this country cares about one another. Because of the economy and wretched state of affairs, we are going to have to get together.”

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For more about affordable housing’s impact, check out September’s web extra article Businesses Feel the Housing Pinch

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