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.
Tuesday, December 14, 2010
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.
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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!
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