Having turned around over 300 mobile home parks over the past two decades, Frank Rolfe has distilled the plan down to simple action items. Hear three of these important action steps in this week’s Mobile Home Park Mastery podcast series. Find out how you can get the park off on the right foot, and break the old owner’s cycle of poor management, quickly and easily. There’s really no reason you can’t fix even the most screwed up mobile home park in a relatively short period of time if you the right things – and in the right sequence. And that’s what we’re going to discuss on this Mobile Home Park Mastery podcast.
Frank Rolfe: Wyatt Earp did it and you can do it too. This is Frank Rolfe Mobile Home Park Mastery, we're going to be talking about how to properly turn around a mobile home park. I'm not talking about Wyatt Earp's Dodge that he was so artfully able to bring law and order and peace to, I'm talking about your typical American mobile home park that you would purchase and you want to do the same thing however, you want to make it into a nice orderly community where everybody is happy and enjoys a good quality of life. So how do you do that? Well, in this, the fourth part of our five part, three action step series, we're going to be talking about three important steps you need to take to properly do a mobile home park turnaround.
The first one in I call Secure the Property. What does that mean? It is a little bit Wyatt Earpish, that's true. What I mean by secure the property is you have got to go in, day one, and bring about law, order, happiness, security. You've got to go in and evict the people who will not follow the rules. You've got to embrace the people who will follow the rules. You have to not let anybody in that park ever again without properly vetting their criminal and credit background so know that everyone who enters from the moment you own it, is going to be a good resident for the sake of the entire community. You're also going to bring about law and order as far as systems and how they're dealt with.
Collections is a big one. Many moms and pops never really had a collection system. Many of them if they had a system, they never, ever followed through on it and typically it ended up in just nothing but favoritism. They had some people that they liked and they would cut deals with them, letting them pay over time, others they didn't like where they would not give them even one day grace. But even in most cases, even on the folks who they didn't really like and still didn't pay their rent, they still could never bring themselves to evict anybody because they just didn't like the whole idea of having to go to court and they just didn't like the confrontational aspect to evictions. Basically they had not collection system at all and that doesn't work.
You cannot have any kind of of orderly, real estate community where you do not require everyone to pay rent every month. We call that theory, No Pay, No Stay. And it means if you don't pay your rent, then you have to go live somewhere where you're not required to pay rent but you can't live in that mobile home park. We've tried many different styles over the last 20 plus years and that is the only fair way to achieve a commonality of everyone paying their rent every month. And it makes sense 'cause if you look at all of the other folks out there who extend credit to people, whether it's power company or the water company, what do they do? What do they do if you don't pay your power bill by the due date? They'll give you a few days grace and then guess what? They're going to turn your power off.
That's the No Pay, No Stay and it's fine, this is what the power company does. And you need to be more like a power company. Power companies have given this a lot of thought over a lot of years and they've realized that the best way, the fairest way to treat everyone is a simple plan. If you don't pay your power bill, they turn off your power. The same with a mobile home park, if people don't pay their rent, you need to evict them. Now if they can pay up after you evict them, well, that's fine. We hold no hard feelings against people, we realize that we're typically in the affordable housing business but we have to have a mandate that everyone has to pay and that's the only fair way to go. You can't have a situation where one person pays their rent like clockwork each month while nobody else does. That's simply not fair to those who pay their rent. Why should they be punished? Why should they have to pay when other people don't? That's certainly wrong.
Another thing you have to start bringing about orderly are rules. You need to go in and set standards and say, "This is the minimum acceptable standard to live in this community and if you cannot meet this standard you'll have to go live somewhere else because we're not going to tolerate you not living in a manner that is acceptable for the community at large." The person who's got the three pitbulls on a chain outside their front door, that person will either have to get rid of those pitbulls and get a new dog, perhaps a small dog, 30 pounds and under is required by most park owners, which they must then keep inside of their home or within a fenced yard. But this whole idea of people making these outrageous lifestyle decisions, parking non-running in their yard, having multiple dangerous breeds of dogs on ropes in their yard, that all has to go and that's all part of securing the property.
When you secure the property what you're really doing is you're eliminating people who cannot live in a civilized world. You're going to be bringing new people who are good community residents and you're going to make sure that all of the systems are enacted and enacted fairly. Rent, collections, rules, everything you do is going to be in a nice, orderly format. Additionally if there are any crime problems with the property from neighboring properties, you're going to resolve those. You may have to build an eight foot fence, whatever you've got to do, you have to let people live in a nice, safe manner. Nobody wants to live in any form of housing, whether it's a mobile home park, a stick built home or an apartment where they do not feel secure in their home. You have to as the park owner, create that environment. We call that basically securing the property.
What do you do beyond securing the property? While you're securing the property another action point is to start upgrading that property. Typically when we buy a mobile home park, there's a bag of things that we want to do to make it nicer place to live. It may be replacing the entry sign and give it a more attractive entry. Might be road improvement. Certainly removing dead trees and dead tree limbs. Painting homes that don't look good. Painting the rusted roofs of some homes. Fixing the skirting. All these many items you need to do on the front end and not later on. Some people have this wrong impression that you leave, make the repairs as you go in and you start making repairs very slowly. They want to just blend that in. Blend that cost in a little bit and that simply does not work because what is going to happen is you're going to have a situation where people are not going to see much improvement in the park on the front end and they're going to lose confidence in yo u.
It's also going to damage your ability to bring in new good residents simply because no one wants to live there. It doesn't look good. All these things you want to do, do them quickly. Do them on the front end. Don't wait. If you do them in rapid fire upon closing, who will take notice? Number one, the residents inside the park and if you then raise the rent, which you typically have to do because the lot rents in America are insanely low and all need to be raised in most cases. They're going to look at that and say, "Well, this is still a good value to live here." Who else will be impressed? The city inspector, he'll see you're making lots of changes, lots of improvements, he'll cut you some slack if there were any inspections issues that he might have written up a citation on, he's more than likely not going to because he sees you're making lots of improvements.
Who else notices? New customers who are driving in, debating, do I want to live here or do I not? If they see that nice things are happening, they see fresh paint, they see new things going on that look like you're trying to make a difference, they're going to reward you with their business. So there's every reason in the world to make all those upgrades as quickly as you can. Don't filter them in over time. Don't say I'll do a little bit each year. It's not going to work for you. You want to get them all done on the front end.
The final item you need to know about turning around a mobile home park is you've got to be flexible. If you read a lot of military history books like I do, you'll notice that in World War II, one reason that the American Navy often fared better than the Japanese Navy is the Japanese commanders weren't flexible. What they would do is they would think through the battle and in advance they would put a certain type of bomb on the airplane, they would have a certain strategy and it was like they were going to try and master plan exactly what would happen. Now if they bet correctly, they could have huge success such as the Battle of Pearl Harbor. However, if they guessed wrong, if they mis-estimated the American fleet or the weather or simply had a bout of bad luck, they would not do well at all because all those bombs that they had put on those planes, those were not the effective bomb for the situation.
American commanders, on the other hand, they liked to put little bit of everything on each plane. They acknowledged on the front end, they really didn't know what was going to happen for sure and as a result they like to hedge their bets. They liked to be very, very flexible. That's why the American Navy, even though they wouldn't have often gigantic victories, they would always have a victory because they had hedged their risk and they were very, very flexible. You need to do the same as a mobile home park owner. You can go in with your turnaround plan and you can say, "Okay, these are the steps we're going to do. This is what we're going to enact and this is how we hope it turns out." But you have to know going in that you don't really hold all the cards on how things turn out.
Let me give you some examples. If you buy a mobile home park and let's say there are 30 people behind in their rent and it's a 100 space mobile home park, you really don't know what will happen when you start trying to collect the rent. You don't know how many of those people who have paid mom and pop, truly can write a check each month and how many of them simply have no job and no income and they're just hard scrabble hanging out in that mobile home park and they really if you pushed them, are just going to jump in their car and drive off. As a result, you've got to be flexible in your turnaround plan. You have to say, "Well, if I lose all 30, here's what I'm going to do. If I lose 15, here's my plan. If I lose five, here's my plan." Don't pretend like you control all the events. Don't say, "Well, I'm only going to lose 10 people." Yes, you might but then again you might not. You have to always be flexible and watch how things are turning out.
Sometimes for example, when you have your plan to turn the park around and you go in and start making changes to mobile homes, let's say you drive through the park and you identify 15 homes that you want to have painted and you go in and start painting them, sometimes people are going to step up to the plate and start fixing up their own property. This has happened to us many times. Don't proceed on with your plan if you realize that you painted three homes so far and people are actually starting to spruce up their stuff, you might stop for a moment then capture your breath and see what they're going to do because often, the new park owner will serve as a catalyst to the good customers in the property who will then get out the appropriate tools, whether it's a rake or a shovel or a weedeater or a paintbrush and start making repairs because it's called pride of ownership. Pride of ownerships means regardless of how much you earn, you like to maintain your property.
When you can start getting that going, it's often contagious. A smart park owner on the turnaround's going to be very flexible and watch every day as to what is going on. Another good example of flexibility is when you start bringing in homes. If you have vacant lots, you're more than likely going to want to fill them to harvest the demand for affordable housing in the US. But what often happens is the smart person in the turnaround doesn't go all in on the front. They'll bring in a home or two homes. They might bring in a new home and a used home, market them and see what happens 'cause you again, don't know for sure what will happen.
Some people might go out and want to buy 20 brand new homes to fill the lots in their mobile home park that are vacant. That's a very bad strategy because what's going to happen is, you're going to bring in those homes, you're going to run the ads, the phone will start ringing, you'll start having showings, you'll start having applications and only then when you start doing those applications do you start really seeing the credit and the amount of cash these customer have. It may turn out that they don't have very good credit scores or much for a down payment. It might work for a used home but certainly not for a new home but what if you've already brought in a whole bunch of new homes? What are you going to do?
Again, that's why you've got to be very, very flexible. Take it one step at a time as you do your turnaround plan. And I'm not saying that means do one step every six months and delay things, but every day that goes by, watch and see what the reaction is to your action. And then work appropriately from there. Let's say, for example, you start painting homes and cleaning things up and people start painting their homes different colors? Let's say they paint their homes bright yellow, bright pink. Maybe that's the color palette of the demographic of your park. Work with that. If you're going to keep painting the homes, adjust your color palette. If you were thinking on the front end I'm going to paint them all brown and green, maybe that's not the appropriate palette.
Always, always, remind yourself that you are going to be flexible and you're not going to make black and white decisions without any form of input because it's how you react to that input that really separates people who are very good at turning around mobile home parks from those who are not. There are mobile home parks out there that we have purchased where once we started enacting the turnaround plan, we suddenly found that we needed to change what we thought we would be doing. Maybe, you decide once you get into it that maybe that sewer line needs a little more work than you thought and a rob Peter to pay Paul, you'll do a little less tree work. Just be flexible. Don't feel like you have to have this rigid 100 point plan, these are the 100 things I'm going to do to this mobile home park starting today and you just blindly just keep nailing them and banging them out without watching what's going on around you.
Mobile home parks are like giant terrariums, they're an ecosystem. You've got millions of things going in there all of which have different outcomes. Work with that. See what's happening. If you get a lot of pushback on some new rule change, see if you can work around that. If you say, "Well, I don't like people having boats in their yards." And yet you realize fairly soon that people really, really care deeply about keeping the boats there so they can watch over them and know they're secured, maybe you can let that go a little bit. There's really nothing that you could have on your plan that can't be a little bit altered once you got good information from the residents to see how it all works out. Again, just always be flexible in everything you do.
This is Frank Rolfe with Mobile Home Park Mastery and again we've gone over the three actions steps for a good and proper turnaround. We'll be back next week with the fifth in our five point series on how to properly operate a mobile home park. I'll have three great action steps to proper mobile home park operations. Again, this is Frank Rolfe with the Mobile Home Park Mastery. Thanks for spending time with me and we'll talk to you again soon