One question we frequently get from individuals and companies that are listing their mobile home park for sale on our site is "How much information should I include in my listing to be posted"?
We have always taken the stance that you can place as little or as much information on the site and will continue to do so. However, based on my experience with selling my own parks on the site I have found that the following formula works the best:
1. Include a description of the park - number of spaces, occupied spaces, monthly rents, acreage, size of spaces, whether the streets are paved or gravel, and type of utilities and who pays what.
2. Include a description of the area - population, major employers, surrounding structures, and other important demographics.
3. Financing and Terms, if any. If there is not owner or assumable financing you may want to talk to some finance companies before listing the park to see what the potential loan and terms may look like for a qualified buyer.
4. Income and Expense Statement - I typically include Projected income based on current occupancy and Actual expenses from the previous year with adjustments for any differences. By including fictitious statements or those that are missing important information, the credibility of the seller will be compromised. If the income and expense statement looks bad, then either don't include it in the listing or else explain why it looks so bad and how it can be improved on.
5. If you do not want your manager or residents to know the park is for sale then for the location make sure that you make it General (like Colorado or Southern California). You are not required to list the park name and address.
6. A description of any park owned homes and notes. If possible I would recommend you separate the income and expenses from the park owned homes out from the lot rent portion.
7. Pictures - that is often the first question you will receive. If you don't have a way to scan these or email them to us to post them in the listing, then you can always snail mail them to us and we will scan them on. Like the saying goes... a picture is worth a thousand words.
As a general rule, the more information you post the better qualified the leads will be that you receive and the less information you post the more inquiries but the less qualified the leads will be.
If you have any other questions feel free to contact us.
Friday, December 31, 2010
Tuesday, December 28, 2010
Collection Tips
One of the most difficult and time consuming tasks of a mobile home park manager is in the collection of rents. It has been my experience that about 50 percent of your residents will never have a problem paying on time. Then about 25 percent may be late on occasion and are also not a major problem. It is the other 25 percent that will take most of your time and efforts.
It is this last 25 percent that will often make or break the deal. This is usually the money that is left over after you make your loan payment and cover the other operating expenses. So what is a manager/owner to do to make sure that these slow paying residents get motivated to pay?
Here are a few strategies I have used. Of course, make sure that any of these programs are legal in your state. If you have any other thoughts I will post a followup in the next newsletter.
Rent Discounts. Using a rent discount program, I set the rent a little higher than I typically would and then reward those that pay on time. For example, I might set the rent at $220.00 per month and for all of those residents that have paid by the 1st of the month, they will receive a discount of $20.00 for a total of $200.00 per month. Taking this program further, I have had a rent schedule that goes something like this: Rent of $200.00 by the 1st, $220.00 by the 5th, and $240.00 by the 10th and so on.
Late Fees: Whether used in conjunction with the discount program or as a stand alone program, this program will charge late payers a penalty for not paying the rent on time. In most of my parks, this will be a late charge of $20.00 to $25.00 if the rent is not paid by the 5th of the month.
Taking Credit or Debit Cards: In the world of plastic, many people do not carry cash or checks anymore and by adding this convenient payment method you may be able to increase collections. Many times in the past I have had someone fall behind and in order to avoid an pending eviction, one of their relatives will call with a credit card to catch up the balance. I have even taken this to the point that a few of my residents have their credit or debit card on file and we automatically charge them on the first of each month.
Send out Invoices: Even if the rent is exactly the same every month and there is no utility billing, sending out an invoice is a good way to get your rent bill on the pile, so to speak. People are more apt to pay the bills with an invoice first. Using self-addressed stamped envelopes are also an option. In the world of high tech, you might even be able to accomplish sending out the invoices via email. By using a mail merge on excel and word this can be done within minutes. There are also software specific programs out there that will do most of the work.
Sending out Late Notices: It is important to send these out on time every month so your residents know that you haven't forgot about them. You should be persistent and follow-up with phone calls and in person visits. This way they know you mean business.
The 3,5, 7, or 10 day notice: If they have not paid then send them the legal notice to pay or vacate. This should spur some action and after a few times of having to pay court costs, the residents will get the picture that they have to pay. The rent bill should go to the top of the list. The longer you let the resident go without paying the less likely they will be to get caught up. If they don't have the rent money in May, then they probably won't have the May and June rent in June and so on.
Collecting on delinquencies is probably the least enjoyable part of managing a mobile home park but ranks up there with the most important parts. When you find the strategy that works best you should follow it every month like clockwork. You want the residents to pay their rent before they pay on their cell phone bill and other un-necessities.
It is this last 25 percent that will often make or break the deal. This is usually the money that is left over after you make your loan payment and cover the other operating expenses. So what is a manager/owner to do to make sure that these slow paying residents get motivated to pay?
Here are a few strategies I have used. Of course, make sure that any of these programs are legal in your state. If you have any other thoughts I will post a followup in the next newsletter.
Rent Discounts. Using a rent discount program, I set the rent a little higher than I typically would and then reward those that pay on time. For example, I might set the rent at $220.00 per month and for all of those residents that have paid by the 1st of the month, they will receive a discount of $20.00 for a total of $200.00 per month. Taking this program further, I have had a rent schedule that goes something like this: Rent of $200.00 by the 1st, $220.00 by the 5th, and $240.00 by the 10th and so on.
Late Fees: Whether used in conjunction with the discount program or as a stand alone program, this program will charge late payers a penalty for not paying the rent on time. In most of my parks, this will be a late charge of $20.00 to $25.00 if the rent is not paid by the 5th of the month.
Taking Credit or Debit Cards: In the world of plastic, many people do not carry cash or checks anymore and by adding this convenient payment method you may be able to increase collections. Many times in the past I have had someone fall behind and in order to avoid an pending eviction, one of their relatives will call with a credit card to catch up the balance. I have even taken this to the point that a few of my residents have their credit or debit card on file and we automatically charge them on the first of each month.
Send out Invoices: Even if the rent is exactly the same every month and there is no utility billing, sending out an invoice is a good way to get your rent bill on the pile, so to speak. People are more apt to pay the bills with an invoice first. Using self-addressed stamped envelopes are also an option. In the world of high tech, you might even be able to accomplish sending out the invoices via email. By using a mail merge on excel and word this can be done within minutes. There are also software specific programs out there that will do most of the work.
Sending out Late Notices: It is important to send these out on time every month so your residents know that you haven't forgot about them. You should be persistent and follow-up with phone calls and in person visits. This way they know you mean business.
The 3,5, 7, or 10 day notice: If they have not paid then send them the legal notice to pay or vacate. This should spur some action and after a few times of having to pay court costs, the residents will get the picture that they have to pay. The rent bill should go to the top of the list. The longer you let the resident go without paying the less likely they will be to get caught up. If they don't have the rent money in May, then they probably won't have the May and June rent in June and so on.
Collecting on delinquencies is probably the least enjoyable part of managing a mobile home park but ranks up there with the most important parts. When you find the strategy that works best you should follow it every month like clockwork. You want the residents to pay their rent before they pay on their cell phone bill and other un-necessities.
Monday, December 27, 2010
Fill Your Vacancies!
Most mobile home park owners today have vacancy problem, thanks to chattel mortgage crisis that began in 2000. It is not uncommon for a park that was full in 2000 to now be at 60% occupancy due to repossession of homes. If you have been waiting for the mobile home dealers to fill you back up, you are probably depressed and making no progress. So here are some ideas to get you back in action at increasing occupancy;
First of all, you need to locate the folks in your area that have grown to absorb some of the demand that is left unaddressed by dealers. There is still a lot of demand to rent or buy used mobile homes, even if the dealer structure has become a non-player. Most of the time these new “Dealers” are individuals who buy and sell or buy and rent old mobile homes specifically in parks. You need to find these people and get them to bring homes into your park. Two ways you can find them are to 1) talk to local mobile home movers and ask if they have had any mobile home moves with these individuals (they normally remember them because they have more than one) 2) go to competing mobile home parks and see if you can spot any for sale signs that have the same phone numbers. This is a giveaway that they are not selling there own personal homes, but rather it is a business. Offer these entrepreneurs free rent until they get their home sold or rented in your park, or whatever incentive it takes to make your park their new home base.
Another source of homes is to “steal” them from competing park that is doing a lousy job of keeping their tenants happy. Remember that ‘mobile’ means they can be moved. Of course it is not cheap to move a mobile home, so you will have to pay some or all of move cost to get them to move to your property. But it is well worth it. Even at the cost of $3000 for the move, you will get your money back in a year if the rent was $250 per month. Be sure not to ask people to break their lease, only to move to your park if their lease is up and they have the option of moving. Once you get one to move, and they are happy, it is not hard to convince their friends. It is amazing how many park owners give no thought to the resident’s retention and just assume they are their slave forever.
A final idea is to convert your vacant lots into something that is wanted, and that can be tapped with a small capital outlay. For example, consider opening a section of your park as an RV park. A small dedicated RV park within a mobile home park can really work if the location is right. And it is possible to test and, if failure, abandon the project with little or no downside. Or you might consider opening a park and store facility for RVs, boats and cars. Try and see what is in demand, and see if you can deliver on it.
In these tough times, it is essential to be creative to fix your occupancy!
First of all, you need to locate the folks in your area that have grown to absorb some of the demand that is left unaddressed by dealers. There is still a lot of demand to rent or buy used mobile homes, even if the dealer structure has become a non-player. Most of the time these new “Dealers” are individuals who buy and sell or buy and rent old mobile homes specifically in parks. You need to find these people and get them to bring homes into your park. Two ways you can find them are to 1) talk to local mobile home movers and ask if they have had any mobile home moves with these individuals (they normally remember them because they have more than one) 2) go to competing mobile home parks and see if you can spot any for sale signs that have the same phone numbers. This is a giveaway that they are not selling there own personal homes, but rather it is a business. Offer these entrepreneurs free rent until they get their home sold or rented in your park, or whatever incentive it takes to make your park their new home base.
Another source of homes is to “steal” them from competing park that is doing a lousy job of keeping their tenants happy. Remember that ‘mobile’ means they can be moved. Of course it is not cheap to move a mobile home, so you will have to pay some or all of move cost to get them to move to your property. But it is well worth it. Even at the cost of $3000 for the move, you will get your money back in a year if the rent was $250 per month. Be sure not to ask people to break their lease, only to move to your park if their lease is up and they have the option of moving. Once you get one to move, and they are happy, it is not hard to convince their friends. It is amazing how many park owners give no thought to the resident’s retention and just assume they are their slave forever.
A final idea is to convert your vacant lots into something that is wanted, and that can be tapped with a small capital outlay. For example, consider opening a section of your park as an RV park. A small dedicated RV park within a mobile home park can really work if the location is right. And it is possible to test and, if failure, abandon the project with little or no downside. Or you might consider opening a park and store facility for RVs, boats and cars. Try and see what is in demand, and see if you can deliver on it.
In these tough times, it is essential to be creative to fix your occupancy!
Wednesday, December 22, 2010
Renting Mobile Homes Won't Make You Rich
There are a lot of books out there extolling the financial benefits of buying mobile homes for purposes of renting them out. DON'T BE SUCKERED INTO THIS WITHOUT GETTING THE FULL STORY. These books generally leave out three important problems that turn any proposed economics into bankruptcy.
They are:
Tenants will trash the property and steal appliances (including furnaces and air-conditioners) on just about every rental, and the cost to repair will exceed your gross rent
Tenants will never pay their rent on time, and will require a costly eviction and writ of execution to get them out for only a few short months.
Mobile homes make for lousy rental properties because they are too flimsily constructed. Who ever heard of 1" x2" framing? Go to a factory and see for yourself how they're built. A 10 year old can rip a door off its hinges
So what does this mean? It means that any revenue you take in will immediately go back out the door (and then some) in repairs and make-ready, and legal fees.
Don't believe us? Look at the financial statements of those publicly held REITs that rent mobile homes and see how impressive those numbers are. Or talk to someone who has already made such an investment and see how they're doing. You'll soon get the accurate picture.
I once had a guy come up to me at eviction in court, out in the hallway. This guy liked to go around and buy properties this way, hoping that disgusted landlords would sell them cheap, and he would then throw them into his slumlord empire. I told him my properties were mobile homes � not stick-built houses. He looked at me and said "I don't deal in that junk � there's no money in it!" That's the most accurate analysis I've heard (unless you own the park).
So why do they sell such books? Because everyone wants to believe that there is a great rich quick scheme out there, even when they know it sounds too good to be true. If you want to learn how to REALLY make money in the mobile home business, especially with the mobile home side of it check out our new book titled "The Insider's Guide to Buying New and Used Mobile Homes" available on our bookstore.
They are:
Tenants will trash the property and steal appliances (including furnaces and air-conditioners) on just about every rental, and the cost to repair will exceed your gross rent
Tenants will never pay their rent on time, and will require a costly eviction and writ of execution to get them out for only a few short months.
Mobile homes make for lousy rental properties because they are too flimsily constructed. Who ever heard of 1" x2" framing? Go to a factory and see for yourself how they're built. A 10 year old can rip a door off its hinges
So what does this mean? It means that any revenue you take in will immediately go back out the door (and then some) in repairs and make-ready, and legal fees.
Don't believe us? Look at the financial statements of those publicly held REITs that rent mobile homes and see how impressive those numbers are. Or talk to someone who has already made such an investment and see how they're doing. You'll soon get the accurate picture.
I once had a guy come up to me at eviction in court, out in the hallway. This guy liked to go around and buy properties this way, hoping that disgusted landlords would sell them cheap, and he would then throw them into his slumlord empire. I told him my properties were mobile homes � not stick-built houses. He looked at me and said "I don't deal in that junk � there's no money in it!" That's the most accurate analysis I've heard (unless you own the park).
So why do they sell such books? Because everyone wants to believe that there is a great rich quick scheme out there, even when they know it sounds too good to be true. If you want to learn how to REALLY make money in the mobile home business, especially with the mobile home side of it check out our new book titled "The Insider's Guide to Buying New and Used Mobile Homes" available on our bookstore.
Monday, December 20, 2010
Finding and Evaluating Mobile Home Parks
Of all the questions I receive from investors that are looking to purchase a mobile home park there are two questions that are asked most often:
How do I find a mobile home park deal that makes sense?
How do I place a value on that mobile home park?
These are important questions and there are several ways to find mobile home park investments and even more ways that one can approach evaluation of that investment. When I first started in the business about 12 years ago, I spent a lot of money driving across the country looking at listings I found in major newspapers and on the internet. While this allowed me to see a lot of potential deals, it was a big waste of time and money. Many times I would get in my car and drive 1,000 miles only to find that the park I was looking at was a complete dump, had unrealistic profit and loss projections, or was already under contract by another investor.
I soon realized that it was worthwhile to do a more thorough analysis before visiting the property. If it passed the initial analysis, then I would try to get an accepted offer and request detailed financials from the seller. If it still looked good I would schedule a trip to visit the park. Before implementing this strategy, I was visiting about ten parks for every one I purchased. Now, that ratio is more like two-to-one and I am not on the road all the time.
If the mobile home park looks good on paper, get it under contract before spending $1,000.00 in travel and two days to visit it!
In order to find a mobile home park that makes sense financially the most important part is to be able to quickly identify and separate the good deals from the bad. The only way to acquire this skill is to educate yourself on this business (through books and other resources) and start looking at as many mobile home park offerings as you can. With the availability of information on the internet you can accomplish this task quickly. Go to MHPS.com and other internet websites such as Loopnet.com where you can view over a thousand mobile home parks for sale.
Whether you are a new or seasoned investor in this asset class I would suggest getting the information on as many properties as you can and then put them side-by-side and analyze each one. You will get an idea of the capitalization rates, expense ratios, occupancy levels, and rental rates for different markets. You will find prices all over the place but if you invest the time and effort in evaluating deals, you will start to develop an idea of what to look for in terms of price-per-space, how park-owned homes affect values and other important factors.
Invest the time in evaluating as many deals as possible and invest the money on properly educating yourself on the business so that you can separate the good deals from the bad and concentrate on those with promise!
So where is the best place to find a mobile home park to buy? The best answer to this question is that you should try as many logical approaches as possible. As mentioned above, I would suggest you start by checking out the websites that have thousands of mobile home parks for sale like MHPS.com and other commercial real estate sites such as Loopnet.com. There are new parks listed daily on these sites and the best way to utilize these services is to sign up for notification of new properties for sale. This way you have a better chance of jumping on the good deals before they are available to the general public.
I have purchased over 50 mobile home parks over the past 12 years and about 15 of those purchases came as a direct result of listings on the internet.
The next strategy that I would suggest is to start a direct mail campaign to mobile home parks that are in the markets and states that you are interested in. This has accounted for about 20 of my 50 mobile home park purchases. If you obtain a good list of addresses, you can target mobile home parks with a certain number of spaces in select markets expressing your interest in purchasing a mobile home park.
I have experimented with postcards, letters, and even actual purchase contracts and have found that the response is about the same for each of these. The key has not been in the type of piece but in the frequency of mailing. I have received many calls from mobile home park owners saying that they have received our numerous mailings over the years and are giving us first shot at the park since they know we are a legitimate company. I actually had one seller pull out a file included over 25 mailings from us. In another instance I mailed out 1,000 letters to two states expressing our interest in buying mobile home parks. I followed this up about 2 weeks later with the same mailing piece (in error) and found that my response rate was about 100% higher from the second mailing. So the key with direct mail is in getting a good list to mail to and frequency.
There are several other options that I have used with varying degrees of success. I have listed some of these below.
Driving through mobile home parks in markets you are interested in and talking with the onsite manager/owner or following up with cold calls or letters to parks that you would be interested in owning. The advantage of this method is that you see the park before you start any communication with the owner and it will give the owner a level of comfort dealing with someone that made the effort to see the park first. This works best with an owner that lives onsite and you can meet face-to-face. I have purchased several parks this way and there are many other parks I still have an open line of communication with the owner that I anticipate purchasing when they are ready to sell..
Making cold calls to parks in markets I am interested in. While this works best when the owner answers the phone, it can be very frustrating. I have been hung up on many times as have my employees. However, if you don't mind the frustrations, this is a viable method of finding potential deals. Besides being hung up on, the biggest frustration I have had is that you often get the response that anything is for sale at the right price (which is usually more than it is worth).
Another option is to stay in contact with real estate brokers that specialize in the sale of Mobile Home Parks. The key here is to stay in constant contact with these brokers in order to get a copy of all of their listings as soon as they receive them. Before they put the listings on the internet they will send out the information to the buyers they know are serious in hopes of making a quick sale. You want to be on that list so you get first shot at the good listings. Once you have a relationship with a broker and especially after you successfully close a transaction with them, they will know that you are a real buyer. I have one broker that I have purchased three parks from and he knows what I am looking for and contacts me anytime he gets something that fits those criteria.
Along with staying in contact with those brokers that specialize in mobile home parks and commercial real estate, you should contact brokers in those specific markets you are looking to buy parks. Many times these brokers will not have any idea about the internet sites that can help them sell the parks and otherwise do not understand how to value and market mobile home parks. While many times their listings will be grossly overpriced you will occasionally find those listings that are priced right or even better� under market.
Newspapers (online and offline), trade magazines, local and national MLS services, and other websites.
Country tax records, banks, appraisers, movers, dealers, and other industry professionals.
The key to locating good potential mobile home parks investments is to be diligent in your search and use whatever methods work best for you. The best deals are usually found by finding those parks that are the least advertised.
Once you find a potential mobile home park that looks a winner, the next step will be determining the value of that park. This will be the subject of my next article and will include a discussion on the methods I use in the evaluation of mobile home parks.
How do I find a mobile home park deal that makes sense?
How do I place a value on that mobile home park?
These are important questions and there are several ways to find mobile home park investments and even more ways that one can approach evaluation of that investment. When I first started in the business about 12 years ago, I spent a lot of money driving across the country looking at listings I found in major newspapers and on the internet. While this allowed me to see a lot of potential deals, it was a big waste of time and money. Many times I would get in my car and drive 1,000 miles only to find that the park I was looking at was a complete dump, had unrealistic profit and loss projections, or was already under contract by another investor.
I soon realized that it was worthwhile to do a more thorough analysis before visiting the property. If it passed the initial analysis, then I would try to get an accepted offer and request detailed financials from the seller. If it still looked good I would schedule a trip to visit the park. Before implementing this strategy, I was visiting about ten parks for every one I purchased. Now, that ratio is more like two-to-one and I am not on the road all the time.
If the mobile home park looks good on paper, get it under contract before spending $1,000.00 in travel and two days to visit it!
In order to find a mobile home park that makes sense financially the most important part is to be able to quickly identify and separate the good deals from the bad. The only way to acquire this skill is to educate yourself on this business (through books and other resources) and start looking at as many mobile home park offerings as you can. With the availability of information on the internet you can accomplish this task quickly. Go to MHPS.com and other internet websites such as Loopnet.com where you can view over a thousand mobile home parks for sale.
Whether you are a new or seasoned investor in this asset class I would suggest getting the information on as many properties as you can and then put them side-by-side and analyze each one. You will get an idea of the capitalization rates, expense ratios, occupancy levels, and rental rates for different markets. You will find prices all over the place but if you invest the time and effort in evaluating deals, you will start to develop an idea of what to look for in terms of price-per-space, how park-owned homes affect values and other important factors.
Invest the time in evaluating as many deals as possible and invest the money on properly educating yourself on the business so that you can separate the good deals from the bad and concentrate on those with promise!
So where is the best place to find a mobile home park to buy? The best answer to this question is that you should try as many logical approaches as possible. As mentioned above, I would suggest you start by checking out the websites that have thousands of mobile home parks for sale like MHPS.com and other commercial real estate sites such as Loopnet.com. There are new parks listed daily on these sites and the best way to utilize these services is to sign up for notification of new properties for sale. This way you have a better chance of jumping on the good deals before they are available to the general public.
I have purchased over 50 mobile home parks over the past 12 years and about 15 of those purchases came as a direct result of listings on the internet.
The next strategy that I would suggest is to start a direct mail campaign to mobile home parks that are in the markets and states that you are interested in. This has accounted for about 20 of my 50 mobile home park purchases. If you obtain a good list of addresses, you can target mobile home parks with a certain number of spaces in select markets expressing your interest in purchasing a mobile home park.
I have experimented with postcards, letters, and even actual purchase contracts and have found that the response is about the same for each of these. The key has not been in the type of piece but in the frequency of mailing. I have received many calls from mobile home park owners saying that they have received our numerous mailings over the years and are giving us first shot at the park since they know we are a legitimate company. I actually had one seller pull out a file included over 25 mailings from us. In another instance I mailed out 1,000 letters to two states expressing our interest in buying mobile home parks. I followed this up about 2 weeks later with the same mailing piece (in error) and found that my response rate was about 100% higher from the second mailing. So the key with direct mail is in getting a good list to mail to and frequency.
There are several other options that I have used with varying degrees of success. I have listed some of these below.
Driving through mobile home parks in markets you are interested in and talking with the onsite manager/owner or following up with cold calls or letters to parks that you would be interested in owning. The advantage of this method is that you see the park before you start any communication with the owner and it will give the owner a level of comfort dealing with someone that made the effort to see the park first. This works best with an owner that lives onsite and you can meet face-to-face. I have purchased several parks this way and there are many other parks I still have an open line of communication with the owner that I anticipate purchasing when they are ready to sell..
Making cold calls to parks in markets I am interested in. While this works best when the owner answers the phone, it can be very frustrating. I have been hung up on many times as have my employees. However, if you don't mind the frustrations, this is a viable method of finding potential deals. Besides being hung up on, the biggest frustration I have had is that you often get the response that anything is for sale at the right price (which is usually more than it is worth).
Another option is to stay in contact with real estate brokers that specialize in the sale of Mobile Home Parks. The key here is to stay in constant contact with these brokers in order to get a copy of all of their listings as soon as they receive them. Before they put the listings on the internet they will send out the information to the buyers they know are serious in hopes of making a quick sale. You want to be on that list so you get first shot at the good listings. Once you have a relationship with a broker and especially after you successfully close a transaction with them, they will know that you are a real buyer. I have one broker that I have purchased three parks from and he knows what I am looking for and contacts me anytime he gets something that fits those criteria.
Along with staying in contact with those brokers that specialize in mobile home parks and commercial real estate, you should contact brokers in those specific markets you are looking to buy parks. Many times these brokers will not have any idea about the internet sites that can help them sell the parks and otherwise do not understand how to value and market mobile home parks. While many times their listings will be grossly overpriced you will occasionally find those listings that are priced right or even better� under market.
Newspapers (online and offline), trade magazines, local and national MLS services, and other websites.
Country tax records, banks, appraisers, movers, dealers, and other industry professionals.
The key to locating good potential mobile home parks investments is to be diligent in your search and use whatever methods work best for you. The best deals are usually found by finding those parks that are the least advertised.
Once you find a potential mobile home park that looks a winner, the next step will be determining the value of that park. This will be the subject of my next article and will include a discussion on the methods I use in the evaluation of mobile home parks.
Sunday, December 19, 2010
Don't Expect More from Park Residents than You Do from Subdivision Residents
IT'S NOT GOOD FOR YOU OR THEM!
Written by Frank Rolfe and Dave Reynolds, MobileHomeParkStore.com, LLC
Most every mobile home park owner in the U.S. has a list of rules attached to their lease which is longer than the lease itself. While it's always a good idea to cover your bases and address every possible behavior concern, it's another to expect people to follow more rules than the local prison.
More importantly, what's in it for the park owner?
It's my theory that you should not expect to hold mobile home park residents to a higher standard than those of the folks who live in brick houses in the nearest subdivision. It would make sense that someone who lives in a mobile home is less likely to obey the rules than these stick built home occupants, so why are their park rules ten times longer?
Take a drive around the subdivisions nearest your park. What do you see? I'm betting you see the same things you do in your park. High grass, junk in the yards, non running vehicles and the like. They are just better at hiding it because you can't see into their back yards as easily, and the non running vehicle is up on blocks behind the house. Still, the general quality of violation looks a lot like your park.
My point is that humans, regardless of demographics, violate certain rules as a regular part of their existence. It may not be aesthetic, or morally right, but trying to fight it is like trying to stop the Mississippi River, basically impossible.
Does that mean that you should reduce the number of rules attached to your lease? No, you want to have every contingency covered. However, you may want to think again about what you enforce, and how hard you enforce it. For guidance on this concept, let's look at a typical city government and what it asks of its residents and how they force compliance.
High grass: In most cities, having grass over a certain height, normally 8" is a violation of code. As a result, violators will generally get a warning and a deadline to comply and, if not completed, will get a fine and/or someone from the city will mow it and bill you for it. They don't threaten to evict you, and they don't set the rule at some ridiculously low level like 4".
Non running vehicles: If you don't get rid of them, after receiving a warning, you will get a significant fine. If you don't pay the fine, you will get arrested. Perhaps we can substitute "arrested" for "evicted" in the park rules theology.
Junk in yards: Again, if you don't clean out your yard, they will fine you and force you to pay. However, you have to have a lot of junk to trigger a code officer writing you up.
Aesthetic issues: Painting your house for example. This is hardly even covered in most city ordinances, because they only deal with the absolute worst, most community damaging offenders. They don't get involved in the small stuff, and maybe you shouldn't either.
Just about everything else: Loose dogs, loud music, etc. This is a police matter. It should be for your tenants too. You should not get involved in being the enforcer. That is what police are for.
I think that this is really about all you need to follow on rules enforcement. Some owners have built a career on rules. They spend every waking hour harassing tenants and sending threatening letters, but does it make them any money?
Some might argue that it does in the form of making the park more desirable looking for new tenants, or park buyers or lenders. I would agree, but you can always "doll up" the park right before putting it on the market or refinancing it. As for new tenants coming in, let's get serious, how many new homes are being sold and moved into parks in your area? That's what I thought.
As for resident retention, you are just as likely or more so to scare off existing tenants with a lot of rules and tough enforcement. If they wanted a beautiful, problem free environment, they shouldn't have moved into a mobile home park in the first place. Further, I have found such demanding tenants never stick anyway, since they are always unhappy and end up moving out no matter what you do.
In conclusion, try taking a more mellow, practical view to rules and their enforcement. Your life will improve, and so will your tenants. You can devote those "rule enforcer" hours to more productive uses, like making money.
Written by Frank Rolfe and Dave Reynolds, MobileHomeParkStore.com, LLC
Most every mobile home park owner in the U.S. has a list of rules attached to their lease which is longer than the lease itself. While it's always a good idea to cover your bases and address every possible behavior concern, it's another to expect people to follow more rules than the local prison.
More importantly, what's in it for the park owner?
It's my theory that you should not expect to hold mobile home park residents to a higher standard than those of the folks who live in brick houses in the nearest subdivision. It would make sense that someone who lives in a mobile home is less likely to obey the rules than these stick built home occupants, so why are their park rules ten times longer?
Take a drive around the subdivisions nearest your park. What do you see? I'm betting you see the same things you do in your park. High grass, junk in the yards, non running vehicles and the like. They are just better at hiding it because you can't see into their back yards as easily, and the non running vehicle is up on blocks behind the house. Still, the general quality of violation looks a lot like your park.
My point is that humans, regardless of demographics, violate certain rules as a regular part of their existence. It may not be aesthetic, or morally right, but trying to fight it is like trying to stop the Mississippi River, basically impossible.
Does that mean that you should reduce the number of rules attached to your lease? No, you want to have every contingency covered. However, you may want to think again about what you enforce, and how hard you enforce it. For guidance on this concept, let's look at a typical city government and what it asks of its residents and how they force compliance.
High grass: In most cities, having grass over a certain height, normally 8" is a violation of code. As a result, violators will generally get a warning and a deadline to comply and, if not completed, will get a fine and/or someone from the city will mow it and bill you for it. They don't threaten to evict you, and they don't set the rule at some ridiculously low level like 4".
Non running vehicles: If you don't get rid of them, after receiving a warning, you will get a significant fine. If you don't pay the fine, you will get arrested. Perhaps we can substitute "arrested" for "evicted" in the park rules theology.
Junk in yards: Again, if you don't clean out your yard, they will fine you and force you to pay. However, you have to have a lot of junk to trigger a code officer writing you up.
Aesthetic issues: Painting your house for example. This is hardly even covered in most city ordinances, because they only deal with the absolute worst, most community damaging offenders. They don't get involved in the small stuff, and maybe you shouldn't either.
Just about everything else: Loose dogs, loud music, etc. This is a police matter. It should be for your tenants too. You should not get involved in being the enforcer. That is what police are for.
I think that this is really about all you need to follow on rules enforcement. Some owners have built a career on rules. They spend every waking hour harassing tenants and sending threatening letters, but does it make them any money?
Some might argue that it does in the form of making the park more desirable looking for new tenants, or park buyers or lenders. I would agree, but you can always "doll up" the park right before putting it on the market or refinancing it. As for new tenants coming in, let's get serious, how many new homes are being sold and moved into parks in your area? That's what I thought.
As for resident retention, you are just as likely or more so to scare off existing tenants with a lot of rules and tough enforcement. If they wanted a beautiful, problem free environment, they shouldn't have moved into a mobile home park in the first place. Further, I have found such demanding tenants never stick anyway, since they are always unhappy and end up moving out no matter what you do.
In conclusion, try taking a more mellow, practical view to rules and their enforcement. Your life will improve, and so will your tenants. You can devote those "rule enforcer" hours to more productive uses, like making money.
Thursday, December 16, 2010
How to Move a Mobile Home
You are about to spend $2,000, $4,000 or more in moving, setup, and installation costs to move your mobile home.
Most problems and mistakes with moving homes can be avoided. We have made all the mistakes the hard way... by paying for them!
Don't make the same mistakes we have made and learn from our experience of having several hundred mobile homes moved over the past 15 years.
Find out How to Choose a Mobile Home Mover/Transporter.
Go Through the Process from Teardown to Transporting to Installation.
If You are Moving a Mobile Home to a Mobile Home Park, Learn How to Get it Moved for FREE or At Least at a Big Discount!
I have received many phone calls and emails over the past 10 years from individuals who have hired a mover that takes the money and runs, or the mover that is not licensed or insured and causes damage to the home, or the mover that receives payment up front and then puts you on the back of the schedule.
DON'T Let this Happen to YOU!
The "Complete Guide to Moving your Mobile Home" describes and shows you the Proper way to Minimize Risks and meet your Goal of Moving your Mobile Home.
It is a simple system to follow and after reading the Book, you will sleep better knowing that you have the tools necessary to avoid the traps and pitfalls that so many people have run into over the years.
Inside the "Complete Guide to Moving your Mobile Home" you will find the following:
THE BASICS OF HOW A MOBILE HOME IS MOVED
PREPARATION FOR THE MOVE
THE MOVE
HOME INSTALLATION
ESSENTIAL HOME PREPARATION FOR TRANSPORT
HOW TO CHOOSE A TRANSPORTER
WHEN TO PAY THE TRANSPORTER
ESSENTIAL HOME INSTALLATION
THE DELIVERY OF THE HOME BY THE TRANSPORTER
SETTING THE HOME
WHAT CAN GO WRONG?
HOW TO MITIGATE YOUR RISKS
PREPARE YOUR HOME FOR THE MOVE EFFECTIVELY
TIPS ON SAVING MONEY ON MOVING A MOBILE HOME
--------------------------------------------------------------------------------
The "Complete Guide to Moving your Mobile Home" e-book is available online now for you to read. We thought about charging for it up front but then some people would miss out on some very important information that will cost them in the long run.
So you can read it now, for FREE. If after going through the book, you find that it was helpful, then there is a a link at the end of the book to purchase the PDF version for $5.00.
Go to Page 1 of the Mobile Home Mover Book
Most problems and mistakes with moving homes can be avoided. We have made all the mistakes the hard way... by paying for them!
Don't make the same mistakes we have made and learn from our experience of having several hundred mobile homes moved over the past 15 years.
Find out How to Choose a Mobile Home Mover/Transporter.
Go Through the Process from Teardown to Transporting to Installation.
If You are Moving a Mobile Home to a Mobile Home Park, Learn How to Get it Moved for FREE or At Least at a Big Discount!
I have received many phone calls and emails over the past 10 years from individuals who have hired a mover that takes the money and runs, or the mover that is not licensed or insured and causes damage to the home, or the mover that receives payment up front and then puts you on the back of the schedule.
DON'T Let this Happen to YOU!
The "Complete Guide to Moving your Mobile Home" describes and shows you the Proper way to Minimize Risks and meet your Goal of Moving your Mobile Home.
It is a simple system to follow and after reading the Book, you will sleep better knowing that you have the tools necessary to avoid the traps and pitfalls that so many people have run into over the years.
Inside the "Complete Guide to Moving your Mobile Home" you will find the following:
THE BASICS OF HOW A MOBILE HOME IS MOVED
PREPARATION FOR THE MOVE
THE MOVE
HOME INSTALLATION
ESSENTIAL HOME PREPARATION FOR TRANSPORT
HOW TO CHOOSE A TRANSPORTER
WHEN TO PAY THE TRANSPORTER
ESSENTIAL HOME INSTALLATION
THE DELIVERY OF THE HOME BY THE TRANSPORTER
SETTING THE HOME
WHAT CAN GO WRONG?
HOW TO MITIGATE YOUR RISKS
PREPARE YOUR HOME FOR THE MOVE EFFECTIVELY
TIPS ON SAVING MONEY ON MOVING A MOBILE HOME
--------------------------------------------------------------------------------
The "Complete Guide to Moving your Mobile Home" e-book is available online now for you to read. We thought about charging for it up front but then some people would miss out on some very important information that will cost them in the long run.
So you can read it now, for FREE. If after going through the book, you find that it was helpful, then there is a a link at the end of the book to purchase the PDF version for $5.00.
Go to Page 1 of the Mobile Home Mover Book
Wednesday, December 15, 2010
Fill Your Vacant Lot
I can remember when a good, well-located community could fill seven or eight lots per month with nothing more than some flyers at a manufactured home dealership. To even say such things today dates you as someone from the dinosaur age. And unless you've been in a cave, you know that you are lucky to fill one lot per year in that manner today.
So how do you fill vacant lots in your community? Well, a lot differently than you did in the past and it takes a whole lot more effort. But you'll find that once you put your program together, it will turn your life and spirits around to see new homes coming in to those old, dusty lots.
If you have been reading this magazine at all for the last seven or eight years, you are pretty familiar with the industry "chattel crisis". Basically, it was the sub-prime mess of today, only fully focused on manufactured homes. People bought homes they could not afford, and they went back to the lenders in record numbers. As a result, lenders don't do "easy" lending any more on manufactured homes, and the sales have suffered enormously as a result. Dealers that were selling 10 or 20 houses a month in 1998 are now lucky to sell 2 or3. And very few of those homes end up in land lease communities they almost always end up on private land. So to fill your vacant lots, you have to forget about those dealerships filling you up, and take control of your destiny yourself.
These are my ideas for filling up your vacant lots in the real-world of today:
Become the #1 community for new home dealers. Am I contradicting myself? No, those dealerships do sell an occasional unit that goes into a land lease community, so you can't ignore them altogether. To get any fill rate from these guys, you have to make sure that you have a 100% closing rate on any inquiry for a lot. Make sure that you have flyers at every dealer, as well as an attractive "move-in special" program to entice customers. And call each sales manager or salesman periodically to let them know you really want their business.
See if those same dealers would want to move some inventory into your community and sell it on location. When I went to buy my stick-built house, I choose a location I wanted, and then inspected the available inventory for sale on MLS. Why shouldn't manufactured home buyers do the same thing? Instead of having some used or new inventory gathering dust on the sales lot, see if the dealership would have any interest siting a couple units in your community and advertise them as a "location sale". That's how every other form of housing is sold. We convinced a dealer in Oklahoma to try it, and he sold six units in this first year! You will probably have to give the dealer free lot rent until the unit is sold that's a small price to pay.
Locate those individuals who like to buy and sell or rent manufactured homes, and see if they will bring in inventory to your community. Sometimes referred to as "Lonnie deals", named after Lonnie Scruggs who wrote the book "Deals on Wheels", these are transactions where someone purchases a manufactured home and then re-sells it or rents it for a profit. Many of these homes begin life in the older inventory section of a dealer, or on private land, and are then initially moved into a community. Make sure that your community is where they go. You can find these "Lonnie" individuals by driving through other communities looking for "For Sale" or "For Rent" signs that share the same phone number, or by asking the local dealers and home movers. We have one individual who has brought in about 40 homes to date under this system. Again, you will have to give the "Lonnie" individual free rent until it sells. Big deal.
Bring in homes yourself, and then rent or sell them. It's not that difficult. You buy them from a dealer, or from a broker, or even new from a manufacturer. You then either sell them or rent them once they are set up in your community. Two things to watch out for in this scenario 1) you must get a dealer's license in most states and 2) it takes a lot of capital. Just bringing the home in, setting it up, and skirting it can cost about $3,000.
Convince residents from competing communities to move over to yours. I've left this idea for last, since it causes hard-feelings between community owners (and rightfully so!), and can cause a dangerous catch-22 situation where community owners are constantly trying to steal each other's customers. There are two times in which I have used this system, and both were special situations that were not quite as bad as just going after the other guy's tenants. The first is when a competing property is being closed down for new development. In those events, the minute you hear about it, go to the community that is being shut down and tell the manager or owner that you want all of his customers and are willing to pay for the whole move, or part of the move, just to get their business. I once scored 35 homes out of a community closing for the development of Home Depot using this very approach. Normally, the owner of the community that is closing is more than happy to have an option to send his folks. The other time that it is proper to consider trying to obtain customers en masse is when there is a community that is truly doing a terrible job, and the residents want out badly. The reasons can be numerous frequent water or sewer outages, poor management, a location that has become unsafe, the list is endless. You normally find out about such an opportunity when several tenants come to your property suddenly, wanting to move over. In those cases, I tell folks to tell all their friends that we would be happy to take them, or even send a flyer letting people know that if they want to move their home, we would love to have them. You can sometimes pick up 10 or 20 new residents by doing this.
Until industry sales improve, these proactive steps are essential for filling your vacancies, and getting your community on a strong financial footing. Don't wait by the phone for a dealer to call put this plan into motion today!
So how do you fill vacant lots in your community? Well, a lot differently than you did in the past and it takes a whole lot more effort. But you'll find that once you put your program together, it will turn your life and spirits around to see new homes coming in to those old, dusty lots.
If you have been reading this magazine at all for the last seven or eight years, you are pretty familiar with the industry "chattel crisis". Basically, it was the sub-prime mess of today, only fully focused on manufactured homes. People bought homes they could not afford, and they went back to the lenders in record numbers. As a result, lenders don't do "easy" lending any more on manufactured homes, and the sales have suffered enormously as a result. Dealers that were selling 10 or 20 houses a month in 1998 are now lucky to sell 2 or3. And very few of those homes end up in land lease communities they almost always end up on private land. So to fill your vacant lots, you have to forget about those dealerships filling you up, and take control of your destiny yourself.
These are my ideas for filling up your vacant lots in the real-world of today:
Become the #1 community for new home dealers. Am I contradicting myself? No, those dealerships do sell an occasional unit that goes into a land lease community, so you can't ignore them altogether. To get any fill rate from these guys, you have to make sure that you have a 100% closing rate on any inquiry for a lot. Make sure that you have flyers at every dealer, as well as an attractive "move-in special" program to entice customers. And call each sales manager or salesman periodically to let them know you really want their business.
See if those same dealers would want to move some inventory into your community and sell it on location. When I went to buy my stick-built house, I choose a location I wanted, and then inspected the available inventory for sale on MLS. Why shouldn't manufactured home buyers do the same thing? Instead of having some used or new inventory gathering dust on the sales lot, see if the dealership would have any interest siting a couple units in your community and advertise them as a "location sale". That's how every other form of housing is sold. We convinced a dealer in Oklahoma to try it, and he sold six units in this first year! You will probably have to give the dealer free lot rent until the unit is sold that's a small price to pay.
Locate those individuals who like to buy and sell or rent manufactured homes, and see if they will bring in inventory to your community. Sometimes referred to as "Lonnie deals", named after Lonnie Scruggs who wrote the book "Deals on Wheels", these are transactions where someone purchases a manufactured home and then re-sells it or rents it for a profit. Many of these homes begin life in the older inventory section of a dealer, or on private land, and are then initially moved into a community. Make sure that your community is where they go. You can find these "Lonnie" individuals by driving through other communities looking for "For Sale" or "For Rent" signs that share the same phone number, or by asking the local dealers and home movers. We have one individual who has brought in about 40 homes to date under this system. Again, you will have to give the "Lonnie" individual free rent until it sells. Big deal.
Bring in homes yourself, and then rent or sell them. It's not that difficult. You buy them from a dealer, or from a broker, or even new from a manufacturer. You then either sell them or rent them once they are set up in your community. Two things to watch out for in this scenario 1) you must get a dealer's license in most states and 2) it takes a lot of capital. Just bringing the home in, setting it up, and skirting it can cost about $3,000.
Convince residents from competing communities to move over to yours. I've left this idea for last, since it causes hard-feelings between community owners (and rightfully so!), and can cause a dangerous catch-22 situation where community owners are constantly trying to steal each other's customers. There are two times in which I have used this system, and both were special situations that were not quite as bad as just going after the other guy's tenants. The first is when a competing property is being closed down for new development. In those events, the minute you hear about it, go to the community that is being shut down and tell the manager or owner that you want all of his customers and are willing to pay for the whole move, or part of the move, just to get their business. I once scored 35 homes out of a community closing for the development of Home Depot using this very approach. Normally, the owner of the community that is closing is more than happy to have an option to send his folks. The other time that it is proper to consider trying to obtain customers en masse is when there is a community that is truly doing a terrible job, and the residents want out badly. The reasons can be numerous frequent water or sewer outages, poor management, a location that has become unsafe, the list is endless. You normally find out about such an opportunity when several tenants come to your property suddenly, wanting to move over. In those cases, I tell folks to tell all their friends that we would be happy to take them, or even send a flyer letting people know that if they want to move their home, we would love to have them. You can sometimes pick up 10 or 20 new residents by doing this.
Until industry sales improve, these proactive steps are essential for filling your vacancies, and getting your community on a strong financial footing. Don't wait by the phone for a dealer to call put this plan into motion today!
Tuesday, December 14, 2010
Marketing Your Mobile Home Park
When I am looking to market my mobile home park whether it be to potential residents to bring their homes in or to sell homes in the park, I believe that the first contact with the potential customer is key. This first contact may be via a telephone call to your office, a drive-by by the potential resident, or in many cases could be a referral from a current resident or some other local business (chamber of commerce, dealer, broker, etc).
Let's face it, if you or your manager is rude when they call in, they probably will call the next park. If they drive in and the roads are in bad shape, the sign is falling down, or there are dangerous dogs running around, they probably will turn around and look for the next park. And the same holds true with referrals from your current customers. If you current customers don't like living there they will bad mouth you all over town and never refer their friends and relatives to move in. Continuing on to other local businesses that would otherwise refer your community to potential residents, you don't stand a chance if you have a bad reputation.
So I think the best form of marketing is to build your credibility in your town, keep your current residents happy, and make sure that those potential customers have a good first impression whether it be a phone call or a drive-by.
Before you ever spend one penny on a newspaper ad, a flyer a the local dealer, or some type of direct mailing to apartment complexes, you should make sure that you have everything in place to attract good residents once they respond. Here is my top 5 list of things you need to do first:
1.
Focus on the entrance to the park: A nice sign that says "Welcome to ___________ Mobile Home Community". Also plant some bushes or trees near the entrance and keep the grass mowed and trimmed nicely.
2.
Roads: Your roads don't have to paved and have curb and gutters, but they do have to be passable. If there are large potholes, patch them immediately. If they need graded, grade them. Before a potential resident ever gets out of the car they will see your entrance and drive on the roads. Make that a good experience.
3.
Park Office: with the park office you want to make sure that it looks inviting. I have been to many an office that is not properly marked with "Welcome" or some other inviting remark. Instead it says something like, "if your rent is not paid by the 5th it is late" or "take your excuses somewhere else". Is that any way to greet a potential resident?
4.
Park Office again: I have also been to many parks that as you are walking up to the office you are greeted by a fence with a dog inside and you have to decide whether to enter or not. Other times you knock on the door and then there are 3 dogs scratching at the door waiting to pounce on you. I don't have a problem with my manager's home being duplicated as the park office, but I do think they need to take precautions against scaring people off with their own dogs.
5.
General Appearance of the Community: once the potential resident enters the park and is satisfied with the entrance and roads, they will encounter the rest of the park. If the park is a complete disaster with trash, junk, high grass and weeds, and so on, do you think this will be a good selling point for potential customers? At least it is not a good selling point for the customers you are hoping to attract.
Ok, now that we have the entrance, roads, office, and general look of the community ready for new residents, what do we do next? Let's suppose that we are talking about getting new customers to move their home into our park and that we have 25 vacant lots. Now apply one of the best marketing ideas I have ever heard which goes something like this. Is it better to do ONE thing 25 times to fill those lots? Or is it better to do TWENTY-FIVE things one time to fill those lots? I think the latter is the better approach. Maybe in the past you could just bring a flyer down to the local mobile home dealer and watch as he fills up the park. This is not going to happen anymore. You need to to get the flyer down to the dealer, run an ad in the paper, get referrals from your customers, join the chamber, and generally get the word out about your mobile home park.
Here is a list of some of my ideas that should get you started.
1.
Flyer to all Mobile Home Dealers in a 25 mile radius - On the flyer, offer some form of move in special (free 3 months, lower rent, etc).
2.
Join the Chamber of Commerce - then in all of your flyers and ads you can put that you are a member of the Chamber - builds credibility.
3.
Entrance Sign - it works for you 24/7 and make sure to put your phone number on it!
4.
Sponsor a Referral Program to your residents - if they refer someone give them a nice reward (not a $5 discount on the rent).
5.
Talk to local Real Estate Brokers - if they have a customer that can't qualify on a house, maybe they will send them your way (give them a referral fee as well).
6.
Advertisement in the paper or papers - make your ad different from the rest of the ads in the paper - not the simple... mobile home lots for rent, call ???. Instead, try something like... Incredibly Large and Spacious Mobile Home Sites... We will pay you $1,000.00 to help with moving costs! The first five callers will also get the first 3 months Rent FREE! - you get the point, make it stand out and make it enticing.
7.
Start a Community Newsletter and send out the best stories from your newsletter to the local paper to have published. Most local newspapers have a community or local section and are always looking for good stories to publish. Also, if you get the email address from all potential prospects, you can send them this newsletter every month so when they think about moving they won't have forgot about you.
8.
Signs on Vacant Lots - put nice signs on your vacant lots with a phone number for people to call.
9.
Banner signs at entrance - big move in special or discounted rate or we pay you $1,000 to move your home to our park type of banners around the perimeter on high traffic areas of the park.
10.
Telephone Book - make sure that you have an ad in the phone book as this is where many of your potential customers will find you. In the ad, you might want to include something about your move-in specials or direct them to your website to find out the move-in special of the month.
Finally, when you are out there doing your marketing, it is important to test what is working and what is not working. If you run ads in the paper and get no calls... then stop running that ad and try a different one. If none of your park residents are referring people to move in, find out way and up the ante.
Let's face it, if you or your manager is rude when they call in, they probably will call the next park. If they drive in and the roads are in bad shape, the sign is falling down, or there are dangerous dogs running around, they probably will turn around and look for the next park. And the same holds true with referrals from your current customers. If you current customers don't like living there they will bad mouth you all over town and never refer their friends and relatives to move in. Continuing on to other local businesses that would otherwise refer your community to potential residents, you don't stand a chance if you have a bad reputation.
So I think the best form of marketing is to build your credibility in your town, keep your current residents happy, and make sure that those potential customers have a good first impression whether it be a phone call or a drive-by.
Before you ever spend one penny on a newspaper ad, a flyer a the local dealer, or some type of direct mailing to apartment complexes, you should make sure that you have everything in place to attract good residents once they respond. Here is my top 5 list of things you need to do first:
1.
Focus on the entrance to the park: A nice sign that says "Welcome to ___________ Mobile Home Community". Also plant some bushes or trees near the entrance and keep the grass mowed and trimmed nicely.
2.
Roads: Your roads don't have to paved and have curb and gutters, but they do have to be passable. If there are large potholes, patch them immediately. If they need graded, grade them. Before a potential resident ever gets out of the car they will see your entrance and drive on the roads. Make that a good experience.
3.
Park Office: with the park office you want to make sure that it looks inviting. I have been to many an office that is not properly marked with "Welcome" or some other inviting remark. Instead it says something like, "if your rent is not paid by the 5th it is late" or "take your excuses somewhere else". Is that any way to greet a potential resident?
4.
Park Office again: I have also been to many parks that as you are walking up to the office you are greeted by a fence with a dog inside and you have to decide whether to enter or not. Other times you knock on the door and then there are 3 dogs scratching at the door waiting to pounce on you. I don't have a problem with my manager's home being duplicated as the park office, but I do think they need to take precautions against scaring people off with their own dogs.
5.
General Appearance of the Community: once the potential resident enters the park and is satisfied with the entrance and roads, they will encounter the rest of the park. If the park is a complete disaster with trash, junk, high grass and weeds, and so on, do you think this will be a good selling point for potential customers? At least it is not a good selling point for the customers you are hoping to attract.
Ok, now that we have the entrance, roads, office, and general look of the community ready for new residents, what do we do next? Let's suppose that we are talking about getting new customers to move their home into our park and that we have 25 vacant lots. Now apply one of the best marketing ideas I have ever heard which goes something like this. Is it better to do ONE thing 25 times to fill those lots? Or is it better to do TWENTY-FIVE things one time to fill those lots? I think the latter is the better approach. Maybe in the past you could just bring a flyer down to the local mobile home dealer and watch as he fills up the park. This is not going to happen anymore. You need to to get the flyer down to the dealer, run an ad in the paper, get referrals from your customers, join the chamber, and generally get the word out about your mobile home park.
Here is a list of some of my ideas that should get you started.
1.
Flyer to all Mobile Home Dealers in a 25 mile radius - On the flyer, offer some form of move in special (free 3 months, lower rent, etc).
2.
Join the Chamber of Commerce - then in all of your flyers and ads you can put that you are a member of the Chamber - builds credibility.
3.
Entrance Sign - it works for you 24/7 and make sure to put your phone number on it!
4.
Sponsor a Referral Program to your residents - if they refer someone give them a nice reward (not a $5 discount on the rent).
5.
Talk to local Real Estate Brokers - if they have a customer that can't qualify on a house, maybe they will send them your way (give them a referral fee as well).
6.
Advertisement in the paper or papers - make your ad different from the rest of the ads in the paper - not the simple... mobile home lots for rent, call ???. Instead, try something like... Incredibly Large and Spacious Mobile Home Sites... We will pay you $1,000.00 to help with moving costs! The first five callers will also get the first 3 months Rent FREE! - you get the point, make it stand out and make it enticing.
7.
Start a Community Newsletter and send out the best stories from your newsletter to the local paper to have published. Most local newspapers have a community or local section and are always looking for good stories to publish. Also, if you get the email address from all potential prospects, you can send them this newsletter every month so when they think about moving they won't have forgot about you.
8.
Signs on Vacant Lots - put nice signs on your vacant lots with a phone number for people to call.
9.
Banner signs at entrance - big move in special or discounted rate or we pay you $1,000 to move your home to our park type of banners around the perimeter on high traffic areas of the park.
10.
Telephone Book - make sure that you have an ad in the phone book as this is where many of your potential customers will find you. In the ad, you might want to include something about your move-in specials or direct them to your website to find out the move-in special of the month.
Finally, when you are out there doing your marketing, it is important to test what is working and what is not working. If you run ads in the paper and get no calls... then stop running that ad and try a different one. If none of your park residents are referring people to move in, find out way and up the ante.
Monday, December 13, 2010
Build Pride of Ownership in Your Community
I will never forget my first drive through of one of my communities with a conduit lender. The property was about a one-star in quality, but was a cash-flow wonder. I wasn't sure what the bank's reaction would be to my down and dirty "family" community status. As we drove out of the property, I nervously asked the lender "so what do you think?" His response: "well, they seem to have a pride of ownership". With the loan in hand, that term has grown to sum up what I feel is the most important in any community. Even a lower demographic property like mine can be redeemed and affirmed through "pride of ownership".
So what is "pride of ownership"? To me, the answer is when all of my tenants make the best of what they've got. They may not be rich, or have nice homes or cars, and their yard furniture may not be out of the Frontgate catalogue, but they make the best of it. They have clean, orderly yards, keep their homes painted and touched up, have all their skirting up and in line, and keep their yards mowed. These are all items that are earned with sweat equity not dollars. Anyone can aspire to these things regardless of income. It's really a mindset.
So how do you get "pride of ownership" from your tenants? Unfortunately, it's not the easy way of just asking them nicely and they'll do it. It takes a definite strategy to jump start and maintain a "pride of ownership" program.
The first step is to clean up your act. You cannot expect the tenants to put in any effort when the community common areas are a shambles. Before you even ask the tenants to pitch in, you must:
*
Make sure all common areas are adequately mowed
*
Make sure all streets and curbs are professionally edged and cleared of any vegetation (using Round Up, etc.)
*
Fix any fencing that is falling over or rusted and unsightly
*
Trim and remove all dead branches and trees
*
Install a new, professional quality entrance sign and other signage throughout
*
Patch and repair all potholes in your roads and parking pads
Once you have set the tone, send a letter to your tenants, telling them that, effective immediately, you are going to try to turn the community into a nice place to live. Explain what is expected of them, but keep it pretty basic no big trash in
yards, no non-running vehicles, 100% skirting installed, houses attractively painted, etc.
The next step is to have an all-community "trash day". Rent a commercial roll-off dumpster, and send a note to everyone that you are going to have available a huge dumpster so that they can finally get rid of that old rusted swingset, etc. And explain to them that, by Sunday, if their yard is not clean, you are going to through some of the stuff out yourself. Impress on them that this is a one-time only thing, and that it is in their best interest to take advantage of your hospitality. Hopefully, a ton of the trash in the yards will be gone by Monday.
Starting Monday, you need to make list of every house and yard that offends you, and send a letter to each of these tenants stating what you want fixed. Give them only a week to comply, because they never will anyway. You are simply setting them up to get ready for some executive action.
Now comes the time that separates the successful operators from the failures. You can either spend the rest of your life threatening the tenants to do what you want, which never works anyway, or try a new approach. The new approach is to send them a letter stating that you are going to do the work yourself, and bill it back to them, to be spread out and paid over the next twelve months on their rent. For example, if total repairs on a certain lot are $1,200, then you will add $100 per month to their rent for the next year. Don't expect to get this in writing, and don't expect to be able to collect it in court. If you try and get it all neatly signed up, it will take months to accomplish just that step, if you can get it done at all. Think of it this way if you made the necessary repairs normally, it would cost you 100% of the cost. Maybe you can get 50% of it back from the tenants. That's a lot better than the other option.
The expense you will incur is in one of three categories.
*
The cost of repainting or touching up their home.
*
The cost of fixing or replacing their skirting
*
The cost of removing even more debris from their yard
Since you will probably have several of each, you can get an attractive "volume" deal from a contractor. I have found that you don't want to put in a lot of effort in getting input from the tenants, such as coordinating around their schedule. It is one of those times when "shoot first, ask questions later" seems to be the best course of action. Have the contractor speedily get everything done while the tenants are at work. And if anyone complains, tell them that they have no right to say a word since they never bothered to lift a finger on their own.
Once you have artificially jump-started the pride of ownership in your property, keep the momentum going by sending a thank-you letter to the tenants, and celebrate their additional work by having a "yard of the month" program where the tenant wins a free gift. Stay vigilant so that the property never falls back into disrepair.
You can have tenants who have a pride of ownership. You just have to give them the first nudge. And then keep on nudging them.
So what is "pride of ownership"? To me, the answer is when all of my tenants make the best of what they've got. They may not be rich, or have nice homes or cars, and their yard furniture may not be out of the Frontgate catalogue, but they make the best of it. They have clean, orderly yards, keep their homes painted and touched up, have all their skirting up and in line, and keep their yards mowed. These are all items that are earned with sweat equity not dollars. Anyone can aspire to these things regardless of income. It's really a mindset.
So how do you get "pride of ownership" from your tenants? Unfortunately, it's not the easy way of just asking them nicely and they'll do it. It takes a definite strategy to jump start and maintain a "pride of ownership" program.
The first step is to clean up your act. You cannot expect the tenants to put in any effort when the community common areas are a shambles. Before you even ask the tenants to pitch in, you must:
*
Make sure all common areas are adequately mowed
*
Make sure all streets and curbs are professionally edged and cleared of any vegetation (using Round Up, etc.)
*
Fix any fencing that is falling over or rusted and unsightly
*
Trim and remove all dead branches and trees
*
Install a new, professional quality entrance sign and other signage throughout
*
Patch and repair all potholes in your roads and parking pads
Once you have set the tone, send a letter to your tenants, telling them that, effective immediately, you are going to try to turn the community into a nice place to live. Explain what is expected of them, but keep it pretty basic no big trash in
yards, no non-running vehicles, 100% skirting installed, houses attractively painted, etc.
The next step is to have an all-community "trash day". Rent a commercial roll-off dumpster, and send a note to everyone that you are going to have available a huge dumpster so that they can finally get rid of that old rusted swingset, etc. And explain to them that, by Sunday, if their yard is not clean, you are going to through some of the stuff out yourself. Impress on them that this is a one-time only thing, and that it is in their best interest to take advantage of your hospitality. Hopefully, a ton of the trash in the yards will be gone by Monday.
Starting Monday, you need to make list of every house and yard that offends you, and send a letter to each of these tenants stating what you want fixed. Give them only a week to comply, because they never will anyway. You are simply setting them up to get ready for some executive action.
Now comes the time that separates the successful operators from the failures. You can either spend the rest of your life threatening the tenants to do what you want, which never works anyway, or try a new approach. The new approach is to send them a letter stating that you are going to do the work yourself, and bill it back to them, to be spread out and paid over the next twelve months on their rent. For example, if total repairs on a certain lot are $1,200, then you will add $100 per month to their rent for the next year. Don't expect to get this in writing, and don't expect to be able to collect it in court. If you try and get it all neatly signed up, it will take months to accomplish just that step, if you can get it done at all. Think of it this way if you made the necessary repairs normally, it would cost you 100% of the cost. Maybe you can get 50% of it back from the tenants. That's a lot better than the other option.
The expense you will incur is in one of three categories.
*
The cost of repainting or touching up their home.
*
The cost of fixing or replacing their skirting
*
The cost of removing even more debris from their yard
Since you will probably have several of each, you can get an attractive "volume" deal from a contractor. I have found that you don't want to put in a lot of effort in getting input from the tenants, such as coordinating around their schedule. It is one of those times when "shoot first, ask questions later" seems to be the best course of action. Have the contractor speedily get everything done while the tenants are at work. And if anyone complains, tell them that they have no right to say a word since they never bothered to lift a finger on their own.
Once you have artificially jump-started the pride of ownership in your property, keep the momentum going by sending a thank-you letter to the tenants, and celebrate their additional work by having a "yard of the month" program where the tenant wins a free gift. Stay vigilant so that the property never falls back into disrepair.
You can have tenants who have a pride of ownership. You just have to give them the first nudge. And then keep on nudging them.
Thursday, December 9, 2010
You Can Diffuse A Difficult Park Tenant
There is no shortage of difficult to handle tenants inside of a mobile home park. In fact, the challenge is to find nice, rational ones. Until that changes, it is important to know how to diffuse the difficult tenant to minimize stress and disruption to your business. Over time, using the following strategies, you can often "wear out" these tenants and, although they seldom become happy, they will at least leave you alone and put their focus on bothering other people.
The first thing you have to do is get into the mindset of the difficult customer. Often, they fall into two groups 1) bullies, no different than those you would encounter in school and 2) needy, lonely people who create problems to get personal attention they crave. Either type of customer can drain your enthusiasm and happiness, and cost you many times their lot rent in happiness and peace of mind. The tricks I am about to describe will diffuse both of these types of bad customers.
Slow It Down
One of the characteristics that always works to a bad tenant's favor is the ability to "rattle" you and make you react to their complaints immediately. Your desire to immediately convert their problems to solutions only fuels the fire they feel powerful and in command by making you scurry around like their personal butler. The only way to deprive the tenant of this pleasure is to slow the whole process down. If you currently answer your phone on every call, consider letting them all go to voicemail, except the numbers on caller I.D. that are important to you, such as your lender. Once in voicemail, you can review them on your own schedule and prioritize who to call back and when. The first step to curing the bad tenants is to add one entire day to your current response time. If you would call them back within five minutes of their call, then starting immediately, you need to add 24 hours to that call them back in 24 hours and 5 minutes. It will absolutely drive them nuts! If you have trained them to expect you to be their lackey, they will freak out at your total lack of respect for their power. Will slowing things down hurt your business? I doubt it. What could they have to say that really matters that much anyway. Do you know any company, other than 911, that gives immediate responses to your problems? Your insurance company? Your mortgage company? Ha!
Distance Yourself
One great way to send the message to your bad tenants that you are no longer putting up with their games is to make yourself inaccessible. Stop answering your phone. And don't make yourself so accessible when you visit the park. By putting some distance between yourself and your tenants, it sends a clear message that you have a life outside the park, and your life does not revolve around them. Never get in a rut of spending a lot of time shooting the breeze with your tenants. If you need human contact, join a club or something, but don't hang around with trailer park tenants. By not being their "buddy" it reduces your interaction with them and makes it harder to bring problems to you, or to "bond" with you.
Turn The Tables
Nothing takes the wind out of the sails of the bad tenant more than letting them know that you don't really care what they think or if they even stay in the park. A great way to respond to a nasty tenant's complaint is to say "obviously you are not happy here, so why don't you move out". This sudden twist puts them on the defensive and creates a change of roles where you are back on top as the landlord. It's your property and you'll do whatever you want with it (within the law hopefully), including shutting it down and evicting everybody. The tenants are only there because you let them be there. It's your business, not theirs. Remember that the tenant has a cost of about $3,000 to move their trailer think of how much power over them that gives you.
Conclusion
Just like your computer gets rid of viruses by banishing them into quarantine, it is important that you remove the disruption and shock of bad tenants from your business and lifestyle. By slowing things down, distancing yourself, and turning the tables, you can turn even the worst actors into paying customers that cause little real disruption.
All you ask from your tenants is that they pay you the rent. Beyond that, their opinions and desires really don't have any place in running a business. Don't make yourself the park concierge go back to being the landlord and save your sanity.
The first thing you have to do is get into the mindset of the difficult customer. Often, they fall into two groups 1) bullies, no different than those you would encounter in school and 2) needy, lonely people who create problems to get personal attention they crave. Either type of customer can drain your enthusiasm and happiness, and cost you many times their lot rent in happiness and peace of mind. The tricks I am about to describe will diffuse both of these types of bad customers.
Slow It Down
One of the characteristics that always works to a bad tenant's favor is the ability to "rattle" you and make you react to their complaints immediately. Your desire to immediately convert their problems to solutions only fuels the fire they feel powerful and in command by making you scurry around like their personal butler. The only way to deprive the tenant of this pleasure is to slow the whole process down. If you currently answer your phone on every call, consider letting them all go to voicemail, except the numbers on caller I.D. that are important to you, such as your lender. Once in voicemail, you can review them on your own schedule and prioritize who to call back and when. The first step to curing the bad tenants is to add one entire day to your current response time. If you would call them back within five minutes of their call, then starting immediately, you need to add 24 hours to that call them back in 24 hours and 5 minutes. It will absolutely drive them nuts! If you have trained them to expect you to be their lackey, they will freak out at your total lack of respect for their power. Will slowing things down hurt your business? I doubt it. What could they have to say that really matters that much anyway. Do you know any company, other than 911, that gives immediate responses to your problems? Your insurance company? Your mortgage company? Ha!
Distance Yourself
One great way to send the message to your bad tenants that you are no longer putting up with their games is to make yourself inaccessible. Stop answering your phone. And don't make yourself so accessible when you visit the park. By putting some distance between yourself and your tenants, it sends a clear message that you have a life outside the park, and your life does not revolve around them. Never get in a rut of spending a lot of time shooting the breeze with your tenants. If you need human contact, join a club or something, but don't hang around with trailer park tenants. By not being their "buddy" it reduces your interaction with them and makes it harder to bring problems to you, or to "bond" with you.
Turn The Tables
Nothing takes the wind out of the sails of the bad tenant more than letting them know that you don't really care what they think or if they even stay in the park. A great way to respond to a nasty tenant's complaint is to say "obviously you are not happy here, so why don't you move out". This sudden twist puts them on the defensive and creates a change of roles where you are back on top as the landlord. It's your property and you'll do whatever you want with it (within the law hopefully), including shutting it down and evicting everybody. The tenants are only there because you let them be there. It's your business, not theirs. Remember that the tenant has a cost of about $3,000 to move their trailer think of how much power over them that gives you.
Conclusion
Just like your computer gets rid of viruses by banishing them into quarantine, it is important that you remove the disruption and shock of bad tenants from your business and lifestyle. By slowing things down, distancing yourself, and turning the tables, you can turn even the worst actors into paying customers that cause little real disruption.
All you ask from your tenants is that they pay you the rent. Beyond that, their opinions and desires really don't have any place in running a business. Don't make yourself the park concierge go back to being the landlord and save your sanity.
Wednesday, December 8, 2010
Rent Mobile Homes in a Down Economy
You can't be a mobile home park owner and not realize that the good old days are over in filling up vacant mobile home park lots. Those of us who owned parks in the late 1990s became spoiled with how easy it was to fill up a mobile home park. Back then, all you had to do was to meet with a few dealers, drop off some flyers, and you would start bringing in a home a week.
Enough of the history lesson, you're saying. How do you rent mobile home park lots in this market? Well, it's a lot harder. But if you follow these steps, you'll find it can be done.
Don't Ignore the Dealers
Just because they are not selling like they used to, you cannot turn your back on your local dealers. They still sell homes occasionally. Make sure that you have a stack of flyers at every dealership, and call them once a month to make sure they have not forgot about you.
Offer Dealers This Deal
Every dealer has some "junk" homes at the back of their lot. Normally trade-ins that weren't of much value. Pitch the dealer on taking those junkers and bring them into your park. Throw some skirting on them and re-paint them, and sell them on location. You won't charge them any lot rent until the home is sold. I've had dealers bring in as many as ten homes under this program, and it works pretty well. There is a lot of pent-up demand for mobile homes that are already set up in parks, as long as the seller carries the paper, or the price is so low that the buyer can come up with the cash.
"Lonnie Deals" are Great As Long As They Are Not Yours
I don't think that buying and selling used mobile homes is that great a business but there are those who do. So let them bring in the homes into your park and you keep your money in the bank. You can find these folks by asking around, places like dealers and people who move mobile homes. You can also find them by driving through other parks and looking for similar signs and phone numbers on homes for sale. When you find one, offer them no lot rent until the home is sold.
Steal Thy Neighbor
If there is a park owner doing a lousy job in your market, consider offering his tenants the ability to move, free of charge, to your park. You can send a direct mail piece to his tenants, who hopefully are not very happy where they are. Make sure not to steal tenants who are still under lease with your competitor. That would break a law called "tortuous interference of business". And be very sure that your tenants like you more than him, because he may return the favor by sending a letter offering the same deal to your tenants. Only pick a park that is in real trouble, and cannot mount any effective attack on your tenants. Sure, the move will cost you about $2,000 or more, but it's a whole lot cheaper than the next option.
Bring in Homes and Sell or Rent Them
This is my least favorite option, since it costs a lot of money and creates lots of management problems. If I didn't have to do it, I wouldn't. The only gain is from filling a lot and getting the lot rent going. But as far as making money in selling or renting the homes forget it. Used mobile homes are money-pits with no upside. If you have no other way to fill lots, at least make sure that the value of the lot your rent (lot rent minus expenses x 12 x 10) equals or exceeds the cost of the home. For example, if your lot rent is $200 per month, with expenses of $60 per month, then the resulting $140 x twelve months x 10 equals a value at a 10% return level on the benefit of getting that lot occupied. If you spend less than this amount of value-add, you at least won't lose money if you bring in a home and give it away for $1 (which is sometimes where you end up).
Conclusion
Yes, you can still fill up your vacant lots. But it's a lot harder than just dropping off a stack of flyers at your local dealer. If you follow these suggestions aggressively, you should be able to create a positive fill rate and increase your cash flow and value substantially.
Enough of the history lesson, you're saying. How do you rent mobile home park lots in this market? Well, it's a lot harder. But if you follow these steps, you'll find it can be done.
Don't Ignore the Dealers
Just because they are not selling like they used to, you cannot turn your back on your local dealers. They still sell homes occasionally. Make sure that you have a stack of flyers at every dealership, and call them once a month to make sure they have not forgot about you.
Offer Dealers This Deal
Every dealer has some "junk" homes at the back of their lot. Normally trade-ins that weren't of much value. Pitch the dealer on taking those junkers and bring them into your park. Throw some skirting on them and re-paint them, and sell them on location. You won't charge them any lot rent until the home is sold. I've had dealers bring in as many as ten homes under this program, and it works pretty well. There is a lot of pent-up demand for mobile homes that are already set up in parks, as long as the seller carries the paper, or the price is so low that the buyer can come up with the cash.
"Lonnie Deals" are Great As Long As They Are Not Yours
I don't think that buying and selling used mobile homes is that great a business but there are those who do. So let them bring in the homes into your park and you keep your money in the bank. You can find these folks by asking around, places like dealers and people who move mobile homes. You can also find them by driving through other parks and looking for similar signs and phone numbers on homes for sale. When you find one, offer them no lot rent until the home is sold.
Steal Thy Neighbor
If there is a park owner doing a lousy job in your market, consider offering his tenants the ability to move, free of charge, to your park. You can send a direct mail piece to his tenants, who hopefully are not very happy where they are. Make sure not to steal tenants who are still under lease with your competitor. That would break a law called "tortuous interference of business". And be very sure that your tenants like you more than him, because he may return the favor by sending a letter offering the same deal to your tenants. Only pick a park that is in real trouble, and cannot mount any effective attack on your tenants. Sure, the move will cost you about $2,000 or more, but it's a whole lot cheaper than the next option.
Bring in Homes and Sell or Rent Them
This is my least favorite option, since it costs a lot of money and creates lots of management problems. If I didn't have to do it, I wouldn't. The only gain is from filling a lot and getting the lot rent going. But as far as making money in selling or renting the homes forget it. Used mobile homes are money-pits with no upside. If you have no other way to fill lots, at least make sure that the value of the lot your rent (lot rent minus expenses x 12 x 10) equals or exceeds the cost of the home. For example, if your lot rent is $200 per month, with expenses of $60 per month, then the resulting $140 x twelve months x 10 equals a value at a 10% return level on the benefit of getting that lot occupied. If you spend less than this amount of value-add, you at least won't lose money if you bring in a home and give it away for $1 (which is sometimes where you end up).
Conclusion
Yes, you can still fill up your vacant lots. But it's a lot harder than just dropping off a stack of flyers at your local dealer. If you follow these suggestions aggressively, you should be able to create a positive fill rate and increase your cash flow and value substantially.
Tuesday, December 7, 2010
How to Spot Crime in a Mobile Home Park
Unless you have spent time in law enforcement, there are certain signs of crime that you would never notice as a result of your sheltered existence. However, there are important crime signals that every park owner should know, but that nobody will tell you due to political correctness. So here they are:
Shoes don't grow on power lines.
Have you ever noticed a pair of tennis shoes hanging from a power line? That is the universal sign for "drugs sold here". When someone is wanting to buy drugs in the mobile home park, they look for the hanging tennis shoes. In really bad parks, you will see tennis shoes hanging from power lines on every street in the park.
Real tears don't have dark blue outlines.
Have you ever seen a tenant with teardrop tattoos coming out of their eyes and going down their face? Those are jail-house tattoos, and every tear drop represents a family member who died while they were serving time in prison. A guy with ten teardrops means he was probably in jail for murder, since 10 family members died while he was in there. Or maybe he was in jail ten times and one family member died during each term. Any way you cut it, teardrop tattoos are bad news for tenant quality. You should be very wary around this type of clientele.
Real tattoo parlors have some type of quality control.
Have you seen folks with incredibly amateurish tattoos covering there entire backs, necks, arms and chests. These are jail-house tattoos. With nothing else to do, they give each other tattoos. Think the artwork is bad? Check out the verbage. They need to teach more grammar courses in jail.
Tenants standing out in front of their homes are seldom admiring them.
In parks with a lot of drug activity, you will see tenants milling about in the street in front of their homes. Sometimes, they will just be standing there with their hands in their pockets for hours. They are selling drugs to cars that pass by. Those weren't star maps they were exchanging for cash.
Those bright lights beaming out of the shed are not a Mickey Rooney drama production.
Often, driving through a park at night, you will see very bright lights beaming out of the cracks around doors and windows (there's aluminum foil over the windows). What's that all about? It's called a "grow-lab". They grow marijuana in sheds (and sometimes homes) using lights so bright they replicate the sun. These homes will have incredibly high electric usage and it's not from the A/C.
Nobody can be that popular.
Do you have a tenant that has an endless line of cars driving to his house and then quickly leaving? No, he is not just a party animal he's dealing drugs.
Real teeth don't look like toothpicks.
Have you ever met a tenant with teeth that look like little slivers? That's a side effect of someone taking "crank", a very strong, illegal drug. When you meet a tenant who has teeth that look like toothpicks, and is very fidgety, you have met a crank addict.
That smell is not from cooking not exactly, anyway.
Have you ever encountered a really bad smell in a mobile home park, but you're sure it's not from a rotting body or a sewer leak? That may be the smell of a drug lab manufacturing meth. It has a nasty, burnt trash smell. Maybe I'm wrong maybe they just burned the turkey while basting it in gasoline.
With some tenants, the answer is "all of the above".
When you find a tenant or home has one of the above attributes, you will often notice that many more apply. You see the tennis shoes on the power line. Then later that day, you smell a terrible smell coming from the house, and notice the tenant hanging out in the street. He has tear-drop tattoos on his face, and lousy tattoos on his back. And when he smiles, you notice that his teeth look like jail bars. Yep, you've got a crime problem on your hands.
Conclusion
It's not fair to profile people. But there are certain signs of past bad behavior, and current bad behavior, that you have to be vigilant over. When you experience some of the items mentioned above, it might just be coincidence. Or maybe they have served their time and are now respectable members of society.
Or just maybe you are the landlord to the next John Dillinger.
Shoes don't grow on power lines.
Have you ever noticed a pair of tennis shoes hanging from a power line? That is the universal sign for "drugs sold here". When someone is wanting to buy drugs in the mobile home park, they look for the hanging tennis shoes. In really bad parks, you will see tennis shoes hanging from power lines on every street in the park.
Real tears don't have dark blue outlines.
Have you ever seen a tenant with teardrop tattoos coming out of their eyes and going down their face? Those are jail-house tattoos, and every tear drop represents a family member who died while they were serving time in prison. A guy with ten teardrops means he was probably in jail for murder, since 10 family members died while he was in there. Or maybe he was in jail ten times and one family member died during each term. Any way you cut it, teardrop tattoos are bad news for tenant quality. You should be very wary around this type of clientele.
Real tattoo parlors have some type of quality control.
Have you seen folks with incredibly amateurish tattoos covering there entire backs, necks, arms and chests. These are jail-house tattoos. With nothing else to do, they give each other tattoos. Think the artwork is bad? Check out the verbage. They need to teach more grammar courses in jail.
Tenants standing out in front of their homes are seldom admiring them.
In parks with a lot of drug activity, you will see tenants milling about in the street in front of their homes. Sometimes, they will just be standing there with their hands in their pockets for hours. They are selling drugs to cars that pass by. Those weren't star maps they were exchanging for cash.
Those bright lights beaming out of the shed are not a Mickey Rooney drama production.
Often, driving through a park at night, you will see very bright lights beaming out of the cracks around doors and windows (there's aluminum foil over the windows). What's that all about? It's called a "grow-lab". They grow marijuana in sheds (and sometimes homes) using lights so bright they replicate the sun. These homes will have incredibly high electric usage and it's not from the A/C.
Nobody can be that popular.
Do you have a tenant that has an endless line of cars driving to his house and then quickly leaving? No, he is not just a party animal he's dealing drugs.
Real teeth don't look like toothpicks.
Have you ever met a tenant with teeth that look like little slivers? That's a side effect of someone taking "crank", a very strong, illegal drug. When you meet a tenant who has teeth that look like toothpicks, and is very fidgety, you have met a crank addict.
That smell is not from cooking not exactly, anyway.
Have you ever encountered a really bad smell in a mobile home park, but you're sure it's not from a rotting body or a sewer leak? That may be the smell of a drug lab manufacturing meth. It has a nasty, burnt trash smell. Maybe I'm wrong maybe they just burned the turkey while basting it in gasoline.
With some tenants, the answer is "all of the above".
When you find a tenant or home has one of the above attributes, you will often notice that many more apply. You see the tennis shoes on the power line. Then later that day, you smell a terrible smell coming from the house, and notice the tenant hanging out in the street. He has tear-drop tattoos on his face, and lousy tattoos on his back. And when he smiles, you notice that his teeth look like jail bars. Yep, you've got a crime problem on your hands.
Conclusion
It's not fair to profile people. But there are certain signs of past bad behavior, and current bad behavior, that you have to be vigilant over. When you experience some of the items mentioned above, it might just be coincidence. Or maybe they have served their time and are now respectable members of society.
Or just maybe you are the landlord to the next John Dillinger.
Monday, December 6, 2010
Why the Mobile Home Park Business Works, but Manufactured Homes Do Not
When I got in the mobile home park business, many of the sellers I bought from called the mobile homes "coaches" and "trailers". Roger Miller even wrote a hit song with the lyrics "trailers for sale or rent". But manufacturers and dealers thought the business needed an upgrade, so they changed the name to "mobile home". Of course, the name was misleading, because mobile homes are far from mobile. Some can't survive any movement at all, and moving one can cost $3,000 or more. And I guess they stuck the word "home" on there to make it sound reassuing or folksy (as opposed to saying "mobile unit"), or to give you greater direction on what you were supposed to do with the thing. But I embraced the new moniker, and so did everybody else.
The mobile home is a fine symbol of affordable housing. It represents the collective efforts of manufacturers and the government to build the cheapest detached housing unit in the world. Although it is not always appealing to the eye, and has been a notorious incubator for some of the wildest living conditions in mankind, it is cheap. Sometimes, real cheap. I have seen used mobile homes sell for $1,000 that's 94 cents per square foot. That's about 100 times cheaper than a comparable stick-built house.
Mobile homes were inhabited by people who didn't earn much but they were at least inhabited. Nobody expected much besides four walls and a roof, and they were seldom disappointed. If you didn't have much money, you always felt safe that there would be a mobile home in a park to fit any budget.
But then in the 1990s they decided to re-invent the industry again, this time under the moniker "manufactured home". Out with the concept of "mobile" and in with the concept of building a thing in a factory. First off, I'm not so sure that you want to beat the customer over the head with the idea that their housing unit was built in a factory. That's not exactly a crowd-pleaser or reason to boast at a cocktail party "my house was built just like my car". Most things built in a factory are impersonal, cheaply made and often prone to breaking. Wait a minute maybe that is a pretty accurate impression.
With the new "classy" name came new pricing for the homes about two to three times what mobile homes cost. But they still sold O.K. due to impossibly low standards by lenders such as Greentree. Suddenly, mobile homes that cost $10,000 now cost $40,000 as manufactured homes. And therein lies the problem.
Manufactured housing has lost its roots as affordable housing. Now it wants to pretend that it is something more than it is and make the consumer join in the fun. I think the American public has voted with its pocketbook. Sales of manufactured homes have fallen about 75% since 2000. The sad truth is that nobody wants an expensive manufactured home. They want cheap mobile homes.
There is talk that the industry wants to change the name again. Perhaps "executive mansions on the go" is on the table. I would urge the industry, instead, to go back to the "mobile home business". Everyone knew what it meant affordable housing and they could afford it. Homes sold briskly and parks were full. That demand has not gone anywhere, but nobody can afford, or wants to buy, affordable housing for $40,000. Instead of straining to find out how to build and sell the most expensive manufactured home, let's refocus the industry on how to build the least expensive. I know it's not as profitable, but you can make it up in volume.
"Coaches", "trailers" and "mobile homes" are where the demand is. "Manufactured homes"? Nobody's interested. And forget any new names you've already embarrassed yourselves enough.
The mobile home is a fine symbol of affordable housing. It represents the collective efforts of manufacturers and the government to build the cheapest detached housing unit in the world. Although it is not always appealing to the eye, and has been a notorious incubator for some of the wildest living conditions in mankind, it is cheap. Sometimes, real cheap. I have seen used mobile homes sell for $1,000 that's 94 cents per square foot. That's about 100 times cheaper than a comparable stick-built house.
Mobile homes were inhabited by people who didn't earn much but they were at least inhabited. Nobody expected much besides four walls and a roof, and they were seldom disappointed. If you didn't have much money, you always felt safe that there would be a mobile home in a park to fit any budget.
But then in the 1990s they decided to re-invent the industry again, this time under the moniker "manufactured home". Out with the concept of "mobile" and in with the concept of building a thing in a factory. First off, I'm not so sure that you want to beat the customer over the head with the idea that their housing unit was built in a factory. That's not exactly a crowd-pleaser or reason to boast at a cocktail party "my house was built just like my car". Most things built in a factory are impersonal, cheaply made and often prone to breaking. Wait a minute maybe that is a pretty accurate impression.
With the new "classy" name came new pricing for the homes about two to three times what mobile homes cost. But they still sold O.K. due to impossibly low standards by lenders such as Greentree. Suddenly, mobile homes that cost $10,000 now cost $40,000 as manufactured homes. And therein lies the problem.
Manufactured housing has lost its roots as affordable housing. Now it wants to pretend that it is something more than it is and make the consumer join in the fun. I think the American public has voted with its pocketbook. Sales of manufactured homes have fallen about 75% since 2000. The sad truth is that nobody wants an expensive manufactured home. They want cheap mobile homes.
There is talk that the industry wants to change the name again. Perhaps "executive mansions on the go" is on the table. I would urge the industry, instead, to go back to the "mobile home business". Everyone knew what it meant affordable housing and they could afford it. Homes sold briskly and parks were full. That demand has not gone anywhere, but nobody can afford, or wants to buy, affordable housing for $40,000. Instead of straining to find out how to build and sell the most expensive manufactured home, let's refocus the industry on how to build the least expensive. I know it's not as profitable, but you can make it up in volume.
"Coaches", "trailers" and "mobile homes" are where the demand is. "Manufactured homes"? Nobody's interested. And forget any new names you've already embarrassed yourselves enough.
Thursday, December 2, 2010
Why Pretty Mobile Home Parks Often Have Ugly Returns
Some mobile home park buyers have this erroneous idea that the goal is to buy a great looking asset. They even rate the parks they look at based on physical appearance. The star system is a good example. Most people think a five-star park is always superior to a one star park. However, the only real star system they should consider is which park is a superstar on cash flow. Because at the end of the day, all that really matters when you own a mobile home park is making money. Parks that make money are great, no matter how ugly they are, and parks that lose money are dogs, despite how cute their entry may be. And, as a general rule, the prettier the park, the uglier the cash flow.
So why do pretty parks often not make money?
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They cost too much to buy. Pretty parks sell at the lowest cap rates. Normally one digit, and a low one digit at that. 5% , 6% and 7% cap rates are great for sellers, but can be complete failures for buyers. It is quite difficult to make any money buying parks at 6% returns.
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They are normally at full market rent, so you have no room to push rents. Pretty parks normally have lot rents that are at the top of the market. So the best a buyer can hope for is to gradually nudge the rents up a tiny bit each year or so.
*
They are normally fully occupied, so you have no occupancy upside. Tenants are drawn to the park's aesthetics, and the vacancy factor is normally 5% or less. So there is no way to significantly increase operating income through filling lots.
*
They cost too much to maintain. The landscaping alone on one of these parks is higher than a one star park may spend on total management. It requires a constant outlay of cash to keep a park to the highest standard. When you feel you must re-pave instead of patch roads, and plant seasonal color at your entry, you are going down the path to lower margins.
*
They have plenty of amenities, and they all cost money to run. Pools, clubhouses, jogging tracks, playgrounds they all sound great, but cost a lot to maintain and insure. While they are staples of five-star parks, they are causes of poor cash flow.
Are all pretty parks bad? No, not if you bought them cheaply twenty years ago. The only guy getting rich off these parks today are the current sellers. As for the buyers, that's a lot of work for a CD style yield. Personally, I'd rather buy a down and dirty, ugly park that makes real money. But I wouldn't want to live in one!
So why do pretty parks often not make money?
*
They cost too much to buy. Pretty parks sell at the lowest cap rates. Normally one digit, and a low one digit at that. 5% , 6% and 7% cap rates are great for sellers, but can be complete failures for buyers. It is quite difficult to make any money buying parks at 6% returns.
*
They are normally at full market rent, so you have no room to push rents. Pretty parks normally have lot rents that are at the top of the market. So the best a buyer can hope for is to gradually nudge the rents up a tiny bit each year or so.
*
They are normally fully occupied, so you have no occupancy upside. Tenants are drawn to the park's aesthetics, and the vacancy factor is normally 5% or less. So there is no way to significantly increase operating income through filling lots.
*
They cost too much to maintain. The landscaping alone on one of these parks is higher than a one star park may spend on total management. It requires a constant outlay of cash to keep a park to the highest standard. When you feel you must re-pave instead of patch roads, and plant seasonal color at your entry, you are going down the path to lower margins.
*
They have plenty of amenities, and they all cost money to run. Pools, clubhouses, jogging tracks, playgrounds they all sound great, but cost a lot to maintain and insure. While they are staples of five-star parks, they are causes of poor cash flow.
Are all pretty parks bad? No, not if you bought them cheaply twenty years ago. The only guy getting rich off these parks today are the current sellers. As for the buyers, that's a lot of work for a CD style yield. Personally, I'd rather buy a down and dirty, ugly park that makes real money. But I wouldn't want to live in one!
Tuesday, November 30, 2010
How to Help Your Tenants and Keep Your Cash Flow
It is impossible to be a landlord and not receive frequent requests to "help" your tenants. These requests normally revolve around payment of the rent either to pay late or to pay a reduced amount. And the way you handle these requests has a huge impact on your business, and the life of your tenant.
First, let's look at the request to pay rent late. Normally, the tenant has an excuse for paying rent late, such as a delayed check from an employer or social security. And sometimes the reasons are legitimate. However, you must never allow someone to pay rent late without consequences. The tenant who is paying late must pay a late fee, as should be standard with all of your customers. If you allow the tenant to pay rent late and not pay a late fee, you have set a dangerous precedent that will be spread by word of mouth throughout the park. Additionally, you must explain to the tenant that you will begin the eviction process as scheduled if the rent has not been received during the grace period, but sill stop the process as soon as the rent is received. For example, if the park sends out ten day demand letters on the 7th of the month, then you should go forward with sending the letter, regardless of any advance request by the tenant. You can always call off the eviction process if the rent is received. However, you cannot afford to delay beginning the process as scheduled. That way, if the tenant is lying and is not going to pay the rent, you can kick him out in line with any other tenant who failed to pay the rent. Bear in mind that a lot of times the condition that forces the tenant to request to pay late is a structural change in the tenant's finances that will eventually force him to leave the park. For example, the delay in receiving disability payments from the government may be the result of being kicked out of that program. Similarly, a tenant who claims he is getting paid late by his employer may actually have lost his job, or has been laid off due to lack of work. This problem is not going to go away in the near future only get worse.
Requests to pay less than the required rent require the same proactive approach. If you agree to let a tenant pay less than the required amount, you will create a deadly precedent in your park. Nothing will put you out of business faster than receiving partial rent every month none of your bills can be paid with partial payments. But the truth about letting a tenant pay less than they owe, including no rent at all, and not evicting them is that you are really setting them up for losing their home and putting them out on the street. You have become an accessory to the crime. The fact is, if you let the tenant get more than one month behind on their rent, they will never be able to catch up. It is very hard for the average tenant to manage their finances well enough to pay the existing month's rent, much less an even greater amount. If you force the tenant to pay the rent or be evicted, then you force them to take immediate action to solve their financial problem. Maybe they need to get a second job, or change their payment priorities, or get a bridge loan from a relative. The sooner they focus on their finances, the faster they will get back out of trouble. By letting them pass on their rent, you are basically loaning the tenant money a loan they will never be able to pay. Think sub-prime predatory lending, because that's what it is. And the result will work for them as well as it has for the mortgage industry. When you don't force the issue that very month, you are actually doing a disservice to your tenant. And their family and any other person living with them, who is soon to be homeless. In a mobile home park, the rent is relatively low maybe $200 per month and well within the reach of any person even earning minimum wage. It's not a money issue when a tenant can't pay it's a prioritization issue. They are testing you to see if you are one of the bills that can be rolled when that big screen T.V. is on sale, or there is an Aerosmith concert to buy tickets for.
So how do you respond to a rent request from a tenant. First, tell them that you have systems in place that do not allow for customization. Explain that you have to continue with the eviction process no matter what, but you will call it off once the rent has been paid in full, plus the appropriate late fee. It also helps to tell the tenant that you are not the owner (even if you are) and that your boss (even if you are the boss) doesn't allow any rent deals. This is the type of response that the tenant is used to hearing from the more important bills he has (car payment, charge card, utility company) so he will immediately group you with the "have to pay" bills.
Nobody likes to be the "tough guy" with their tenants. However, when it comes to the rent, "tough love" is imperative. So do your tenant and yourself a favor, and don't give in when tenants call you about rent.
First, let's look at the request to pay rent late. Normally, the tenant has an excuse for paying rent late, such as a delayed check from an employer or social security. And sometimes the reasons are legitimate. However, you must never allow someone to pay rent late without consequences. The tenant who is paying late must pay a late fee, as should be standard with all of your customers. If you allow the tenant to pay rent late and not pay a late fee, you have set a dangerous precedent that will be spread by word of mouth throughout the park. Additionally, you must explain to the tenant that you will begin the eviction process as scheduled if the rent has not been received during the grace period, but sill stop the process as soon as the rent is received. For example, if the park sends out ten day demand letters on the 7th of the month, then you should go forward with sending the letter, regardless of any advance request by the tenant. You can always call off the eviction process if the rent is received. However, you cannot afford to delay beginning the process as scheduled. That way, if the tenant is lying and is not going to pay the rent, you can kick him out in line with any other tenant who failed to pay the rent. Bear in mind that a lot of times the condition that forces the tenant to request to pay late is a structural change in the tenant's finances that will eventually force him to leave the park. For example, the delay in receiving disability payments from the government may be the result of being kicked out of that program. Similarly, a tenant who claims he is getting paid late by his employer may actually have lost his job, or has been laid off due to lack of work. This problem is not going to go away in the near future only get worse.
Requests to pay less than the required rent require the same proactive approach. If you agree to let a tenant pay less than the required amount, you will create a deadly precedent in your park. Nothing will put you out of business faster than receiving partial rent every month none of your bills can be paid with partial payments. But the truth about letting a tenant pay less than they owe, including no rent at all, and not evicting them is that you are really setting them up for losing their home and putting them out on the street. You have become an accessory to the crime. The fact is, if you let the tenant get more than one month behind on their rent, they will never be able to catch up. It is very hard for the average tenant to manage their finances well enough to pay the existing month's rent, much less an even greater amount. If you force the tenant to pay the rent or be evicted, then you force them to take immediate action to solve their financial problem. Maybe they need to get a second job, or change their payment priorities, or get a bridge loan from a relative. The sooner they focus on their finances, the faster they will get back out of trouble. By letting them pass on their rent, you are basically loaning the tenant money a loan they will never be able to pay. Think sub-prime predatory lending, because that's what it is. And the result will work for them as well as it has for the mortgage industry. When you don't force the issue that very month, you are actually doing a disservice to your tenant. And their family and any other person living with them, who is soon to be homeless. In a mobile home park, the rent is relatively low maybe $200 per month and well within the reach of any person even earning minimum wage. It's not a money issue when a tenant can't pay it's a prioritization issue. They are testing you to see if you are one of the bills that can be rolled when that big screen T.V. is on sale, or there is an Aerosmith concert to buy tickets for.
So how do you respond to a rent request from a tenant. First, tell them that you have systems in place that do not allow for customization. Explain that you have to continue with the eviction process no matter what, but you will call it off once the rent has been paid in full, plus the appropriate late fee. It also helps to tell the tenant that you are not the owner (even if you are) and that your boss (even if you are the boss) doesn't allow any rent deals. This is the type of response that the tenant is used to hearing from the more important bills he has (car payment, charge card, utility company) so he will immediately group you with the "have to pay" bills.
Nobody likes to be the "tough guy" with their tenants. However, when it comes to the rent, "tough love" is imperative. So do your tenant and yourself a favor, and don't give in when tenants call you about rent.
Monday, November 29, 2010
How to Handle Your Tenants
In Kung Fu, the concept is to combat aggression with the least amount of human effort and movement. Evidently the oriental masters' theories can be applied to mobile home parks. The best way to handle mobile home park tenants is to use very little effort to pretty much ignore 99% of what they say and do.
Complaints
There is no point to listening to tenant complaints that you have no intention of acting on. If you have recently converted your park's curbside service to dumpster and all the tenants hate it, and you have no interest in changing it back to curbside, then why would you waste your time listening to them complain? A better plan is to let them phone in their complaints to voice mail, and then erasing them all at the end of each day, without even listening to them other than to verify it is a complaint on trash. This is why it is a good idea to have a regular phone line with voice mail as the tenants key contact and then always let it go to voicemail. Never give out your cell number to a tenant.
Collections
Nothing your tenant can say can make up for not paying the rent. Either they have paid or not. If they have, then you have nothing to talk about. If they haven't then they need to pay their rent. You need cash not conversation. Don't waste your time discussing why the rent's not there. If they don't pay, evict them. If they do then don't. But there is absolutely no point in discussing the situation. Often, the tenant will want to talk to you to make a payment plan. You never want to accept payment plans. So there really is nothing the tenant can say to stave off eviction. So don't waste your time.
Rules
Adopt some basic, simple rules that are obvious and you feel enthusiastically must be kept. The best of these are no non-running vehicles, no big trash in yards, and no ridiculously tall grass. Once you have derived these basic essentials, then when you cite tenants for abusing the rules, or tow their non-running cars, you should feel free to ignore their calls. If they call to scream and vent their anger, there is little point to listening to it. So let it go to the voicemail, and then erase it without listening to it unless you want a good laugh.
Everything Else
When driving through your park, and a tenant approaches your car to tell you something, pretend you don't see them and drive off. There is nothing they can say that has any importance to you or your property. If you have lots of time on your hands, and don't mind chit-chatting with the tenant , then feel free to learn about the movies, and the weather, and how cool a hemi engine would be. As for me, I'd rather reserve my free time for my family.
Conclusion
It sounds cruel, but ignoring your tenants is often the best business move in a mobile home park. They can drive you nuts if you listen to them or, even worse, try to please them. There is no solution to their problems certainly none that you would want to participate in, like letting them live free for a few months. So, rather than put yourself in a lose/lose position, just avoid it altogether. I have never had a situation that could be improved through one-on-one conversation with a tenant, either by phone or in person.
So put a karate chop to your tenant's time wasting, and just avoid contact altogether.
Complaints
There is no point to listening to tenant complaints that you have no intention of acting on. If you have recently converted your park's curbside service to dumpster and all the tenants hate it, and you have no interest in changing it back to curbside, then why would you waste your time listening to them complain? A better plan is to let them phone in their complaints to voice mail, and then erasing them all at the end of each day, without even listening to them other than to verify it is a complaint on trash. This is why it is a good idea to have a regular phone line with voice mail as the tenants key contact and then always let it go to voicemail. Never give out your cell number to a tenant.
Collections
Nothing your tenant can say can make up for not paying the rent. Either they have paid or not. If they have, then you have nothing to talk about. If they haven't then they need to pay their rent. You need cash not conversation. Don't waste your time discussing why the rent's not there. If they don't pay, evict them. If they do then don't. But there is absolutely no point in discussing the situation. Often, the tenant will want to talk to you to make a payment plan. You never want to accept payment plans. So there really is nothing the tenant can say to stave off eviction. So don't waste your time.
Rules
Adopt some basic, simple rules that are obvious and you feel enthusiastically must be kept. The best of these are no non-running vehicles, no big trash in yards, and no ridiculously tall grass. Once you have derived these basic essentials, then when you cite tenants for abusing the rules, or tow their non-running cars, you should feel free to ignore their calls. If they call to scream and vent their anger, there is little point to listening to it. So let it go to the voicemail, and then erase it without listening to it unless you want a good laugh.
Everything Else
When driving through your park, and a tenant approaches your car to tell you something, pretend you don't see them and drive off. There is nothing they can say that has any importance to you or your property. If you have lots of time on your hands, and don't mind chit-chatting with the tenant , then feel free to learn about the movies, and the weather, and how cool a hemi engine would be. As for me, I'd rather reserve my free time for my family.
Conclusion
It sounds cruel, but ignoring your tenants is often the best business move in a mobile home park. They can drive you nuts if you listen to them or, even worse, try to please them. There is no solution to their problems certainly none that you would want to participate in, like letting them live free for a few months. So, rather than put yourself in a lose/lose position, just avoid it altogether. I have never had a situation that could be improved through one-on-one conversation with a tenant, either by phone or in person.
So put a karate chop to your tenant's time wasting, and just avoid contact altogether.
Sunday, November 28, 2010
Take Advantage of This Great Buying Opportunity
Warren Buffet once said of Berkshire Hathaway "we only get greedy when others get fearful". That statement has never been more accurate in describing the opportunities in the mobile home park business. We are approaching a time in the industry when the owners of parks for sale are fearful, and their fear is amplified by a struggling, nearly dead mobile home retail industry and a sudden reversal of fortune in lending. It appears to be the perfect storm for many owners. And that cyclical train wreck is going to lead to some really great buys if park buyers are properly prepared to take advantage of this once-in-a-lifetime buying opportunity.
The Causes
The mobile home industry had its "subprime meltdown" all the way back in 2000. Just like today, lenders had been way too aggressive in their lending standards if they used any at all. Repossessions went through the roof, and with every mobile home dragged to auction came a new low in collateral value.
$35,000 homes were being sold for $5,000 at auction.
In turn, this re-valuation of collateral led to continually more homeowners walking off and leaving their hugely overvalued mobile home. As the lenders put an end to making loans on mobile homes, dealers found they could not find any credit-worthy buyers to buy their inventory. If you had bought one share of each of the publicly-traded manufacturers in 1999, you would seen the value of this portfolio fall by 90% in 2008. With dealers not selling any homes, the ability to fill mobile home lots has become difficult. In addition, many park owners are faced with the daily risk of losing more customer homes to foreclosure.
The other fundamental of the park business that has hit a brick wall is lending. A few years ago, many banks were aggressively approving loans for parks to be purchased. Unfortunately, several of these are no longer an active player as they once were. Indeed, many of the hard-core lenders from the last few years have virtually shut their doors to new loans.
Much of this was the result of the extreme losses in lending that are occurring right now, although interestingly, most of the mobile home park loans are doing fine. Repossessions of mobile home parks are not very common. But the lending industry has limited mobile home parks along with all forms of real estate borrowing. As a result, if someone wants to buy a park, they must have great credit and plenty of cash for a down payment or the loan will never materialize. In addition, many park lenders are being harder on occupancy, criteria, and location.
The Opportunities
With no dealers selling homes, and little lending for park purchases, many park sellers are becoming truly desperate. Day after day passes without any offers and, when they get one, the deal falls through predictably during the financing contingency. Many sellers do not know how to get their parks sold. And the panic feeds on itself and on other similar parks. A lot of value is based on perception and many sellers perceive their parks to be nearly valueless. Most notable are the parks that have less occupancy than is required for a bank loan (say 60%), yet show reasonable positive cash flow. Despite a lot of good, solid raw material, the seller may perceive that the park will never find a buyer despite the low asking price. And so the price just keeps dropping.
The key buying opportunities in parks today are:
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Parks that have just enough vacancy to be unable to get financing, yet can reach this occupancy level (normally about 80%) with the addition of only a few homes.
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Parks that have sufficient occupancy, but have lousy financials due to mismanagement, and costs that can be reduced.
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Parks that can attain an enormous rent boost upon closing without any changes in occupancy to attain attractive numbers.
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Parks that come with additional real estate assets which can be subdivided and sold off, to reduce the basis in the park.
These opportunities allow a buyer to increase the park income almost immediately, and with little risk. And they circumvent the weakness in the market (dealer sales/occupancy/financing issues) and allow the buyer to obtain a winning deal from the start.
Buyer Preparation
To be able to take advantage of these opportunities, the buyer has to sharpen the weapons in his arsenal. The first of these weapons is his knowledge of the industry. The mobile home park business is extremely complicated. There are over 30 different items that much be checked and confirmed during due diligence, and some of these can cause you to lose your entire investment. In addition, having the knowledge to build a sample budget in line with industry standard cost ratios is essential to success. And once a good deal has been bought, the buyer must know the strategies to successfully manage the property and maximize its profitability. To prepare these skills, there are complete courses on mobile home park diligence and management available, which are essential for the novice and even experienced investor who is crossing over from another asset type.
The buyer must also have the capital necessary to make the down payment on a deal, and afford the additional capital expenditures necessary to put the park in good working order. The time to line up this capital is before you begin your search for parks, not after you have found one. Normally, parks are sold with a 30 day due diligence and a 30 day financing period so there is really no time to raise capital after the property has been tied up. Capital can be obtained from your own liquidity, or family members or financial partners. Knowing the maximum amount of capital available to you will help shape the size of deals you will pursue.
Having a lender who knows and trusts you is another essential ingredient. Often, particularly on deals which have a blemish which you will resolve upon purchase, having the trust of your banker is essential to getting the loan. Another way to achieve a head start in banking is to consult with a loan broker who has access to all of the current lenders on mobile home parks. It is always a good idea to have current financial statements on hand, and a resume on real estate experience.
Conclusion
Not since the Savings & Loan crisis of the 1980's have so many great deals on mobile home parks been available. Since these cycles only come every couple of decades, this is one opportunity that may not come again in your lifetime. So it is important to "carpe diem" "seize the day".
If you take the necessary steps to succeed, you may find yourself owning a profitable mobile home park in the near future.
The Causes
The mobile home industry had its "subprime meltdown" all the way back in 2000. Just like today, lenders had been way too aggressive in their lending standards if they used any at all. Repossessions went through the roof, and with every mobile home dragged to auction came a new low in collateral value.
$35,000 homes were being sold for $5,000 at auction.
In turn, this re-valuation of collateral led to continually more homeowners walking off and leaving their hugely overvalued mobile home. As the lenders put an end to making loans on mobile homes, dealers found they could not find any credit-worthy buyers to buy their inventory. If you had bought one share of each of the publicly-traded manufacturers in 1999, you would seen the value of this portfolio fall by 90% in 2008. With dealers not selling any homes, the ability to fill mobile home lots has become difficult. In addition, many park owners are faced with the daily risk of losing more customer homes to foreclosure.
The other fundamental of the park business that has hit a brick wall is lending. A few years ago, many banks were aggressively approving loans for parks to be purchased. Unfortunately, several of these are no longer an active player as they once were. Indeed, many of the hard-core lenders from the last few years have virtually shut their doors to new loans.
Much of this was the result of the extreme losses in lending that are occurring right now, although interestingly, most of the mobile home park loans are doing fine. Repossessions of mobile home parks are not very common. But the lending industry has limited mobile home parks along with all forms of real estate borrowing. As a result, if someone wants to buy a park, they must have great credit and plenty of cash for a down payment or the loan will never materialize. In addition, many park lenders are being harder on occupancy, criteria, and location.
The Opportunities
With no dealers selling homes, and little lending for park purchases, many park sellers are becoming truly desperate. Day after day passes without any offers and, when they get one, the deal falls through predictably during the financing contingency. Many sellers do not know how to get their parks sold. And the panic feeds on itself and on other similar parks. A lot of value is based on perception and many sellers perceive their parks to be nearly valueless. Most notable are the parks that have less occupancy than is required for a bank loan (say 60%), yet show reasonable positive cash flow. Despite a lot of good, solid raw material, the seller may perceive that the park will never find a buyer despite the low asking price. And so the price just keeps dropping.
The key buying opportunities in parks today are:
*
Parks that have just enough vacancy to be unable to get financing, yet can reach this occupancy level (normally about 80%) with the addition of only a few homes.
*
Parks that have sufficient occupancy, but have lousy financials due to mismanagement, and costs that can be reduced.
*
Parks that can attain an enormous rent boost upon closing without any changes in occupancy to attain attractive numbers.
*
Parks that come with additional real estate assets which can be subdivided and sold off, to reduce the basis in the park.
These opportunities allow a buyer to increase the park income almost immediately, and with little risk. And they circumvent the weakness in the market (dealer sales/occupancy/financing issues) and allow the buyer to obtain a winning deal from the start.
Buyer Preparation
To be able to take advantage of these opportunities, the buyer has to sharpen the weapons in his arsenal. The first of these weapons is his knowledge of the industry. The mobile home park business is extremely complicated. There are over 30 different items that much be checked and confirmed during due diligence, and some of these can cause you to lose your entire investment. In addition, having the knowledge to build a sample budget in line with industry standard cost ratios is essential to success. And once a good deal has been bought, the buyer must know the strategies to successfully manage the property and maximize its profitability. To prepare these skills, there are complete courses on mobile home park diligence and management available, which are essential for the novice and even experienced investor who is crossing over from another asset type.
The buyer must also have the capital necessary to make the down payment on a deal, and afford the additional capital expenditures necessary to put the park in good working order. The time to line up this capital is before you begin your search for parks, not after you have found one. Normally, parks are sold with a 30 day due diligence and a 30 day financing period so there is really no time to raise capital after the property has been tied up. Capital can be obtained from your own liquidity, or family members or financial partners. Knowing the maximum amount of capital available to you will help shape the size of deals you will pursue.
Having a lender who knows and trusts you is another essential ingredient. Often, particularly on deals which have a blemish which you will resolve upon purchase, having the trust of your banker is essential to getting the loan. Another way to achieve a head start in banking is to consult with a loan broker who has access to all of the current lenders on mobile home parks. It is always a good idea to have current financial statements on hand, and a resume on real estate experience.
Conclusion
Not since the Savings & Loan crisis of the 1980's have so many great deals on mobile home parks been available. Since these cycles only come every couple of decades, this is one opportunity that may not come again in your lifetime. So it is important to "carpe diem" "seize the day".
If you take the necessary steps to succeed, you may find yourself owning a profitable mobile home park in the near future.
Tuesday, November 23, 2010
How to Accept and Love Your Mobile Home Park Utilities
When you first buy a mobile home park, you are a little terrified of your water and sewer system. "What if it breaks down?" you worry. "Can I afford to fix it?". "Will my tenants get mad and leave if the water goes out for a couple days?".
One of the key things to remember is that each mobile home park's utilities has its own personality. Just like people, all utility systems have their own strengths and weaknesses. The key to living with your utility system is to recognize it's unique "personality" and to accept it for what it is. Here are a few of the different utility systems and their typical strengths and weaknesses:
Metal Water Lines
Burying metal in the ground is not a great idea. Metal rusts. So metal water lines are a time-delayed disaster. But how much time do you have? In some cases, a whole lot. I have seen metal water lines that have virtually no corrosion despite the fact that they're 50 years old. If you think about it, virtually all the water lines you can think of (unless you live in a brand new subdivision in a town that was entirely built in the 1990s) are made of metal. And everything seems to be O.K. Sure PVC is better, but metal can be just fine. And there's nothing you can do about it. Can I sleep at night with metal lines? You bet I can. I have had little trouble with all my metal lines, and I can definitely be proud of them with all their faults.
PVC Water Lines
If you have PVC water lines, you are a very, very fortunate person. There are very few parks out there that have them. They are the best. Nothing else can compete with them. Before you get too excited, make sure that the whole system is PVC. A lot of times, the park owner has retrofitted PVC onto metal lines where they come out of the ground. To have a PVC system, it has to be 100% PVC below and above the ground.
Clay Tile Sewer
This was the standard design from about 1900 to the 1970s. Most of what you see out there is clay tile. It's basically sewer pipe that is ceramic it looks like pipe made out of the same stuff as the flower pots at the fancy nursery. And it is really a pretty good system. I have had many clay tile sewer systems, and I was not worried about them when I went to sleep each night. The biggest weakness with clay tile is tree roots. The clay tile pipe does not fit together so tightly that tree roots can't find a way to get into such a terrific water source. So when you have clay tile, you will be doing a lot of rooter roto repair calls. But that's a manageable expense. The other weakness with clay tile is its inability to survive jetting of the lines. When you "jet" a line, you spray extremely high pressured water down the sewer lines to push any debris into the city main line. The high pressure spray can often cause a cracked pipe to cave in. When we discontinued jetting our clay tile lines, we had no further cave-ins.
Cast Iron Sewer Line
These are very rare systems. Of course, they are easy to work with. They don't cave in. They can deteriorate over time, theoretically, but I've never actually seen that happen. We've only had one of these systems, and the only fault it had was a series of "bellies", where the flow was slightly uphill in places to it would not drain properly. You would never lose sleep over a cast iron system.
Thin-Walled Plastic Sewer Line
This is the bad boy of the sewer pipe world. This is the crazy, undependable cousin of real utility lines. This junk will cave in all the time sometimes in 50 foot segments. Having this type of sewer system is like inviting a mass murderer over as a house sitter. It might be O.K. or it might be a catastrophe. It's like the crazy gun slinger in a spaghetti western who might shoot you or smile at you. Living with that type of uncertainty will drive any sane person nuts. The only thing you can do with this type of system is "tough love" if it can't work properly, then replace it. And make sure you budget for this eventuality when you buy the park. If I was looking at a park built with this junk, I wouldn't touch it unless I could re-pipe the entire park into PVC, and still have a great return on investment. And that's probably where you are going to end up, either replacing the system at one time or in sections over time. I can't sleep well with this stuff.
PVC Sewer Line
This is the Cadillac of the industry. It is, if properly installed, flawless. Whoever invented this stuff was a genius. I can think of no weakness with PVC. If you have a full PVC sewer system, then you are very lucky indeed.
Conclusion
Like people, water and sewer systems come in all types of shapes and sizes. But that does not mean that certain types are to be avoided or discriminated against. It is possible to accept the type you have, and be happy with it. You just have to understand the character flaws, and work around them.
One of the key things to remember is that each mobile home park's utilities has its own personality. Just like people, all utility systems have their own strengths and weaknesses. The key to living with your utility system is to recognize it's unique "personality" and to accept it for what it is. Here are a few of the different utility systems and their typical strengths and weaknesses:
Metal Water Lines
Burying metal in the ground is not a great idea. Metal rusts. So metal water lines are a time-delayed disaster. But how much time do you have? In some cases, a whole lot. I have seen metal water lines that have virtually no corrosion despite the fact that they're 50 years old. If you think about it, virtually all the water lines you can think of (unless you live in a brand new subdivision in a town that was entirely built in the 1990s) are made of metal. And everything seems to be O.K. Sure PVC is better, but metal can be just fine. And there's nothing you can do about it. Can I sleep at night with metal lines? You bet I can. I have had little trouble with all my metal lines, and I can definitely be proud of them with all their faults.
PVC Water Lines
If you have PVC water lines, you are a very, very fortunate person. There are very few parks out there that have them. They are the best. Nothing else can compete with them. Before you get too excited, make sure that the whole system is PVC. A lot of times, the park owner has retrofitted PVC onto metal lines where they come out of the ground. To have a PVC system, it has to be 100% PVC below and above the ground.
Clay Tile Sewer
This was the standard design from about 1900 to the 1970s. Most of what you see out there is clay tile. It's basically sewer pipe that is ceramic it looks like pipe made out of the same stuff as the flower pots at the fancy nursery. And it is really a pretty good system. I have had many clay tile sewer systems, and I was not worried about them when I went to sleep each night. The biggest weakness with clay tile is tree roots. The clay tile pipe does not fit together so tightly that tree roots can't find a way to get into such a terrific water source. So when you have clay tile, you will be doing a lot of rooter roto repair calls. But that's a manageable expense. The other weakness with clay tile is its inability to survive jetting of the lines. When you "jet" a line, you spray extremely high pressured water down the sewer lines to push any debris into the city main line. The high pressure spray can often cause a cracked pipe to cave in. When we discontinued jetting our clay tile lines, we had no further cave-ins.
Cast Iron Sewer Line
These are very rare systems. Of course, they are easy to work with. They don't cave in. They can deteriorate over time, theoretically, but I've never actually seen that happen. We've only had one of these systems, and the only fault it had was a series of "bellies", where the flow was slightly uphill in places to it would not drain properly. You would never lose sleep over a cast iron system.
Thin-Walled Plastic Sewer Line
This is the bad boy of the sewer pipe world. This is the crazy, undependable cousin of real utility lines. This junk will cave in all the time sometimes in 50 foot segments. Having this type of sewer system is like inviting a mass murderer over as a house sitter. It might be O.K. or it might be a catastrophe. It's like the crazy gun slinger in a spaghetti western who might shoot you or smile at you. Living with that type of uncertainty will drive any sane person nuts. The only thing you can do with this type of system is "tough love" if it can't work properly, then replace it. And make sure you budget for this eventuality when you buy the park. If I was looking at a park built with this junk, I wouldn't touch it unless I could re-pipe the entire park into PVC, and still have a great return on investment. And that's probably where you are going to end up, either replacing the system at one time or in sections over time. I can't sleep well with this stuff.
PVC Sewer Line
This is the Cadillac of the industry. It is, if properly installed, flawless. Whoever invented this stuff was a genius. I can think of no weakness with PVC. If you have a full PVC sewer system, then you are very lucky indeed.
Conclusion
Like people, water and sewer systems come in all types of shapes and sizes. But that does not mean that certain types are to be avoided or discriminated against. It is possible to accept the type you have, and be happy with it. You just have to understand the character flaws, and work around them.
Monday, November 22, 2010
HOW TO PREPARE YOUR PARK FOR THE RECESSION
Unless you're George Bush, you probably already realize that we are heading into a national recession. And if you agree that we are heading into economic trouble, then it is worth your while to make preparations to survive and prosper during this cycle. It's important to remember that it takes time to make adjustments in your business plan, so you should start making these changes immediately.
Focus on Affordable Housing
The universal desire during a recession is to keep costs low. Consumers are looking to find the cheapest housing they can. Instead of focusing on bringing in newer homes that look nicer in your park, instead concentrate on older, uglier ones that can be sold or rented cheaply. Remember that old, ugly houses have no monthly mortgage payments and that means that your customer only has to pay lot rent to survive. You will have a more solid, bill-paying tenant base with older, paid-for homes.
Be Tougher Than Ever on Collections
When money is tight, your tenants have to pick and choose which bills to pay. You must never let them think that the rent can be delayed or missed. You must keep the big club of eviction dangling over their heads at all times. Never miss a beat on getting out your demand notices and filing evictions. And keep pressing with writs of execution don't delay because you are worried about losing tenants during a recession. These folks are not going anywhere. They can't afford to move their homes but they can afford to pay your lot rent. At minimum wage, you can still afford the average mobile home lot rent of $200 per month or so. So be relentless and keep your tenants' priorities straight.
Keep Raising Rent Annually
Some park owners make the mistake of delaying or eliminating the annual lot rent increase during recessions. The problem is that you still need that annual increase to cover the increased costs of running the park, plus ever greater cash flow to meet your budget and reward you for taking the risk of buying a park. There is no way that a tenant is going to be pushed over the edge by a rent increase of $10 to $20 per month. However, if you do not keep the rent escalating, you may soon find that you are losing your battle and having reduced net income annually. If you do not raise the rent a little every year, you will have to make a huge jump down the road, and that will be much more offensive to your tenants.
Cut Costs
Question every bill you pay. Do you really need that extra phone line? Can you mow the grass every two weeks instead of weekly? Never write a check without thinking of at least three different methods to cut that cost. Often , such as the power bill, there is not much you can do to about it. However, a lot of times, you do have some discretionary control over what you spend, especially in repair and park maintenance categories, as well as administrative and office costs. Although you do not want to live you life that way, it does not hurt to role-play the penny-pinching miser out of a Dickens novel. By focusing on cost control, you will spread that gospel throughout your organization.
Approach Loan Renewals Well In Advance
One of the big hurdles of a recession is the sudden disappearance of the usual banks and other lenders. In a world in which Indymac can fail, why not your lender, too? In that type of environment, you need to allow yourself extra time to line up a loan. If your current loan expires in two years, you might want to attack that problem starting now. It might take you two months to get our loan package perfected, another two months to find the right lender, and four to six months to put the deal together. So what's the other year for? Just in case that lender falls apart right before closing, and you have to start all over again. I would much rather pay a slight pre-payment penalty on my existing loan from starting early, rather than be unable to find a replacement loan and end up in foreclosure.
Never Pre-pay For Anything
You have to look at all other businesses that you do business with very cautiously. In a recession, anything can happen. Businesses that have been around for decades can suddenly disappear overnight. So never pay for any project until it has been completed. I have actually had cases, during recessions, where the contractor disappeared in the middle, or even the end, of a job. One time, I had a guy build a brick and stone entry to a park really fancy and he disappeared when the project was 95% complete. We never saw him again. Prior to running off, he had wanted me to pre-pay him for the project, but I had refused to pay him until it was done. By refusing to pay until completion, I ended up with a virtually free, fancy entry. So where did the guy go? I have no idea. Maybe he ran off because he owed so many people money.
Be More Aggressive on the Acquisitions Side
Some of the best mobile home park buys in history have been made during recessions. That is the exact time when all of the planets come into alignment to make the ideal buy. So start watching and listening for real distress mobile home park deals. You may see pricing that you never dreamed you would see. And that is why it is more important than ever to keep yourself out of trouble, so that you can reap the rewards that only a recession can bring.
Conclusion
Recessions are terrible things. However, once you get used to them, they are like a big rain storm. You want to make sure that you have a big umbrella when they hit, and make sure you don't step in a big puddle. But when they're over, everything is cleaner and smells better, and if you have put yourself in the proper position, you may end up with some great parks you bought for a penny on the dollar.
Focus on Affordable Housing
The universal desire during a recession is to keep costs low. Consumers are looking to find the cheapest housing they can. Instead of focusing on bringing in newer homes that look nicer in your park, instead concentrate on older, uglier ones that can be sold or rented cheaply. Remember that old, ugly houses have no monthly mortgage payments and that means that your customer only has to pay lot rent to survive. You will have a more solid, bill-paying tenant base with older, paid-for homes.
Be Tougher Than Ever on Collections
When money is tight, your tenants have to pick and choose which bills to pay. You must never let them think that the rent can be delayed or missed. You must keep the big club of eviction dangling over their heads at all times. Never miss a beat on getting out your demand notices and filing evictions. And keep pressing with writs of execution don't delay because you are worried about losing tenants during a recession. These folks are not going anywhere. They can't afford to move their homes but they can afford to pay your lot rent. At minimum wage, you can still afford the average mobile home lot rent of $200 per month or so. So be relentless and keep your tenants' priorities straight.
Keep Raising Rent Annually
Some park owners make the mistake of delaying or eliminating the annual lot rent increase during recessions. The problem is that you still need that annual increase to cover the increased costs of running the park, plus ever greater cash flow to meet your budget and reward you for taking the risk of buying a park. There is no way that a tenant is going to be pushed over the edge by a rent increase of $10 to $20 per month. However, if you do not keep the rent escalating, you may soon find that you are losing your battle and having reduced net income annually. If you do not raise the rent a little every year, you will have to make a huge jump down the road, and that will be much more offensive to your tenants.
Cut Costs
Question every bill you pay. Do you really need that extra phone line? Can you mow the grass every two weeks instead of weekly? Never write a check without thinking of at least three different methods to cut that cost. Often , such as the power bill, there is not much you can do to about it. However, a lot of times, you do have some discretionary control over what you spend, especially in repair and park maintenance categories, as well as administrative and office costs. Although you do not want to live you life that way, it does not hurt to role-play the penny-pinching miser out of a Dickens novel. By focusing on cost control, you will spread that gospel throughout your organization.
Approach Loan Renewals Well In Advance
One of the big hurdles of a recession is the sudden disappearance of the usual banks and other lenders. In a world in which Indymac can fail, why not your lender, too? In that type of environment, you need to allow yourself extra time to line up a loan. If your current loan expires in two years, you might want to attack that problem starting now. It might take you two months to get our loan package perfected, another two months to find the right lender, and four to six months to put the deal together. So what's the other year for? Just in case that lender falls apart right before closing, and you have to start all over again. I would much rather pay a slight pre-payment penalty on my existing loan from starting early, rather than be unable to find a replacement loan and end up in foreclosure.
Never Pre-pay For Anything
You have to look at all other businesses that you do business with very cautiously. In a recession, anything can happen. Businesses that have been around for decades can suddenly disappear overnight. So never pay for any project until it has been completed. I have actually had cases, during recessions, where the contractor disappeared in the middle, or even the end, of a job. One time, I had a guy build a brick and stone entry to a park really fancy and he disappeared when the project was 95% complete. We never saw him again. Prior to running off, he had wanted me to pre-pay him for the project, but I had refused to pay him until it was done. By refusing to pay until completion, I ended up with a virtually free, fancy entry. So where did the guy go? I have no idea. Maybe he ran off because he owed so many people money.
Be More Aggressive on the Acquisitions Side
Some of the best mobile home park buys in history have been made during recessions. That is the exact time when all of the planets come into alignment to make the ideal buy. So start watching and listening for real distress mobile home park deals. You may see pricing that you never dreamed you would see. And that is why it is more important than ever to keep yourself out of trouble, so that you can reap the rewards that only a recession can bring.
Conclusion
Recessions are terrible things. However, once you get used to them, they are like a big rain storm. You want to make sure that you have a big umbrella when they hit, and make sure you don't step in a big puddle. But when they're over, everything is cleaner and smells better, and if you have put yourself in the proper position, you may end up with some great parks you bought for a penny on the dollar.
Thursday, November 18, 2010
What Will You Tell Your Grandchildren?
You only need one mobile home park. That's all you need to create a sizable asset and a consistent source of income. That's assuming you buy it and operate it correctly.
There has not been a better time to buy that one park in the last decade. Due to problems in the commercial real estate lending market, prices for parks have plummeted over the last six months. Desperate sellers are dumping their parks at prices far less than construction cost. Just look at the prices on the site. Notice how many sellers have written on their price "must sell", "desperate", and "all reasonable offers accepted". And they are also advertising "seller financing available". It is, without question, a buyers market.
It wasn't always that way. Just twelve months ago, people would complain that there were no good deals out there. For sure, there weren't many. Sellers were trying to get 6% to 7% cap rates. And many were including in their numbers rent raises and increased occupancy that didn't even exist. Going through the list of parks for sale on the site was frequently depressing where were the good deals?
Well, they're here now.
So how can just one park change you and your family's life? Here's the economics based on a 30 space park that you buy for $270,000 from an anxious seller. Let's assume that the park is 80% occupied (24 lots) and the lot rent is $150 per month and the expense ratio is 30%. Then that gives you the following net income: [ 24 x $150 x .7 x 12] = $30,240. Based on a sales price of $270,000, that's an 11% cap rate.
Let's say you can increase the lot rent by $10 per month each year, so that in year five the rent is $200 per month net of utilities. That's pretty plausible, right? Let's also assume that you are able to fill just 3 more lots over that five year period, through aggressive marketing and thinking outside the box. That's not much, right? Well, let's look at the net income now: [27 x $200 x .7 x 12] = $45,360. That's a cap rate of 17% based on your purchase price. Pretty good, huh?
So what can you do with that 17% cap rate. Well, you could sell the park at a 10% cap, and put $183,600 in your pocket before tax. Or you could hold the park until the mortgage is paid off and put $45,360 in your pocket annually (assuming you never rent another lot or raise the rent another dollar, ever). And don't forget that you only put $54,000 [20% of purchase price] down on the park. That's a 300% return on your investment within 5 years, on pretty conservative assumptions. Try and make that kind of return on any other form of real estate, especially now.
Interested?
To learn more about the mobile home park industry, you will find ample books, CDs and courses on the industry on MobileHomeParkStore.com. These products are produced by Frank Rolfe and Dave Reynolds, who have over $100,000,000 in park deals under their belts, and who are real people with real experiences and real facts to convey. Although the materials are lengthy [some are up to 700 pages long], they are easy to read and completely essential to not make a mistake buying or operating your park.
So there's a road map for you to improve the lives of you, your kids, and your grandchildren. And the opportunity is right now.
There has not been a better time to buy that one park in the last decade. Due to problems in the commercial real estate lending market, prices for parks have plummeted over the last six months. Desperate sellers are dumping their parks at prices far less than construction cost. Just look at the prices on the site. Notice how many sellers have written on their price "must sell", "desperate", and "all reasonable offers accepted". And they are also advertising "seller financing available". It is, without question, a buyers market.
It wasn't always that way. Just twelve months ago, people would complain that there were no good deals out there. For sure, there weren't many. Sellers were trying to get 6% to 7% cap rates. And many were including in their numbers rent raises and increased occupancy that didn't even exist. Going through the list of parks for sale on the site was frequently depressing where were the good deals?
Well, they're here now.
So how can just one park change you and your family's life? Here's the economics based on a 30 space park that you buy for $270,000 from an anxious seller. Let's assume that the park is 80% occupied (24 lots) and the lot rent is $150 per month and the expense ratio is 30%. Then that gives you the following net income: [ 24 x $150 x .7 x 12] = $30,240. Based on a sales price of $270,000, that's an 11% cap rate.
Let's say you can increase the lot rent by $10 per month each year, so that in year five the rent is $200 per month net of utilities. That's pretty plausible, right? Let's also assume that you are able to fill just 3 more lots over that five year period, through aggressive marketing and thinking outside the box. That's not much, right? Well, let's look at the net income now: [27 x $200 x .7 x 12] = $45,360. That's a cap rate of 17% based on your purchase price. Pretty good, huh?
So what can you do with that 17% cap rate. Well, you could sell the park at a 10% cap, and put $183,600 in your pocket before tax. Or you could hold the park until the mortgage is paid off and put $45,360 in your pocket annually (assuming you never rent another lot or raise the rent another dollar, ever). And don't forget that you only put $54,000 [20% of purchase price] down on the park. That's a 300% return on your investment within 5 years, on pretty conservative assumptions. Try and make that kind of return on any other form of real estate, especially now.
Interested?
To learn more about the mobile home park industry, you will find ample books, CDs and courses on the industry on MobileHomeParkStore.com. These products are produced by Frank Rolfe and Dave Reynolds, who have over $100,000,000 in park deals under their belts, and who are real people with real experiences and real facts to convey. Although the materials are lengthy [some are up to 700 pages long], they are easy to read and completely essential to not make a mistake buying or operating your park.
So there's a road map for you to improve the lives of you, your kids, and your grandchildren. And the opportunity is right now.
Tuesday, November 16, 2010
Investing in Mobile Home Parks
The 2008 Olympics in Beijing offers an important lesson to the manufactured housing industry. Here you have an event where athletes have taken a certain specialty, a certain strength, and turned it into an extremely advanced skill. Some of these people you and I could beat in at least a dozen parlor games, but in their specialty, they are the tops in the world. So that begs the question: what is the specialty that the manufactured housing industry has to offer what can it alone focus on and excel at?
In my opinion, our specialty is affordable housing. That's what we do well, That's our strength. We can put a customer in a detached home for less money than anyone else on earth. So why can't we accept this specialty and run with it?
I think it's about time we stopped confusing the public with what our strength is. I don't think it's building the most attractive form of housing. I don't know anyone who becomes breathless with excitement with a glimpse of our product. Those two story homes that sit on dealers' lots are cool to look at but don't sell that well. I never hear folks at the local country club talking about the latest manufactured home designs along with the latest Lexus models. Let's face it. Our strength is not beauty.
Our strength is also not quality of construction. We all use the sales pitch that you can build a home better in a factory with factory testing and storing of materials, but every time I walk in a home and feel it jiggle and bounce, I am guessing that the whole "better quality" sales pitch is out the window with most customers.
So what do we excel at what can we win a gold medal at? The answer is affordability. Nobody does that better than we do. Our cost per square foot is lowest. We are the national champion in that category. And we are the only form of housing that someone who earns minimum wage can actually afford. Or who retires on $1,000 per month in total monthly benefits. For someone on a low budget, we are the Michael Phelps of detached housing.
While most manufactured home community owners have realized and accepted out niche, and are moving away from overzealous attention to rules enforcement and landscaping that customers never cared for anyway, most manufacturers have still not taken the hint. Many manufactured home community owners have come to realize that the only way to fill lots in their communities is to buy homes, bring them in, and sell them on location. There certainly is no future in waiting for the local dealer to sell a home and even then, you would be competing with at least 10 other properties trying to attract that customer to their manufactured home community. If your focus is affordable housing, and you are trying to buy and bring in a home, obviously your goal is to buy the least expensive home possible. Yet this concept is lost on most manufacturers. I have called to get prices to buy a home to fill a lot, and the manufacturers all want to sell you on the more expensive models they want you to focus on upgraded drapes and kitchen cabinets. Instead, they need to focus on building the cheapest home in the universe, and marketing that to community owners. For over a decade, the manufacturers have been pushing the price point higher and higher and, let's face it, it hasn't worked. Sure, you can build a $50,000 singlewide, but will anyone ever pay it off? I think we all learned the answer to that question with the chattel collapse. Let's focus instead on building truly affordable housing. Let's cut out every possible upgrade and extra. Let's strive to build an ever cheaper home; one our customers can afford and will pay off the mortgage on.
If you were to go door to door in any manufactured home community, and ask the residents why they live there, the resounding answer would be "because it's cheap". You won't find a bunch of eccentric millionaires, and you won't find retired symphony orchestra naturalists who want to commune with nature. Instead you'll find men and women who have a limited budget and are trying to wring some sort of quality of life out of a small income. Let's listen to this majority and get our heads screwed on straight. The customers want cheap let's deliver it!
This theme can also be lost on manufactured home community owners. While rent raises have driven many community lot rents to stratospheric levels, many owners do not seem to realize that there is a glass ceiling on how high they can go. When your sum of lot rent and home mortgage starts to break the $1,000 barrier (or even $800 level in most markets), you are no longer affordable housing. There are a million options at that price point; houses, condos, apartments of all types and locations. Nobody is going to live in a manufactured home community if they can own a brick house instead. I talked to an owner of a four-star community recently, and found he is having to buy out at least 10% of the homes in his property per year to keep the homes from being sold and pulled out. Why? His customers are leaving in droves. Why shouldn't they his lot rent is $600 per month, not including utilities. When you load in their home mortgage, they'd be crazy not to redirect that money to a better housing option. And this same guy is still raising the rents annually. Clearly, this is a flawed business model. Many community owners have apparently lost sight of the affordable housing goal.
So what can we, as an industry, do to win the gold medal to have a thriving, successful business that revolves around our strengths and the strength of demand in the market? The answer is for all of us to focus our energies on doing things as cheaply as possible. We need to be thinking "affordable housing" 24 hours a day. We need to deliver a product that is cheaper each year, not more expensive. That's what the market wants. That's what we have the ability to deliver. Until we do this, we are not even going to qualify for the finals, much less win a medal.
In my opinion, our specialty is affordable housing. That's what we do well, That's our strength. We can put a customer in a detached home for less money than anyone else on earth. So why can't we accept this specialty and run with it?
I think it's about time we stopped confusing the public with what our strength is. I don't think it's building the most attractive form of housing. I don't know anyone who becomes breathless with excitement with a glimpse of our product. Those two story homes that sit on dealers' lots are cool to look at but don't sell that well. I never hear folks at the local country club talking about the latest manufactured home designs along with the latest Lexus models. Let's face it. Our strength is not beauty.
Our strength is also not quality of construction. We all use the sales pitch that you can build a home better in a factory with factory testing and storing of materials, but every time I walk in a home and feel it jiggle and bounce, I am guessing that the whole "better quality" sales pitch is out the window with most customers.
So what do we excel at what can we win a gold medal at? The answer is affordability. Nobody does that better than we do. Our cost per square foot is lowest. We are the national champion in that category. And we are the only form of housing that someone who earns minimum wage can actually afford. Or who retires on $1,000 per month in total monthly benefits. For someone on a low budget, we are the Michael Phelps of detached housing.
While most manufactured home community owners have realized and accepted out niche, and are moving away from overzealous attention to rules enforcement and landscaping that customers never cared for anyway, most manufacturers have still not taken the hint. Many manufactured home community owners have come to realize that the only way to fill lots in their communities is to buy homes, bring them in, and sell them on location. There certainly is no future in waiting for the local dealer to sell a home and even then, you would be competing with at least 10 other properties trying to attract that customer to their manufactured home community. If your focus is affordable housing, and you are trying to buy and bring in a home, obviously your goal is to buy the least expensive home possible. Yet this concept is lost on most manufacturers. I have called to get prices to buy a home to fill a lot, and the manufacturers all want to sell you on the more expensive models they want you to focus on upgraded drapes and kitchen cabinets. Instead, they need to focus on building the cheapest home in the universe, and marketing that to community owners. For over a decade, the manufacturers have been pushing the price point higher and higher and, let's face it, it hasn't worked. Sure, you can build a $50,000 singlewide, but will anyone ever pay it off? I think we all learned the answer to that question with the chattel collapse. Let's focus instead on building truly affordable housing. Let's cut out every possible upgrade and extra. Let's strive to build an ever cheaper home; one our customers can afford and will pay off the mortgage on.
If you were to go door to door in any manufactured home community, and ask the residents why they live there, the resounding answer would be "because it's cheap". You won't find a bunch of eccentric millionaires, and you won't find retired symphony orchestra naturalists who want to commune with nature. Instead you'll find men and women who have a limited budget and are trying to wring some sort of quality of life out of a small income. Let's listen to this majority and get our heads screwed on straight. The customers want cheap let's deliver it!
This theme can also be lost on manufactured home community owners. While rent raises have driven many community lot rents to stratospheric levels, many owners do not seem to realize that there is a glass ceiling on how high they can go. When your sum of lot rent and home mortgage starts to break the $1,000 barrier (or even $800 level in most markets), you are no longer affordable housing. There are a million options at that price point; houses, condos, apartments of all types and locations. Nobody is going to live in a manufactured home community if they can own a brick house instead. I talked to an owner of a four-star community recently, and found he is having to buy out at least 10% of the homes in his property per year to keep the homes from being sold and pulled out. Why? His customers are leaving in droves. Why shouldn't they his lot rent is $600 per month, not including utilities. When you load in their home mortgage, they'd be crazy not to redirect that money to a better housing option. And this same guy is still raising the rents annually. Clearly, this is a flawed business model. Many community owners have apparently lost sight of the affordable housing goal.
So what can we, as an industry, do to win the gold medal to have a thriving, successful business that revolves around our strengths and the strength of demand in the market? The answer is for all of us to focus our energies on doing things as cheaply as possible. We need to be thinking "affordable housing" 24 hours a day. We need to deliver a product that is cheaper each year, not more expensive. That's what the market wants. That's what we have the ability to deliver. Until we do this, we are not even going to qualify for the finals, much less win a medal.
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