Trust Waiheke is the fund manager
With so many Waiheke charitable, volunteer and good-deed organisations, it does not need another service provider. Lacking is a source of funding that does not keep going to the same benefactors asking for another handout. Rather, it needs to establish a donated fund that invests the donation in inflation-protected investments, and gives out the income, but does not eat into the endowment.
Waiheke has some very wealthy part-time land owners who have selected Waiheke because of its qualities. Trust Waiheke will ask them for endowments – a one-time ask, the gift that keeps giving. It will then invest those funds in the sort of high return that is available to sophisticated investors.
One of these investments is in affordable housing. At the bottom end of the social scale, the hidden homeless are living in cars, tents, sheds, garages and over crowded conditions. Unlike the target audience served by groups like the Salvation Army, the hidden homeless don’t need wrap-around services of mental health, addiction treatment, etc., they need what the NZ Human Rights Commission calls adequate housing. They already have a private support network – whanau, family or friends offering their land to park what is called a mobile home. In most cases, the rent is paid by the social services department. But because the units cost so little to manufacture, this rent enables a program called Lease to Purchase. At the end of six years rent, the beneficiary has the option to buy the unit for a peppercorn price. The fund would provide the investment capital to manufacture the unit, and would receive a 10% ROI for the period. Principal would be rolled over so it becomes a perpetual affordable housing fund, while 10% income is then retained by the Fund and distributed to the Waiheke projects. To be clear, the lessees are nation-wide, but the net income distribution is limited to Waiheke.
The investment plan is not limited to mobile homes, but at this point, it is a win-win, thus is explained in more detail below.
The Investment of Funds
Conservative and beneficial
A win-win investment that helps NZ’s most vulnerable while funding Waiheke’s Community Needs
Manufactured Mobile trailer Homes
How the Fund Works
Market: Simplicity is often the safest. People need somewhere to live and 41,000 New Zealanders, 1% of the nation, are hidden homeless, living in cars, tents, garages and overcrowded conditions. This will get worse when the devastating effects of the Covid-19 shutdown become clear. In addition to these people on the lowest rung of the housing ladder there are many more stuck paying high rent with no hope of saving the deposit to put down on their first mortgage. With KiwiBuild saying $650,000 is affordable, they are locked out. These two groups are the primary market for mobile homes.
Fund : Trust Waiheke raises the endowment fund for Waiheke. It invests the endowment in the mobile home financing fund. The money pays for the manufacture of about 300 new mobile trailer homes that are leased to tenants.; some on annual rents, others on 5-7 year rent-to-own leases. Trust Waiheke is paid 10% per year for its investment. The industry has been in operation for two decades, and it is expected this will continue for many decades. In America, for example, 6% of the population live in mobile homes and the largest manufacturer is a company owned by Warren Buffett.
Product
The factories make and lease the mobile home. They handle application, credit checks, contracts, financing, delivery, installation, insurance and rent.
Mobile homes cost about $65,000, about the same as the deposit on a KiwiBuild. WINZ or MSD pay some rent direct. Others tenants pay about $50/week more for rent-to-own: Pay rent on time for the duration of the 6-year lease and at the end, buy the unit at a peppercorn price. They can continue to live rent free, or sell to raise cash for a home deposit.
Mobile homes are not like buildings. They are designed to be perpetually refurbishable with every component accessible in a day. They are portable thus they can be responsive to a much wider range of conditions than fixed buildings.
Tenant
Thank you for the awesome customer service from start to finish. We are over the moon with the inside quality of the cabin right from the kitchenette to the bathroom and added sliding doors inside. We are so happy with our rental. Thank you very very much also for delivering during the Covid 19 lockdown. I appreciate all your efforts, Jenny, Dave and Peter and everyone else working hard behind the scenes.
The two decade record in the industry is one of very few defaults. People will go hungry before they give up their home. The rental management company meets and interviews each applicant before a lease is approved. Often times the applicant is a parent who made some bad decisions before they had children, decisions that cause the computer algorithm to reject their credit applications. In personal interviews, done the old fashioned way, the rental company exercises judgement, and in doing so produces another good outcome – the tenant demonstrates they are a responsible person, rebuilding their credit rating.
ROI
Trust Waiheke seeks to raise $20 million, which pays for about 300 mobile trailer homes. It invests these funds as investment capital with interest paid at 10%, managed by the mobile home manufacturer or one of their subsidiary financing companies. Trust Waiheke receives monthly payments which will be distributed on Waiheke under the grant program.
The investment is guaranteed by the lease, backed by the asserts of the mobile homes in the field. The investment management company is prohibited from taking on any other debt. The record in the industry is outstanding, very few defaults, and unlike buildings, the units may be immediately removed, refurbished and leased to another family – anywhere in the country.
The demand for mobile homes far exceeds the supply. This is because the banks will not lend on them, and finance companies do not understand the market. The specialist companies that do provide financing find it very stable and secure.