Nobody can own a mobile home park without having at least one run-in with the city inspector. They normally come out of nowhere, and often when you think you are doing a great job with your park. There is no reason for embarrassment everyone has been there.
Normally what triggers an inspector showing up at your park is a complaint from a tenant or a neighbor. Often the tenant complaint has been made by someone trying to block their eviction for non-payment of rent (similar to pulling the fire alarm to try and get out of your calculus test). It has nothing to do with your management of the park, or any defect in the park. The neighbor normally complains due to loud music, or a park tenant creating havoc, and again has nothing do with your management faults. Yet, to cause the park trouble, he builds it up into some huge complaint and embellishes it with a pile of made up stories. So you should never take it personally when an inspector shows up it is not a condemnation of your work.
The correct way to deal with an inspector has two parts: 1) be as nice as you can and, if that fails, then 2) be as mean as you can.
First, the nice part. You can often get rid of the inspector by agreeing to everything he asks, and brown nosing him like crazy. Tell him that it is your goal to make this the nicest park in town, and will accept nothing less. Look like you are on his team. Let him blow off any steam and then accept complete guilt and plead for forgiveness. Whatever it takes to make the guy happy, within reason, do. It is a lot cheaper than the next option that we are going to discuss. So fix that sign, trim that tree --- whatever the inspector wants you to do, no matter how much you dislike the guy. Most of the time, this plan works, and you won't see the inspector again for a long time.
If the nice act doesn't work, then it's time to get mean. You cannot complain that the inspector is being too hard on you nobody is going to accept the idea that your mobile home park is a dreamland. However, the inspector must work within legal means, and that is his weak spot. By being mean, I am not advocating slashing his car tires. Instead, I am advocating that you take a moral indignation position that you have done a great job with the park and you are not going to sit back and let some inspector criticize your property with no basis in fact. And you back up your position with the help of a hard-nosed lawyer who knows landlord case law, and is not afraid of a little confrontation.
Often times, in your mean stage, the best solution is to have your attorney call the city attorney, and threaten him with a litany of legal actions. This often works because the city attorney does not want to mess with such a trivial item and time-waster. Although the inspector may not know how to spell G-R-A-N-D-F-A-T-H-E-R-E-D, the city attorney does. And the city attorney can sometimes shake up the inspector with a simple phone call telling him to back off. In fact, going over his head is often the best way to emasculate the inspector and put him back in his place. Although a bully, he cannot take much pressure himself, and may run and hide and never bother you again.
If that does not work, here's a real solution that I have used that has nearly lethal success in stopping an inspector cold. Remember that the ticket that a inspector gives you is just the same as a traffic ticket, and must be dealt with in municipal court. And cases in court have the right to a jury trial. So file for a jury trial on your ticket. Why? It puts a lot of pressure on the court system to hold a jury trial, and won't be heard for a long time. And the city knows as well as anyone that the average jury hates city officials and always sides with the common man, being beaten up by the heartless bureaucracy. In other words, you are probably going to win. And the city knows that.
I once had a park where an over-zealous inspector gave me over 20 tickets for code violations. So I filed for 20 jury trials. The judge dismissed all of the tickets, rather than tie his court up for months with jury trials. He even called the inspector and told him never to mess with me again, and he never did.
So there's the system. It's simple, and it has the best chance of success that I know of. Remember that, when dealing with an inspector, be as nice as your can and, if that fails, be as mean as you can. One without the other greatly reduces your odds of success.
Sunday, November 14, 2010
Thursday, November 11, 2010
The Retirement Experience: Men vs. Women
Do men and women see things differently? At least on the topic of retirement, the answer may be yes. A recent study commissioned by Ameriprise Financial reveals that gender may play a significant role in how we feel about and prepare for this major life event.
According to findings from the New Retirement Mindscape IISM study, women tend to have a more positive outlook towards retirement, while men are more likely to feel financially ready for it. The study also found that the recession has impacted men and women differently, a fact that may account for dissimilarities in the way they plan and prepare for retirement. For those in a couple, these differences could cause some major bumps on the road to a shared retirement. Financial pitfalls and stress on your relationship are just two of the potential fallouts you and your spouse or partner could encounter if you fail to communicate effectively about your plans and goals for retirement.
The Findings: Understanding the Gender Split
In 2005, Ameriprise Financial commissioned the New Retirement Mindscapestudy, which examined how Americans ages 40-75 view retirement. Five years later, prompted by the seismic shift in the economy, Ameriprise revisited this research to discover how the retirement landscape has changed for U.S. consumers. Findings from the New Retirement Mindscape II study demonstrate that men and women continue to approach retirement differently, and that the recession may have actually made the contrast starker.
If you tend to feel more excited about retirement than your spouse or partner (or vice versa) you're not alone. In 2010, pre-retired women are much more likely than men to feel "enthusiastic" about retirement (74% vs. 65%). They're also more likely to feel "excited with anticipation" about the day they retire than men (53% vs. 38%). Meanwhile, among retired men, fewer express that they "enjoy retirement a great deal" in 2010 (56%) than they did in 2005 (67%), while the percentage basically has held steady for retired women (57% in 2005 vs. 56% in 2010).
Why the gender enthusiasm gap? If you've read the newspaper recently, you might guess one possible reason: men have been hit harder by the recession. According to the Bureau of Labor Statistics, men account for nearly two-thirds of the jobs lost between late 2007 and December 2009. With such lopsided economic fallout, it's perhaps no wonder that men report feeling less excited about retirement than women.
There's the old joke about men being reluctant to stop and ask for directions. In fact, when it comes to financial planning, this may hold true. Despite having been hit harder by the recession, men in general are less inclined to seek guidance from a financial advisor. Both genders are more likely to work with a financial advisor in 2010 than they were in 2005; however, women do so at a higher rate (46% vs. 38%).
What's more, it appears that men and women may be planning for a different type of retirement. More pre-retired men expect to work - either part-time or full-time - in retirement than pre-retired women (38% vs. 27%). Meanwhile, pre-retired women appear to place importance on being able to volunteer (31% vs. 22%) and spend time with family (77% vs. 68%) during retirement.
Time to Talk Retirement
The study's findings paint a complicated picture for anyone who's planning to retire with a spouse or partner. What if you're planning to retire next year and your mate wants to keep working for another decade? What if you envision a retirement filled with travel and your spouse or partner wants to stay close to home? What happens if you disagree about whether or not you can even afford to retire?
To avoid any unfortunate surprises as you approach or enter into retirement, open up the lines of communication with your spouse or partner about their hopes, fears and level of preparedness for retirement as early as possible. Discussing how you want to spend retirement is not only important from an emotional aspect, but also a financial one. Establishing your goals for the future will help you determine how much money you need to save in order to fund them.
A financial advisor can assist you with writing a financial plan that weaves together your financial objectives and your partner's. In addition to providing a roadmap to your financial future, it can be an opportunity to learn how he or she envisions retirement. The process may be eye-opening.
###
Kevin Lyle Schenck has a financial advisory practice of Ameriprise Financial Services. As a financial advisor, Schenck provides customized financial advice that is anchored in a solid understanding of client needs and expectations, and provided in a one-on-one relationship with his clients. For more information, please contact Kevin at 1.561.226.5838.
Advisor is licensed/registered in Florida.
The New Retirement Mindscape IISM and New Retirement Mindscape studies were commissioned by Ameriprise Financial, Inc. and conducted by telephone by Harris Interactive in May 2010 and August 2005 among 2,007 (2010) and 2,000 (2005) U.S. adults age 40-75. The sampling error for the 2010 study is +/-2.5%. The 2005 study was conducted in conjunction with Age Wave and Ken Dychtwald, Ph.D.
This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. Neither Ameriprise Financial nor its advisors or representatives provide tax or legal advice. The views expressed may not be suitable for every situation.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.
File #108719
[1] Bureau of Labor Statistics, Household Data Seasonally Adjusted Averages, Q2, 2010.
According to findings from the New Retirement Mindscape IISM study, women tend to have a more positive outlook towards retirement, while men are more likely to feel financially ready for it. The study also found that the recession has impacted men and women differently, a fact that may account for dissimilarities in the way they plan and prepare for retirement. For those in a couple, these differences could cause some major bumps on the road to a shared retirement. Financial pitfalls and stress on your relationship are just two of the potential fallouts you and your spouse or partner could encounter if you fail to communicate effectively about your plans and goals for retirement.
The Findings: Understanding the Gender Split
In 2005, Ameriprise Financial commissioned the New Retirement Mindscapestudy, which examined how Americans ages 40-75 view retirement. Five years later, prompted by the seismic shift in the economy, Ameriprise revisited this research to discover how the retirement landscape has changed for U.S. consumers. Findings from the New Retirement Mindscape II study demonstrate that men and women continue to approach retirement differently, and that the recession may have actually made the contrast starker.
If you tend to feel more excited about retirement than your spouse or partner (or vice versa) you're not alone. In 2010, pre-retired women are much more likely than men to feel "enthusiastic" about retirement (74% vs. 65%). They're also more likely to feel "excited with anticipation" about the day they retire than men (53% vs. 38%). Meanwhile, among retired men, fewer express that they "enjoy retirement a great deal" in 2010 (56%) than they did in 2005 (67%), while the percentage basically has held steady for retired women (57% in 2005 vs. 56% in 2010).
Why the gender enthusiasm gap? If you've read the newspaper recently, you might guess one possible reason: men have been hit harder by the recession. According to the Bureau of Labor Statistics, men account for nearly two-thirds of the jobs lost between late 2007 and December 2009. With such lopsided economic fallout, it's perhaps no wonder that men report feeling less excited about retirement than women.
There's the old joke about men being reluctant to stop and ask for directions. In fact, when it comes to financial planning, this may hold true. Despite having been hit harder by the recession, men in general are less inclined to seek guidance from a financial advisor. Both genders are more likely to work with a financial advisor in 2010 than they were in 2005; however, women do so at a higher rate (46% vs. 38%).
What's more, it appears that men and women may be planning for a different type of retirement. More pre-retired men expect to work - either part-time or full-time - in retirement than pre-retired women (38% vs. 27%). Meanwhile, pre-retired women appear to place importance on being able to volunteer (31% vs. 22%) and spend time with family (77% vs. 68%) during retirement.
Time to Talk Retirement
The study's findings paint a complicated picture for anyone who's planning to retire with a spouse or partner. What if you're planning to retire next year and your mate wants to keep working for another decade? What if you envision a retirement filled with travel and your spouse or partner wants to stay close to home? What happens if you disagree about whether or not you can even afford to retire?
To avoid any unfortunate surprises as you approach or enter into retirement, open up the lines of communication with your spouse or partner about their hopes, fears and level of preparedness for retirement as early as possible. Discussing how you want to spend retirement is not only important from an emotional aspect, but also a financial one. Establishing your goals for the future will help you determine how much money you need to save in order to fund them.
A financial advisor can assist you with writing a financial plan that weaves together your financial objectives and your partner's. In addition to providing a roadmap to your financial future, it can be an opportunity to learn how he or she envisions retirement. The process may be eye-opening.
###
Kevin Lyle Schenck has a financial advisory practice of Ameriprise Financial Services. As a financial advisor, Schenck provides customized financial advice that is anchored in a solid understanding of client needs and expectations, and provided in a one-on-one relationship with his clients. For more information, please contact Kevin at 1.561.226.5838.
Advisor is licensed/registered in Florida.
The New Retirement Mindscape IISM and New Retirement Mindscape studies were commissioned by Ameriprise Financial, Inc. and conducted by telephone by Harris Interactive in May 2010 and August 2005 among 2,007 (2010) and 2,000 (2005) U.S. adults age 40-75. The sampling error for the 2010 study is +/-2.5%. The 2005 study was conducted in conjunction with Age Wave and Ken Dychtwald, Ph.D.
This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. Neither Ameriprise Financial nor its advisors or representatives provide tax or legal advice. The views expressed may not be suitable for every situation.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.
File #108719
[1] Bureau of Labor Statistics, Household Data Seasonally Adjusted Averages, Q2, 2010.
Wednesday, November 10, 2010
Top 100 Park Owners
We made a list of the top mobile home park owners. Check it out!
http://www.mobilehomeparkstore.com/articles/mobile-home-park-100.htm
http://www.mobilehomeparkstore.com/articles/mobile-home-park-100.htm
Tuesday, November 9, 2010
Why Invest In Mobile Home Parks?
Check out our newest FREE webinar!
http://www.mobilehomeparkstore.com/articles/why-invest-in-mobile-home-parks-webinar.htm
http://www.mobilehomeparkstore.com/articles/why-invest-in-mobile-home-parks-webinar.htm
Monday, November 8, 2010
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.
Thursday, November 4, 2010
How to Make $$$ with Your Mobile Home Park
Although it has taken us literally thousands of pages to describe how to do due diligence and operate mobile home parks effectively, the general theory on how to make money with mobile home park investments could fit on the back of an envelope.
These are the few, simple steps to making money in mobile home parks.
I. Buy a park in a big market. It doesn't have to be New York City, but you need to have a market that has enough size to fill vacant lots and push rents. A mobile home park in a tiny town suffers from few new move-ins and great danger from the employment trends of a couple of large employers. Also, you need prevailing two-bedroom apartment rents in the $700 or so range. If you are looking at a market with two-bedroom apartment rents of $295 per month where is the affordable housing niche? The apartments, in that case, are already delivering affordable housing so who needs mobile homes? And how can you push rents in that scenario?
II. Stick to city water and city sewer, if you can. If you can avoid private utilities, you can avoid huge potential capital calls. In the absence of private utilities, the worst capital expenditure you will be forced into spending is a few thousand dollars on pothole repair. But if you have a water well or packaging plant or lagoon, the overnight cash you might have to cough up could be $50,000 to $250,000.
III. Never count any income but lot rent. You can't use any mobile home rentals, or note income, or laundry income in your calculations. Only lot rent. Period. Even if you are insist on trying to use it, your bank will stop you by turning down your loan.
IV. Buy at a 10% cap rate or better. You should only get in the mobile home park business to make money. To make money, you have to put yourself in a position to do that. Buying parks at a 6% or 8% return is starting off behind the 8-ball. All you will do is, maybe, cover your mortgage. You will have no cash flow to reward yourself for all your time, effort and risk. And that's just not a fair deal to yourself.
V. Push rents. Relentlessly. There is no better way to make money in the mobile home park business than to increase rents. Every dollar that you increase rents falls directly to the bottom line. And every dollar of rent you increase equals 10 times more in value. Increasing rents by $1,000 per month yields $120,000 in sales value enhancements, at a 10% cap rate.
VI. Groom the park into a 20% cap rate. If you push the rents by about 10% each year, it will take you only until about seven years to have doubled the rent. Can you push rents this aggressively? You bet. At $3,000 or so to move a mobile home, there is a huge barrier to moving out, so tenants will accept pretty much whatever you raise the rents to within reason!
That's the entire roadmap to success. It's not complicated. It's not hard to understand. Yet people are making errors on this strategy every day. In an effort to buy something quickly, many people will sacrifice their lives and buy a mobile home park that can't possibly make the owner money even if it tried.
If you respect yourself, you have to hold your ground with our strategic deal points. If the seller won't sell at a 10% cap rate walk away from the deal. The same is true with all the other subpoints. Without the correct alignment, the park is going to be only a "tar-baby" that you can't get rid of. And there is certainly no money in that.
Want to make a million dollars in the mobile home park business? Then don't try and get fancy and violate all of the successful formulas that have come before you. Follow our plan, and you will have your best chance at winning.
These are the few, simple steps to making money in mobile home parks.
I. Buy a park in a big market. It doesn't have to be New York City, but you need to have a market that has enough size to fill vacant lots and push rents. A mobile home park in a tiny town suffers from few new move-ins and great danger from the employment trends of a couple of large employers. Also, you need prevailing two-bedroom apartment rents in the $700 or so range. If you are looking at a market with two-bedroom apartment rents of $295 per month where is the affordable housing niche? The apartments, in that case, are already delivering affordable housing so who needs mobile homes? And how can you push rents in that scenario?
II. Stick to city water and city sewer, if you can. If you can avoid private utilities, you can avoid huge potential capital calls. In the absence of private utilities, the worst capital expenditure you will be forced into spending is a few thousand dollars on pothole repair. But if you have a water well or packaging plant or lagoon, the overnight cash you might have to cough up could be $50,000 to $250,000.
III. Never count any income but lot rent. You can't use any mobile home rentals, or note income, or laundry income in your calculations. Only lot rent. Period. Even if you are insist on trying to use it, your bank will stop you by turning down your loan.
IV. Buy at a 10% cap rate or better. You should only get in the mobile home park business to make money. To make money, you have to put yourself in a position to do that. Buying parks at a 6% or 8% return is starting off behind the 8-ball. All you will do is, maybe, cover your mortgage. You will have no cash flow to reward yourself for all your time, effort and risk. And that's just not a fair deal to yourself.
V. Push rents. Relentlessly. There is no better way to make money in the mobile home park business than to increase rents. Every dollar that you increase rents falls directly to the bottom line. And every dollar of rent you increase equals 10 times more in value. Increasing rents by $1,000 per month yields $120,000 in sales value enhancements, at a 10% cap rate.
VI. Groom the park into a 20% cap rate. If you push the rents by about 10% each year, it will take you only until about seven years to have doubled the rent. Can you push rents this aggressively? You bet. At $3,000 or so to move a mobile home, there is a huge barrier to moving out, so tenants will accept pretty much whatever you raise the rents to within reason!
That's the entire roadmap to success. It's not complicated. It's not hard to understand. Yet people are making errors on this strategy every day. In an effort to buy something quickly, many people will sacrifice their lives and buy a mobile home park that can't possibly make the owner money even if it tried.
If you respect yourself, you have to hold your ground with our strategic deal points. If the seller won't sell at a 10% cap rate walk away from the deal. The same is true with all the other subpoints. Without the correct alignment, the park is going to be only a "tar-baby" that you can't get rid of. And there is certainly no money in that.
Want to make a million dollars in the mobile home park business? Then don't try and get fancy and violate all of the successful formulas that have come before you. Follow our plan, and you will have your best chance at winning.
Wednesday, November 3, 2010
How to Properly Charge a Late Fee in Your Mobile Home Park
Mobile home park tenants are not rich. Most of them live from paycheck to paycheck. As a result, they frequently don't pay their bills on time sometimes at all. To motivate these tenants to pay their lot rent on time, you must enact a late fee for rent that is not received by the due date. However, enacting such a plan is a lot more complicated than most park owners recognize. And messing up the plan can cause extreme legal and financial penalties. Here are a few initial points to consider:
How much to charge the tenant.
There is a law in most states as to the maximum late fee you can charge. It is not left up to your discretion. You are not allowed to charge a punitive amount. For example, if the lot rent is $150 per month, your late fee cannot be $100. The law is very specific on what you can and can't charge. Don't know the maximum amount allowed by law? You've got to get this data before you can go forward.
How much to charge the tenant as long as it is within the law.
You do not want anyone to ever be late. As a result, you should charge the maximum amount allowed by law to definitely get their attention. If the maximum is $50, then charge $50. I've toyed with this as much as anyone, but I've found that you have to make it absolutely not an option to be late, or the tenant may rearrange his payment plan and pay for that needed car repair/case of beer/cell phone bill before your lot rent. I cannot think of any reason not to go for the full amount allowed by law.
When do your charge it?
You should charge the late fee after a certain grace period. For example, if the rent is due on the first of the month, then you might have a grace period of the 5th. Any rent paid between the due date and the grace period (and obviously before the due date) would not be assessed any type of late fee. However, any rent received after the grace period would receive a late fee. In our example, any rent received on the 6th or later would be charged a late fee.
How do you prove when you got it?
The best way to do this is by postmark, assuming that you have the rent sent in to a P.O. Box as we do. If the postmark is after the fifth, then you will charge a late fee. What if the postsmark is on the fifth? Well, in some areas, if you sent it on the 5th, it can still reach its destination theoretically by that afternoon. So you are much safer just using the day after the end of your grace period for the postmark definition of late rent. And obviously, you want to save every late postmarked envelope as Exhibit A if you have to go to court over it. No judge is going to rule against you if the postmark is later than the grace period end date.
What about a late fee system that increases with every day?
These systems, and we've tried them, are just too complicated. Although you may feel like it is going to motivate the customer, we've found that it really doesn't they don't think that strategically. Basically, if they have the money in hand they'll pay you, and if not they can't. It's not like you are reminding them. Normally, if they miss the first of the month, they don't get paid again until the 15th, and as a result can't pay you again until the fifteenth, no matter what the penalty. Just keeping track of a daily escalating late fee will cost you way more in time than it is worth.
How do they know they owe a late fee for next month?
The best system is to send a monthly invoice, showing the rent plus a late fee, if they have one. Obviously, you have to have some kind of notification system if you want to be paid. If you let the tenant pay the rent in person at the park office, then the manager will need to keep a list of who owes it and collect at that time. If you send the rent to a P.O. Box, then there will have to be some type of system in place or you will never get your late fees. They can't pay it if they don't know they owe it. And don't imagine that they should know themselves it doesn't happen in the real world. They always dream that somehow they got around the system, or you screwed up and forget to assess it.
Am I being mean charging a late fee?
No. On the contrary, you are being a bad landlord if you don't. If the general tenant base starts delaying or stops paying altogether their rent, then the property will either go bankrupt or into disrepair. Neither scenario is for the good of the community. You must maintain order and keep the bills paid for these folks to have a home. And a late fee is the magic ingredient to help keep them paying, and at least create a small buffer if they don't. Would you rather charge a late fee or kick them all out on the street, because that's basically the choice you are making over the long run.
Can I forgive the late fee once assessed?
Legally you can. However, if you do that for one individual, then word will spread, and you will be besieged by folks wanting the same perk. You are far better off to stay uniform in your treatment of tenants. If you want, you could spread the late fee over several months to make it less painful, The only exception would be for extremely mitigating circumstances concerning a tenant who has never been late. For example, an elderly gentlemen who was put in the hospital on the 29th and released on the 7th. Even then, I would come up with a spin on it like you kept the late fee, but gave him an early payment discount for the next month of the same amount.
Other considerations?
It has been our experience that the total late fees in a stabilized, seasoned tenant base equals the amount of bad debt. This is very important, as it theoretically eliminates your line item of bad debt, when offset by late fees. Without late fees, you will never have perfect collections. With late fees, you scientifically can. And that's essential for hitting your budget.
Conclusion
Late fees are an essential part of being a good landlord. And it is very important that you do them the right way for them to be fair and accurate. In addition, you have to build a system to assess the fees that it simple, consistent and not time consuming.
If you follow the system shown in this article, you will see an immediate improvement in your income and general happiness of your customers in your mobile home park.
How much to charge the tenant.
There is a law in most states as to the maximum late fee you can charge. It is not left up to your discretion. You are not allowed to charge a punitive amount. For example, if the lot rent is $150 per month, your late fee cannot be $100. The law is very specific on what you can and can't charge. Don't know the maximum amount allowed by law? You've got to get this data before you can go forward.
How much to charge the tenant as long as it is within the law.
You do not want anyone to ever be late. As a result, you should charge the maximum amount allowed by law to definitely get their attention. If the maximum is $50, then charge $50. I've toyed with this as much as anyone, but I've found that you have to make it absolutely not an option to be late, or the tenant may rearrange his payment plan and pay for that needed car repair/case of beer/cell phone bill before your lot rent. I cannot think of any reason not to go for the full amount allowed by law.
When do your charge it?
You should charge the late fee after a certain grace period. For example, if the rent is due on the first of the month, then you might have a grace period of the 5th. Any rent paid between the due date and the grace period (and obviously before the due date) would not be assessed any type of late fee. However, any rent received after the grace period would receive a late fee. In our example, any rent received on the 6th or later would be charged a late fee.
How do you prove when you got it?
The best way to do this is by postmark, assuming that you have the rent sent in to a P.O. Box as we do. If the postmark is after the fifth, then you will charge a late fee. What if the postsmark is on the fifth? Well, in some areas, if you sent it on the 5th, it can still reach its destination theoretically by that afternoon. So you are much safer just using the day after the end of your grace period for the postmark definition of late rent. And obviously, you want to save every late postmarked envelope as Exhibit A if you have to go to court over it. No judge is going to rule against you if the postmark is later than the grace period end date.
What about a late fee system that increases with every day?
These systems, and we've tried them, are just too complicated. Although you may feel like it is going to motivate the customer, we've found that it really doesn't they don't think that strategically. Basically, if they have the money in hand they'll pay you, and if not they can't. It's not like you are reminding them. Normally, if they miss the first of the month, they don't get paid again until the 15th, and as a result can't pay you again until the fifteenth, no matter what the penalty. Just keeping track of a daily escalating late fee will cost you way more in time than it is worth.
How do they know they owe a late fee for next month?
The best system is to send a monthly invoice, showing the rent plus a late fee, if they have one. Obviously, you have to have some kind of notification system if you want to be paid. If you let the tenant pay the rent in person at the park office, then the manager will need to keep a list of who owes it and collect at that time. If you send the rent to a P.O. Box, then there will have to be some type of system in place or you will never get your late fees. They can't pay it if they don't know they owe it. And don't imagine that they should know themselves it doesn't happen in the real world. They always dream that somehow they got around the system, or you screwed up and forget to assess it.
Am I being mean charging a late fee?
No. On the contrary, you are being a bad landlord if you don't. If the general tenant base starts delaying or stops paying altogether their rent, then the property will either go bankrupt or into disrepair. Neither scenario is for the good of the community. You must maintain order and keep the bills paid for these folks to have a home. And a late fee is the magic ingredient to help keep them paying, and at least create a small buffer if they don't. Would you rather charge a late fee or kick them all out on the street, because that's basically the choice you are making over the long run.
Can I forgive the late fee once assessed?
Legally you can. However, if you do that for one individual, then word will spread, and you will be besieged by folks wanting the same perk. You are far better off to stay uniform in your treatment of tenants. If you want, you could spread the late fee over several months to make it less painful, The only exception would be for extremely mitigating circumstances concerning a tenant who has never been late. For example, an elderly gentlemen who was put in the hospital on the 29th and released on the 7th. Even then, I would come up with a spin on it like you kept the late fee, but gave him an early payment discount for the next month of the same amount.
Other considerations?
It has been our experience that the total late fees in a stabilized, seasoned tenant base equals the amount of bad debt. This is very important, as it theoretically eliminates your line item of bad debt, when offset by late fees. Without late fees, you will never have perfect collections. With late fees, you scientifically can. And that's essential for hitting your budget.
Conclusion
Late fees are an essential part of being a good landlord. And it is very important that you do them the right way for them to be fair and accurate. In addition, you have to build a system to assess the fees that it simple, consistent and not time consuming.
If you follow the system shown in this article, you will see an immediate improvement in your income and general happiness of your customers in your mobile home park.
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