Update on manufactured home REITs, and our index leaves the S&P in the dust!

On Sunday, I wrote about trailer parks, also known as manufactured homes in planned communities.

Three REITs are active in this market, and I’ve taken a closer at them:

·       Equity LifeStyle Properties (ELS) — Florida, Arizona, California, NE U.S.; for retirees

·       Sun Communities (SUI) — Midwest U.S.; all ages 

·       UMH Properties (UMH) — PA and NJ; lower income, affordable housing

All three REITs have had impressive returns over the past 12 months, in the 18% to 22% range. But their financials stink! The lousy earnings, or lack thereof, stick out like a sore thumb …

ELS reported its quarterly earnings on April 16: $0.30 vs. $0.61 last year. And they’ve been on a downward trend for the past three years, although they are starting to turn around. 

SUI reported 4th quarter 2011 losses of $0.10 per share on February 23, 2012, missing the $0.06 profit expectations of the 2 analysts following the company. That follows losses of $0.02 and $0.04 the previous quarters.

The next earnings announcement from SUI is expected next week. Estimates are for $0.15. But it would take several quarters of rising earnings to impress me.

UMH isn’t much better: A $0.01 loss for the final quarter of 2011 following two quarters of zero. And 2011 earnings were $0.14 vs. $0.52 for 2010.

Another important number to watch is debt-to-equity ratio. This shows how aggressive the company is in financing growth with debt. The higher it is, the more they have to pay in carrying costs, which can be a huge drain on profits.  

·       ELS: 65%

·       SUI: 102%

·       UMH: 51%

There are many good reasons why these REITs could be successful:

·       Nationwide, homebuilding is off and the surplus is dwindling.

·       Unemployment is dropping.

·       Retail is on the rise.

·       Boomers want to downsize.

·       Manufactured homes are a less-expensive alternative to traditional housing.

I think all three of these manufactured home REITs offer possibilities, so I’ll keep an eye on them. But at least until earnings improve, I’m staying away.

The e-FinancialWriter REIT portfolio for the week ending April 20, 2012, took a nice jump, up over 22% since implemented.  The average 12-return for each REIT was more than 10%, not including 4% in dividends!   

REIT	Sector	Blog date	Price	Closing price 04/20/12	Return to date %	Dividend yield %
PSA	Self storage	3/14/2010	90.75	139.72	53.96	2.83
VTR	Health care	12/30/2010	52.87	56.83	7.49	4.13
HCP	Health care		36.81	39.60	7.58	4.90
HCN	Health care		47.53	54.72	15.13	5.27
SNH	Health care		22.00	21.64	-1.64	6.98
IAECREIN:CN	Canada	9/27/2011	19.45cn	24.05cn	23.64	0
ZRE:CN	Canada		16.29cn	19.59cn	20.26	5.13
INVRLPRA:CN	Canada		5.45cn	5.48 cn	0.59	1.96
NNN	Retail	1/29/2012	27.18	27.28	0.37	5.63
Index return since inception*					22.17
Avg 12-mo return of REITs in portfolio*					10.20
Avg dividend yield of REITs in portfolio						4.09
12-mo return S&P 500					3.08

Source: Bloomberg

*Does not include dividends paid

If you have trouble seeing the chart, just in zoom in with your web browser.

To read the posting where I introduced a specific REIT, click the “Blog date” link. And if you’d like to see prior reports, type “reit index” in the search box.

Enjoy your weekend!

George

P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement.

If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

Is the Veep Just Cheap?

I like Joe Biden. He kicks back on the White House lawn to have a beer with the boys, can spout off a good ethnic joke at the drop of hat, and doesn’t care who is listening when handing out sage advice to his boss. Plus he is always smiling.

You can’t blame him, life is good: Free government housing, free government transportation, and according to his just-released tax return made $379,000 in 2011.

Yet he and Jill only gave a measly $5,540 (1.46%) to charity last year.

That’s disturbing, especially from a guy who isn’t shy with bloviating that the rich should do more to pay their share. Maybe he doesn’t consider himself rich. After all he was the poorest member of the Senate when he was chosen to be Obama’s running mate.

But since I like Joe so much, I’m going to give him the benefit of the doubt and believe that he is not cheap … just uninformed.

And as a jester of good will, I’m going to send him a copy of the second edition of A Donor’s Guide to Planned Giving.

After Joe is finished reading it, he’ll understand:

• The most common type of gifts,
  
• How to make his gifts,
  
• Alternative gifts,
  
• And much more.

So by this time next year when Joe sends in his 1040, he will finally have something worthwhile to brag about.

Best wishes,

George

P.S. Would you like to follow me and receive notification each time I post? Just click the “Follow” link at the top of this page or enter your e-mail address in the “Follow by Email” in the space to right, and you’ll be all set. And you can stop the notifications any time you want.

These Aren’t Your Father’s Trailer Parks!

A while back I owned some mobile homes that I rented out. Although they were easy to rent, they were a real pain to maintain: Leaks in the roofs, leaks in the walls, rotting pressboard floors, aluminum wiring, and constantly blowing fuses. I just knew I’d get a call saying that one of the places had gone up in flames. Fortunately, that never happened.

And as far as the type of tenants they attracted ... let me just say they were an interesting lot.

So even though I hated losing the income, it was a blessing in disguise when I got rid of them.

The manufactured home industry has come a long way since those days.

Warren Buffett’s Berkshire-Hathaway owns Clayton Homes, the largest company in the manufactured housing industry, and creator of the environmentally friendly factory-build i-house, as shown in this YouTube video. 

The trailer parks have come a long way, too. Upscale communities of manufactured homes have popped up, and that’s were I see opportunities for real-estate-minded investors.

Real estate investment trusts (REITs) that specialize in manufactured homes get most of their income by leasing the space for the homes. They also own the utilities, such as street lighting, and take care of the community property. The homeowners maintain the space they rent, as well as their homes. 

The manufactured housing sector is a small, often ignored one, with a market cap of $4.36 billion and three publicly-traded REITs. Each focuses on a different part of the country and different homeowners:

·       Equity LifeStyle Properties (ELS) — Florida, Arizona, California, NE U.S.; for retirees

·       Sun Communities (SUI) — Midwest U.S.; all ages 

·       UMH Properties (UMH) — PA and NJ; lower income, affordable housing

I’m taking a close look at this sector, and may add one of the above to the e-FinancialWriter REIT portfolio. You might want to check them out, too. I’ll give you a better idea sometime during the week.

Meanwhile, here is the e-FinancialWriter REIT portfolio for the week ending April 13, 2012.   

REIT	Sector	Blog date	Price	Closing price 04/13/12	Return to date %	Dividend yield %
PSA	Self storage	3/14/2010	90.75	136.78	50.72	2.89
VTR	Health care	12/30/2010	52.87	55.92	5.77	4.19
HCP	Health care		36.81	38.93	5.76	4.98
HCN	Health care		47.53	53.22	11.97	5.42
SNH	Health care		22.00	21.16	-3.82	7.14
IAECREIN:CN	Canada	9/27/2011	19.45cn	23.86cn	22.65	0
ZRE:CN	Canada		16.29cn	19.47cn	19.52	5.16
INVRLPRA:CN	Canada		5.45cn	5.48 cn	0.50	1.96
NNN	Retail	1/29/2012	27.18	26.55	-2.32	5.78
Index return since inception*					19.80
Avg 12-mo return of REITs in portfolio*					9.19
Avg dividend yield of REITs in portfolio						4.17
12-mo return S&P 500					3.83

Source: Bloomberg

*Does not include dividends paid

If you have trouble seeing the chart, just in zoom in with your web browser.

To read the posting where I introduced a specific REIT, click the “Blog date” link. And if you’d like to see prior reports, type “reit index” in the search box.

Enjoy the rest of your weekend!

George

P.S. Would you like to follow me and receive notification each time I post? Just click the “Follow” link at the top of this page or enter your e-mail address in the “Follow by Email” in the space to right, and you’ll be all set. And you can stop the notifications any time you want.

Government getting stinger with long-term care help

Assuming you have even thought about what might happen if your health took a change for the worse, did you figure you’d just let the government pick up the tab?

Well, you might want to give that idea another look.

Your state determines what you need to do to qualify for Medicaid assistance, based on Federal rules. Generally you can’t keep more than $2,000 in cash and investments; plus a car and home.

But with most states up to their eyeballs in red ink and no relief in sight, they’re looking everywhere they can to trim expenses, including Medicaid. Some states are getting tougher than others.

For instance, in Texas, you can qualify for Medicaid-paid nursing home expenses after you buy an annuity with money that exceeds the allowed guideline. Meanwhile, if you hop over the state line to Arkansas, the annuity concept won’t work.  

Cuts could be coming for adult day-health programs and on routine dental care in nursing homes, too. And don’t be surprise to see an increase in the number of daily living activities that you need help with to qualify for Medicaid.

On top of the cutbacks, a handful of states are toying with ideas on how to recover Medicaid dollars they’ve already forked over for long-term care.

To sum it up: If you ever help with long term care costs, don’t expect the government to come to your rescue. 

There are a few things you can do though ...

First, take an inventory of your assets and liabilities. Include the value of each and how they are owned.  

Second, understand your state’s Medicaid rules. Click here for a good government source to check out.

Third, learn your options. In A Boomer’s Guide to Long-term Care, I explain the eight choices you have when planning for your long-term care.  

Best wishes,

George

P.S. Got a question or comment about this posting or something else I’ve written? Then go to the comment box below. Or if you’d rather e-mail me directly, click here.

Looking to save a buck?

Today’s Wall Street Journal had a cool story about the Dollar Shave Club. You can find it here.

And even if you’re not interested in reading the story or saving a dollar, you’ll get a laugh out of the YouTube video.

Best wishes,

George